I was taken aback by the turbulent reactions that followed the recent cashless directive by the CBN. My surprise stems from the fact that the cashless agenda, including penalising people for deposits, is not new. So, this is not one of those things done by “this Buhari government”. Eight years ago, and specifically on August 30 and September 6, 2011, I reflected on this matter, when it was still in its infancy.
A year later, I also analysed developments on the subject matter. I had also done two academic papers on the matter in 2012 and 2018. I will therefore start with the common sense cash-back strategy, which I recommended to the CBN in 2011 and here it goes.
Before delving into the main issue, there are some preliminary observations and clarifications. The first is that I must admit that common sense is no longer common; indeed, it is the scarcest commodity in Nigeria today. This is caused by our attempt to live foreign lives when we have not mastered our traditional values, so that we are neither local nor foreign. We have thrown away everything we have in a bid to emulate what we don’t have and now, we are between and betwixt; we are in a cultural limbo! That is why common sense is very scarce.
Secondly, cashback is a marketing strategy when the strategist is so sure of his offer that he guarantees to refund the customer’s money if/when he/she is not satisfied. Thus, I am sure that the strategy I am about to recommend will work; it is a “sure-banker” as they would say. But since Governor Sanusi is not paying me for this unsolicited consultancy, and I am not even sure he will heed my advice, there can be no cash-back.
Thirdly, the concept of cashlessness requires some serious rethinking. We are using the concept in its Nigerian and everyday meaning because its monetary and macroeconomic interpretations and implications are something else. Even then, many Nigerians are already cashless; not because they don’t want to hold cash or for fear of Sanusi, they don’t have the cash to hold. Some will suffer bouts of cashlessness, but others are permanently cashless – due to acute poverty.
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Furthermore, it is theoretically and practically impossible to have a cashless society. Mike Lee, the CEO of World ATM Association, who is an interested party in this cashless debate has said it all: “the cashless society is about as a real possibility as a paperless office”. We should in effect be talking about less-cash society.
Fourthly, banks and bankers are already punishing their customers for doing business with them. My bank charges a penalty for any cash withdrawal of less than N40,000 and one very old generation bank had once refused to give me my balance over the counter, insisting that I must use my ATM for that purpose. Of course, I applied my Nigerian sense on them. For my bank, I ensure that I don’t withdraw N40,000; rather than leave some amount for them and be punished, I withdraw everything. So, when I need N50,000 and my balance is N80,000, I “clean-up” the account.
For the second bank, I quoted the laws and practices of banking from the days of goldsmiths to the Sanusi era (I am a fellow of the Chartered Institute of Bankers) and they hurriedly obliged! Anyway, what the CBN has done is to endorse the oppressive KITA (kick in the arse) strategy which the banks have always deployed against their hapless customers. It is also important to stress that people have used money for centuries, and it will not be easy to just wish money away and this is not just a Nigerian sentiment.
I must admit that common sense is no longer common; indeed, it is the scarcest commodity in Nigeria today. This is caused by our attempt to live foreign lives when we have not mastered our traditional values, so that we are neither local nor foreign.
Writing on “The new cashless economy” (E-Commerce Times, 24 March 1997) Keith Regan listed “human habits and traditional attachments to the idea of money” as some of the impediments to cashless economy.
Finally, I want to state upfront that the CBN is engaging in a war that may be worthwhile but which it cannot win. In an economy where the black-market accounts for 70 percent of activities, pushing for cashlessness is an effort in futility. We have black market forex; black market oil exploration, refining and importing; black market (illegal) universities and black market (Oluwole-minted) degrees, black market court injunctions and judgments, black market subsidies (diverted to the rich) and black market governance all of which make up black market(informal) economy!
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The simple fact is that cashlessness does not jell with a black market (or informal) economy!
While it is generally believed that the objectives are worthwhile, there have been doubts as to the efficacy of the policy as designed and fears that it may do more harm than good. Indeed, an informed commentator has warned that we may end up with a “bank-less” economy rather than a cashless economy!
Only about 20 percent of Nigerians have access to bank accounts; there is no trust in the environment and even those who do genuine business rely on cash and given the average level of prices, N150,000 appears grossly inadequate-even for petty traders. Some organisations spend more than N1 million daily on cash and carry labourers and there are those who make unholy transactions who must pay cash. The punishment is also damn draconian; it is twenty times the maximum COT charges in the Nigerian banking industry, and one begins to wonder why a customer should be severely punished for withdrawing his own money!
Some Nigerians may comply but those who need the cash for genuine or dirty purposes will adopt several options: split the cheque, under-the-mattress-banking; multiple accounts and multiple banks (after all, a fraudulent fellow recently opened 30 accounts (yes, THIRTY! despite the KYC); compromise the process, or hold foreign currencies.
Before discussing other matters arising from that policy, let me present my cash-back, common sense strategy.
This strategy is based on making it difficult – if not impossible – for people to carry cash around. To do this, the CBN should simply withdraw the higher denominations of the Naira and leave us to battle with the dirty smelly low-value denominations.
The strategy should be gradually and quietly implemented in this manner. In September 2011, the N1,000 notes will quietly disappear. In October, the N500 notes will follow suite; in November, N200 notes will disappear from the vaults and if recalcitrant Nigerians do not “behave”, the N100 notes will also disappear in December, leaving only N50 notes.
By January 2012, the CBN should release the statistics and let us see how it goes. When Nigerians need a container to carry N1 million, then nobody will tell them to look for alternatives to cash! Of course, I trust that Sanusi will not succumb to pressure from the usual “big men” who would complain and protest. If this strategy does not work, I will refund any amount that the CBN has paid for this consultancy!
(This article is from my archives and first published in 2011. Please there is no “Other matters” this week, my apologies)
IK MUO
