Monday, April 16, 2012

CBN Suspension of Cashless Policy

The formal announcement on Monday, March 19, 2012 by Central Bank of Nigeria suspending its much touted cashless policy is a welcome development and shows the apex bank as respecting public opinion on the volatile issue. It is not only the suspension of the take off of the policy till January 1, 2013 in other parts of the country that is heart-warming, the fact that the withdrawal and deposit limit was also increased from N150, 000 to N500, 000 for individuals and N1 million to N3 million for corporate entities also portray the CBN as a responsive and responsible institution. Other measure announced by CBN was the reduction in the processing fees to be paid by customers who may wish to deposit or withdraw more than the approved amount.

The CBN’s plan to push Nigeria into a cashless society is aimed at reducing incidences of money laundering, terrorist financing and other economic and financial crimes. It is also aimed at lessening dependence on cash transactions while exposing bank customers to other means of electronic financial transactions such as Point of Sale (POS) terminals; Mobile payments; Internet banking; Online payments; Automatic Teller Machines; Instant Electronic Fund Transfers; Direct debit for regular-in-nature bills payments (e.g. Electricity bills, Pay-TV bills, Water rates.)

The pilot implementation of the policy in Lagos in the last three months has shown that the programme needs to overcome its teething problems. These include the challenge posed by inadequate information, communication technology (ICT) infrastructure; shortages of electricity; shortage of bank branches, Automated Teller Machines and Point of Sale devices; poor security systems and internet fraud; lack of access to banking services and the extra large informal sector. A CBN report has also been alleged to note that low literacy levels in some parts of the country, weak laws, low consumer confidence and insurance issues pose obstacles to implementing the cashless policy. To surmount the challenge posed by ICT, Association of Telecommunications Companies of Nigeria reckons that additional investments of $100 billion are required over the next five years to support seamless e-transactions.

From the foregoing, it is obvious that the challenges being faced by the operators in implementing this noble policy is daunting though not insurmountable. However, to overcome them, a lot of resources need to be mobilized to tackle the obstacles.
Whether the regulator (CBN) or the operators (banks and other financial institutions) have the humongous resources to make a success of the cashless policy remains to be seen. The way things stand; it seems the solution is going to be more expensive than the problem meant to be solved. Given the financial crises that have nearly crippled banking operations in Nigeria and many cost-cutting measures banks have had to embark on, where will they get the money to implement the cashless policy? They need to procure more of the e-banking platforms like ATM machines, PoS terminals, expand branches, train staffs, carry out sustained sensitization programmes across the country, purchase more power generators, inverters etc, all these will cost a lot of money which some of the banks operating in Nigeria may ill-afford.

True, the suspension of the nationwide roll-out date will give the financial institutions more time to prepare for the implementation of the policy. CBN should also look at where it can help the operators to cushion the effect of the enormous resources to implement the policy. A bail-out may be considered. If this will not happen, a longer period may be considered for take-off of the policy. However, we should not also lose sight of the incentive CBN has given to the bank customers by increasing substantially the limit of the amount that can be deposited or withdrawn daily. Kudos to the Central Bank of Nigeria!