It’s Time to Revitalise CBN’s Cashless Policy
Last December, I had the opportunity of spending memorable moments with family and friends in Nigeria. However, something else was memorable in an odd manner. I had gruelling experiences trying to withdraw funds from the automated teller machines (ATMs). My challenges with accessing cash ranged from frequently arriving at machines that were out of service, to long and rowdy queues at the self-service channels.
From Lagos to Oyo; Ondo to Delta, it was the same story. In Benin City, we drove into the University of Benin, where we found about six or more ATMs of various banks. Only about two were operational at the time. We had no choice but to join one of the long queues. A few moments later, a young man walked up to us, looking distressed. His wife was in the hospital and he needed to make payment for her to be discharged. Everyone on the queue was sympathetic towards him and he was given consideration to jump the queue. The question to be asked is, why would a hospital in a city not have a functional Point of Sale (PoS) system or any other system to enable electronic payment?
While the banks are doing their best in providing ATM outlets for customers to withdraw their money, those channels are neither the only infrastructure needed to modernize the payment system nor can they achieve a cashless system.
But interestingly, the story is not all gloom and doom as the policy has also recorded some successes. Within two years of implementing the policy, the value of interbank transfers, captured through the Nigerian Inter-Bank Settlement System (NIBSS), jumped from N51 billion monthly in January 2012 to over N1.5 trillion as at June 2014. In terms of volume, NIBSS’ transfers rose from 87,000 transactions per month in January 2012 to 3.1 million transactions monthly as at June 2014. According to the CBN, the volume of PoS transactions increased from about 2,000 monthly as at January 2012 to 1.6 million per month in June 2014, while transactions in value moved up from N38 million per month in 2012 to N24 billion monthly in June 2014.
Licenced payment terminal service providers authorised to deliver PoS terminal penetration increased from five to 10, registering over 150,000 PoS terminals across the country as at June 2014.
Outside of Nigeria, developed countries have certainly made significant improvements in cashless transactions. In 2013, MasterCard unveiled a global report, “Cashless Journey,” to track how 33 major economies were progressing from cashbased to cashless societies. The report, produced by MasterCard Advisors, identifies new technologies, government programmes and consumer preferences as key factors that are driving the faster shift to cashless economies, creating more productive and inclusive economies.
The report puts Belgium in the top-ranked position (where an estimated 93% of the value of consumer spend was cashless); France came second (92%); Canada was third (90%); the UK and Sweden ranked in fourth place (89%); Australia was in fifth position (86%); and the Netherlands was placed in sixth position (85%).
Developed economies are doing all they can to go cashless. Sweden, the first European country where national paper currency was printed in 1661 is making efforts to become the world’s first cashless economy, according to a report released by Stockholm’s Royal Institute of Technology (KTH).
Despite the progress Nigeria has made in advancing cashless transactions, the success of the Cashless Policy is dependent upon the widespread acceptance and usage of alternative payment options. For the economy to become truly cashless, three things must be done: Expand adoption of PoS terminals, promote and support fintechs and address infrastructure challenges. Adoption and usage of PoS terminals must expand across the formal and informal sectors of the economy. Corner stores,