Emefiele’s CBN Set to Fail Again with Cashless Policy

The Central Bank of Nigeria (CBN), which has been led since June 2014 by Godwin Emefiele, has been failing in a variety of ways. It does not command the confidence of the market – especially foreign investors – mostly because of its policy of multiple exchange rates. The statutorily independent CBN has been following overt policy dictation of the President Muhammadu Buhari administration, and feels obliged to publicly defend the policies of the government. And the central bank no longer commands the respect of Nigerians who now see the institution as lacking the moral and intellectual authority it exhibited under its previous leaderships.

Even more serious, the CBN has also in recent years been found wanting in delivering its core mandate of ensuring monetary and price stability. In May 2014, the month before Emefiele became CBN Governor, inflation rate was 8 percent. But his tenure has been marked by double-digit inflation; the rate of general increase in prices was 11.24 percent in September 2019.

Many central banks have dual mandates. Apart from price stability, they also pursue what could be described as “economic progress.” Economic progress, for the US Federal Reserve, is “maximum employment.” For the European Central Bank, it is “sustainable growth.” The Reserve Bank of Australia is more explicit. Its second mandate is “maintenance of full employment and economic prosperity and welfare of the people of Australia.”

The CBN also definitely targets economic progress of the people of Nigeria. But either in terms of employment, economic growth, or welfare of Nigerians, the reality has worsened today compared to five years ago. In Q2 2014, Nigeria’s unemployment rate was 7.4 percent. The figure had increased more than threefold to 23.1 percent in Q3 2018 (still the latest data by the National Bureau of Statistics).

Nigeria’s real GDP growth had averaged 6 percent in the 10 years to 2014. The growth number has fallen to average 1.12 percent, from 2015 to the 2019 estimate. That the welfare of Nigerians has plummeted in recent years is already apparent in the trend GDP growth and unemployment rates. Nevertheless, it is important to also note that Nigeria became the “poverty capital of the world” in 2018. That year, we started to have the absolute highest number of extremely poor people compared to other countries, including India that has six times the population of Nigeria.

CBN’s policies target the above key macroeconomic indicators. In 2014, the CBN started to factor unemployment rate in its monetary policy decisions. The apex bank has also launched numerous intervention funds that are aimed at boosting economic growth. Indeed, monetary policy was the only game in town in Nigeria since May 2015, until the current taxation overdrive of the Buhari administration. Therefore, the bank cannot be exonerated from the appalling economic statistics of the recent years, although we concede that the CBN governor is not the president of the country who was elected to promote the welfare of Nigerians.

Perhaps confident that it is not accountable to the people, Emefiele’s CBN now appears to be decidedly anti-welfare of Nigerians. It has turned access to financial services as a framework to further impoverish the people through the introduction of countless number of charges. The latest of the rash of charges is the N50 fee per use of POS terminals.

The POS charge is one of the plethora of charges introduced or approved by the CBN for promoting, and at the same time, discouraging the use of electronic banking and electronic payment services. Bank customers are charged if they make cash deposits or withdrawals above set limits that are quite low. Should they use electronic transfer or e-payment for products or services, they would also be charged. Prior to the new POS charge, the CBN had approved that customers be charged for using the ATM and mobile banking and mobile payment services.

Whether we use electronic banking services or not, we must be charged. This is analogous to the infamous “NEPA”, which charges Nigerians whether or not it supplied us electricity. The only way to escape the rip-off is to not connect to the power grid. Similarly, to avoid the ridiculous charges approved by the CBN is to stay outside the banking system.

But, ironically, the CBN believes it is driving financial inclusion with the cashless policy. However, it is repugnant to be charged for a service you are compelled by others to use. Nigerians already in the banking system, who want to remain in it, have now started to withdraw more cash than they ordinarily would have done. Instead of paying N50 extra each time they want to use POS to pay for petrol, they would rather use cash.

The e-banking charges and penalty charges for cash deposits and withdrawals will also turn off the currently unbanked and underbanked. Instead of taking their money to the bank, they will keep it under the pillow. For most of them who feed on N50 loaf of bread and a sachet of “pure water” for combined breakfast and lunch, it is completely out of the question to use the money to pay POS charge.

Whatever marginal increases that may be recorded in financial inclusion and ebanking, they would be below the potentials of the cashless policy without some of the outrageous charges. In this sense, the cashless policy is set to fail.

The CBN assumes that Nigerians would be able to bear its numerous approved charges. On the one hand, this reeks of elite disconnection from the people. On the other hand, we are familiar with corrupt government officials who would fix various high service and penalty fees believing that the people would find the “means” to pay, despite the low-income levels in the country.

The current CBN leadership did not introduce the cashless policy and some of the existing fees for the services. However, those who introduced the policy were very restrained in forcing its implementation for well-considered reasons, including extant lack of needed infrastructures.

Similarly, the predecessor of President Buhari who introduced the Treasury Single Account (TSA) was restrained in its wholesale implementation for the welladvised reason of not sterilising public funds that could be put into productive use. Impervious to such considerations, and in line with anticorruption posturing, the move towards a holistic implementation of the TSA under Buhari practically brought the public sector economy to a standstill and was partly responsible for the 2016 recession. Yet, corruption has remained very high in government.

The CBN has become similarly rash with policymaking, while failing with its policy objectives. It would be appropriate for the National Assembly to hold a public hearing on the CBN. Nigerians should also directly demand accountability from this CBN.