The era of going to the banking hall to withdraw up to N2 million over the counter has become a thing of the past as the cashless economy has come to stay.
In view of this, Nigerians have been urged to embrace electronic payment (e-payment) channels for their transactions. Such channels include eNaira, cards, mobile money accounts, QR codes, and USSD among others.
It is on record that Nigeria, Africa’s largest economy’s banking sector regulator, the CBN, has implemented various policies to ensure full adoption of cashless policy.
Godwin Emefiele, CBN’s governor, during a press conference on the outcome of the last Monetary Policy Committee (MPC), recently, in Abuja said the online payment has increased astronomically.
Data from the Nigeria Inter-Bank Settlement System (NIBSS), shows that total cashless transactions in Nigeria rose by 45.41 percent year-on-year to N39.58 trillion in January 2023.
Point of Sales (PoS) transactions rose by 40.69 percent to N807.16 billion in January 2023 from N573.72 billion in January 2022.
The NIBSS report showed that total NIP transactions for the period rose by 45.52 per cent year-on-year from N26.65 trillion as of January 2022 to N38.77 trillion as of January 2023.
Emefiele thanked some Fintech companies that used their idle capacity to boost online payments.
“And we are happy that, rather than rely on only the banks, we have many other channels through which online banking and online payment services can be done so that Nigerians don’t have to suffer, because we are insisting that we have to go cashless,” he said.
The CBN said in its Payments Vision 2025 document that the use of cash payments will reduce by 2025.
As approved by President Muhammadu Buhari, the CBN on December 15, 2022, commenced the implementation of the naira redesign policy.
The apex bank had, on October 26, 2022, announced plans to redesign the high value naira notes – N200, N500 and N1,000, aimed at reducing the volume of cash outside the vault of deposit money banks.
The CBN also reintroduced the maximum weekly limit for cash withdrawals across all channels by individuals and corporate organisations to N500,000 and N5m respectively.
“It is clear that the CBN is trying to drive a cashless economy by placing stiffer restrictions on cash withdrawals. However, a more effective strategy could have been to enhance the cashless economy infrastructure to remove or significantly reduce the challenges and irritations that people experience when transacting using electronic payments, said Taiwo Oyedele, head of tax and corporate advisory services at PwC Nigeria.
“Each of us regularly experience unsuccessful electronic payment transactions either due to bad network, switch failure or even lack of electricity to charge the devices,” he said.
Oyedele said a different strategy could have been to make a cashless economy attractive as is the case with MPESA in East Africa so people voluntarily embrace it rather than the stick approach which will unfortunately punish many people for circumstances that are beyond their control, especially the large unbanked population in rural areas.
As a consequence, he said, there could be a lull in economic activities which may slow down GDP growth in the short to medium term. On the other hand, by forcing more transactions to be conducted electronically, there will be less currency outside the banking system which will make monetary policy interventions more effective.
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In addition, this will reduce the size of the black economy and provide more intelligence for the tax authorities to expand the tax net to economic activities which were previously under the radder.
A report by Vox Media featured a rural village in Kenya, where a woman sets out to do her food shopping for the day. She needed cash before she headed to the market, but the nearest bank would be several days’ walk. Instead, she took out her phone and sent a password and a request for money. A few minutes later, she met a man with a cellphone and received cash from him — the withdrawal that she made on her phone. She went off, ready to do her errands.
In July 2021, the CBN introduced the eNaira, which was fully launched in October 2021.The e-Naira is Nigeria’s version of a CBDC (Central Bank Digital Currencies).
At the beginning of the eNaira operations, about 33 banks were fully integrated on the platform, with about N500 million (USD1.2m) minted by the CBN.
“eNaira was introduced to complement the already vibrant payment infrastructure out there,” said Rakiya Mohammed, director, information technology department, at the CBN.
“The eNaira has emerged as the electronic payment channel of choice for financial inclusion and executing social interventions,” Emefiele said, attributing the surge to the use of the e-Naira to disburse aid via a national welfare programme.
Emefiele said the eNaira adoption rate continued to increase and improve, adding that everything was being done to make sure it continued.
He said that within the last 18 months when the eNaira was launched, over 13 million e-wallets were recorded. e-Naira was launched in October 2021.
At the end of November 2022, the CBN said that the eNaira recorded 700,000 transactions valued at N8 billion, adding that this had increased to N22 billion. “With the eNaira, we have a resilient infrastructure that can handle the requirements of the cashless policy and if we are able to drive the adoption of the eNaira efficiently, this will take away the pressure of the current cash crunch and issues with financial transactions in the country,” Mohammed said.
In 2012, the CBN introduced a policy on cash-based transactions which stipulated a cash handling charge on daily cash withdrawals that exceeded N500,000 for Individuals and N3 million corporate bodies.
The policy on cash-based transactions (withdrawals) in banks, was aimed at reducing (not eliminating) the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers.)
The withdrawal limit has been revised to N5 million for corporate bodies and N500,000 for individuals.
According to the CBN governor, these e-wallets were categorised based on their level of usage, with 12.6 million at Tier zero, 11,354 at Tier one, 367,000 at Tier two, and 9,649 at Tier three.
He said one notable example where the eNaira had been adopted and must be appreciated was the ministry of humanitarian affairs, disaster management and social development, which had expressed keen interest in the eNaira product.
He cited March 20, 2023 when approximately 4 million e-wallets were created so far for social intervention payments, representing about 30 percent of the total e-wallet created so far. These wallets were created in response to a request from the ministry as part of plans for the next tranche of the conditional cash transfer programme, which was going to be through in the second quarter, or 2023.
“There are other very good and encouraging data that we have seen like I said the number of e-wallet created is about N18 million, 13 million of them, the value of eNaira transactions, has reached almost N22 billion, which is a 68 percent increase since the beginning of this year. Over 10 billion of it has been minted and about N3.429 billion of it, is currently in circulation.
“So I will say we have seen good progress in the adoption of eNaira and we are happy that as we try to move more and more towards financial inclusion, and get people away from being excluded from the financial system, eNaira remains one very possible option for you to adopt the cashless policy,” Emefiele said.
The CBN, in May last year, adopted an Unstructured Supplementary Service Data (USSD) code, 997 for eNaira transactions. The move was to enable those who do not have a bank account to on-board the eNaira platform.
