Nigeria’s cash-based economy seems to be over-weighing the efforts by the Central Bank of Nigeria to digitalise financial transactions, as the apex bank spent N14.52 billion more to print currency notes in 2018.
According to the 2018 annual report by the Currency Operations Department of the CBN, N64.04 billion was spent to print currency in 2018, a reflection of the dominance of cash in the economy.
Compared to the N49.52 billion used in printing the banknotes in 2017, the industry regulator spent 29.31 percent or N14.52 billion more in producing naira notes last year, data analysed from the report released Tuesday show.
BusinessDay analysis of the CBN data revealed that the N64.04 billion spent in printing the naira in 2018 is the highest that has been used by the apex since 2013 when it started publishing the figures.
“The Bank approved an indent of 3.35 billion pieces of banknotes of various denominations in 2018 to meet the currency needs of the economy,” the apex bank said in the report signed by Priscilla Eleje, Director, Currency Operations Department at the CBN.
Further analysis of the report revealed that the Nigerian Security Printing and Minting (NSPM) Plc which was awarded the contract for the production of the entire indent for the year, delivered 2.65 billion pieces or 79.2 percent of the total approved 3.35 billion pieces of banknotes to post an outstanding balance of 698.03 million as at end-December, 2018.
Also, the 3.35 billion pieces of currency indent ordered from NSPM in the review year is the highest the apex bank has requested since 2014 when it ordered 1.76 billion.
“The sum of N662.21 million was expended on currency notes disposal,” the report read.
The issuance of legal tender currency is one of the core mandates of the CBN, as enshrined in section 2(b) of the CBN Act 2007. The Currency Operations Department executes this mandate, as well as the procurement and distribution of foreign currencies.
In 2012, under the leadership of Sanusi Lamido, the then CBN Governor, the Bank introduced the cashless policy programme which is aimed at curbing excesses in the handling of cash or reduction in the volume of currency in circulation.
Seven years later, the current CBN Governor, Godwin Emefiele re-introduced the cashless policy. The policy intends 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.
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.
A cashless economy is a society whereby credit cards, debit cards, charge cards, and direct transfer are used for making purchases. Some benefits of a cashless society include reducing money laundering and other related cash crimes to a minimum
“Charges should be further reviewed to a little or no charge, to encourage more patronage of e-payment platforms,” a Lagos-based analyst said on the condition of anonymity.
The industry source also recommended that the CBN, Deposit money banks (DMBs), and other non-banks financial institutions should provide public enlightenment and awareness programs that will create awareness and entice the unbanked individuals into the banking system especially those in the informal sector in Nigeria.
A breakdown of the figures from the CBN report revealed that Currency-in-Circulation grew by 0.8 percent to N2.32 trillion at the end of December 2018.
“The growth in CIC reflected the high dominance of cash in the economy and increase in economic activities,” the report read.
A further breakdown of the CIC indicated that, in terms of volume and value, the proportion of higher denomination banknotes (N100, N200, N500 and N1000) in total rose from 41.9 to 44.3 percent and 96.9 to 97.6 percent respectively.
The lower denomination currency notes continued to be larger in terms of volume, constituting 55.7 percent of the total. In value terms, it constituted 2.4 percent of the total banknotes. The ratio of CIC to nominal GDP, which measures the moneyness of the economy, fell slightly by 0.1 percentage point to 1.8 percent in 2018. The decline in the CIC/GDP ratio reflected increased usage of e-payment products such as electronic payment cards.
