The latest monetary policy by the Central Bank of Nigeria (CBN) aimed at easing pressures on cash transactions in the banks has already begun in Lagos. It is known as ‘cashless’ policy. In some other countries operating the system, the policy is called ‘mobile wallet’, which is an alternative payment method that allows a consumer to use mobile phone to pay for a wide range of services. The choice of Lagos as the pilot scheme is understandable: About 65 percent of commercial transactions in the country reportedly takes place in Lagos.
According to the CBN, the cashless system has become necessary to promote the use of electronic means of transaction towards making Nigeria a cashless economy in the nearest future. CBN says the policy is in reaction to the increasing dominance of cash in the economy with its attendant implications for cost of cash management to the banking industry, security, money laundering, among other huge costs. The policy was endorsed by the Bankers’ Committee, which comprises the CBN, the Nigeria Deposit Insurance Corporation (NDIC), Discount Houses and the 24 commercial banks in the country.
Under the policy, effective from June 1, 2012, daily cumulative withdrawals and lodgements in banks by individuals would be limited to a maximum of N150,000, while daily cumulative withdrawals and lodgements by corporate customers is pegged at N1 million. However, individuals and corporate organizations wishing to withdraw above the fixed amount would have to pay special charges. Such special charges are not yet clear.
Initial reactions to this policy are mixed. While some customers say they are yet to be adequately enlightened, some bank personnel are already fretting that the policy may cost them their jobs.
Still, many industry watchers insist that the cashless policy has the benefit to transform the payment system and help the banks, many of which are currently in dire financial straits, reduce operating costs and lending rates. The apex bank has also said that most of the banks are currently incurring ‘excess baggage’ because of unnecessary expenses that are cutting deep into their financial profile and profitability. In 2009 alone, the direct cost of cash management incurred by the banks was put at N114.5 billion. This has been projected to rise to N194 billion this year, an increase of 68 percent. This will increase the cost of lending by the banks, which is calculated on the basis of interest on fixed deposits, operating expenses and the expected margin of profits.
Everything considered, we welcome any genuine reform that will sanitize the banking industry and restore public confidence which is the cutting edge in the financial services sector. With the Nigerian banking industry still smarting from the global economic meltdown few years ago and the insolvency, failures and mismanagement that resulted in the recent Mergers and Acquisitions (M&As), the sector needs tighter control that will engender customer satisfaction and spur economic growth.
But this makes special precautions economically appealing and expedient. We are, however, concerned that while this cashless policy has its noble intentions with the ultimate aim of growing our economy and encouraging the emergence of e-payment across the country, the groundwork for the take off of the system has not been sufficiently done. It is one thing to borrow a good idea, but the success of that idea must take into cognizance the peculiar economic environment of the country.
No adequate enlightenment has been done before the take off of the policy in Lagos where the scheme is now being put to test. Caution is therefore necessary to avoid any unsavoury consequences such as mass retrenchment of banks’ staff. We insist that even as the benefits of the system look very attractive, with the opportunity to access the world of e-commerce and e-payment, thereby reducing the cost of managing cash in our economy, the apex bank should enforce its guideline to the effect that any bank that contravenes the intention of the policy must be sanctioned accordingly. As a new phenomenon in Nigeria, if the operational hitches are not taken care of, the noble objective of the scheme will be defeated. That is why many policies that have worked elsewhere in the world have failed in Nigeria.