Before the introduction and implementation of cashless policy in the country seven years ago, the ease of cash flow occasioned by the cash-based economy made Nigeria vulnerable to fraud, terrorism, and crime.
Armed robbers attacked bullion vans and customers who carried large sum of cash. Apart from that, the central bank spends billions of naira to remove and replace dirty notes in circulation.
However, the cost of currency management reduced in 2014 by 13 percent following the introduction of cashless policy by the Central Bank of Nigeria (CBN).
The CBN in 2012 after several engagements across multiple stakeholders, introduced the cashless policy, which is aimed at curbing excesses in the handling of cash or reduction in the volume of currency in circulation.
Looking at the implication of the policy on the Nigerian economy, Ayodele Akinwunmi, of investment banking, FSDH Merchant Bank Limited, said it would reduce handling charges, increase efficiency, increase velocity of transaction which will in turn increase economic activity, and above all, increase financial transaction particularly among people in the rural areas.
It will also create more job opportunities for Nigerians as they continue to develop financial applications that are used in financial technology business.
The volume of currency in circulation fell by 7 percent to N2 billion as at the end of September 2019 from N2.16 billion at the end of April 2019 according to data from the CBN website.
Conscious that over 40 percent of eligible Nigerians in 2015 lacked access to financial services, the CBN under the leadership of Godwin Emefiele, governor, embarked on a couple of steps to improve access to finance.
Through initiatives such as the Shared Agent Network Facility (SANEF) and the launch of a policy on Payment Service Banks, which enables non-banks to provide limited financial services, the regulator sought to encourage the use of technological tools in improving access to finance for people who live in underserved parts of the country.
Also, the Apex bank set up a payment services management department solely dedicated to enabling the build-up of a robust payment systems infrastructure, while seeking to contain the risk to the financial system that could emerge from the use of digital channels.
Consequently, the total volume of retail electronic payments has witnessed a threefold increase over the last five years. New financial access points are being created in parts of the North East and North West as a result of measures deployed by the central bank to extend financial services to the underserved in the rural communities.
Nigeria’s financial inclusion rate increased to 63.6 per cent in 2018 from 45.4 per cent recorded in 2016, according to a Survey by Enhancing Financial Innovation and Access (EFInA).
Financial inclusion strategy seeks to ensure 80 percent of bankable adults in Nigeria have access to financial services.
National Financial Inclusion Strategy (NFIS) was launched in 2012 with a mandate to reduce financial exclusion rate of bankable adults to 20 percent by 2020.
In his five year policy thrust, Emefiele said the ultimate objective of the CBN in his second term administration was to ensure that 95 percent of eligible Nigerians have access to financial services by 2024.
As part of efforts towards meeting this objective, the CBN recently issued Approval-in-Principle (AIP) to three Payments service banks (PSBs).
PSBs are specialised banks established to promote financial inclusion and enhance access to financial services for low income earners and unbanked segments of the society by leveraging on technology.
The CBN also re-introduced the cashless policy. The intent of the policy is to encourage electronic payments, with the objectives of developing the payments system, as part of the key requirements for achieving the Payments National Vision; whilst reducing the risk and costs associated with already identified high usage of cash.
The policy prescribed processing fees on daily cash withdrawals and cash deposits that exceed N500,000 for Individuals and N3,000,000 for Corporate bodies. The processing fees prescribed are 3 percent and 5 percent on withdrawals by individuals and corporates respectively while deposits/lodgements are charged by 2 percent and 3 percent also for individuals and corporates. In addition, the process for merchant settlement was reviewed to further deepen financial inclusion, enhance transparency and efficiency of the Nigerian payments system.
According to a circular by the CBN, the charges on deposits would apply in Lagos, Ogun, Kano, Abia, Anambra, and Rivers States, as well as the Federal Capital Territory, while nationwide implementation of the policy would take effect from March 31, 2020.
Sam Okojere, director, payments system management explained that there would be no processing fee either under the Cashless Policy or tax on cash-outs done at agent locations in order to encourage financial inclusion in the country.
The central bank has braced itself for this new cashless regime in the 6 states and the FCT. This has been done through the licensing of 26 Mobile Money Operators, 10 Super Agents, 21 Payment Terminal Service Providers, 21 Payment Solution Service Providers, 4 Third Party Processors, 9 Switches and 5 non-Bank Acquirers. It is expected that these licensed entities will smoothen the implementation of the Cashless Policy across the Payments System.
As evidenced by the NIBSS second-quarter fraud report of 2019, attempted fraud volume decreased by 47.28 percent from Q1 figures, while Web, ATM and Mobile remain the usual suspects to be used by fraudsters.
Okojere noted the growth in the volume of transactions that occurred in 2012 against 2018, following the Cashless Policy re-introduction and increase in usage of electronic transactions.
Consequently, transactions on instant payments grew from 4 million in 2012 to 729m in 2018, transactions on PoS from 2.5 million in 2012 to 285 million in 2018, and transactions on Mobile Inter-Scheme grew from 2,200 in 2012 to 15 million in 2018.
Responding to the challenges of the cashless policy, Akinwunmi said, “the challenge is the resistance from some people who do not want the process to work for reasons best known to them”.
The House of Representatives directed the central bank to suspend the implementation of the cashless policy on deposits following reactions from the public.
Taiwo Oyedele, head, Tax and Regulatory Services, PwC said, it is not the role of the lawmakers to issue directives to the CBN. According to him, a better approach would have been to ask the CBN to provide data and explanation of possible impact of the policy and measures put in place to ensure desired outcomes.
The National Assembly has the tendency of playing to the gallery and align with public sentiment,” Oyedele said.
