Analysts want CBN’s cashless policy extended to foreign currency transactions

As the banking sector battles to adjust to the Central Bank of Nigeria’s (CBN) populist programme of abolition of fees associated with limits on deposits under the cashless policy, some analysts say incorporation of the policy to accommodate dollar and foreign currency transactions would be healthy for the economy.

Anchoring their recommendation on the growing tendency of dollarising the economy, the analysts say the action would bring transparency in the operations of the CBN as well as enhance data integrity as the smaller foreign currency transactions would be incorporated.

Besides, the analysts are of the opinion that the developmental programme of CBN as spelt out by Godwin Emefiele, the apex bank’s governor, at his maiden media briefing last week in Abuja would be meaningful as it would enhance capturing of informal sector transactions for proper planning and effective monetary policy measures.

The possibility of Emefiele’s regime extending the cashless policy to accommodate dollar and other foreign currency transactions, according to the analysts, would ensure that foreign currency payments can only be made for smaller amounts, while all informal payments in foreign currencies would be reduced.

Razia Khan, analyst at Standard Chartered Bank, London, says any move in the direction of extending the cashless policy would be positive. She adds that a key benefit of going cashless is that it reduces economic informality, saying this is important in an economy like Nigeria, which must still look to increase revenue mobilisation substantially.

“The other equally important benefit, of course, is that it boosts transparency and creates an audit trail. Discouraging the use of cash may not completely stamp out payments of an illegal nature, but it can help to minimise such payments. So the adoption of even more stringent, more all-encompassing cashless policies over time is to be encouraged,” Khan said. 

Ayodeji Ebo, head, investment research, Afrinvest, said they expect the present cashless policy “may be extended to accommodate dollar and foreign currency transactions such that foreign currency payment can only be made for smaller amounts, with all informal payments in foreign currencies reduced”.

Friday Ameh, an energy analyst, says the action would ensure that the CBN keeps tab on all transactions, adding that the present practice where the economy is gradually being dollarised calls for concerted action by the new governor.

Preparatory to the nationwide cashless policy, the CBN last week directed all Deposit Money Banks (DMBs) to immediately commence enlightenment of phase III nationwide rollout of the policy, ahead of the July 1, 2014 extension to the 30 remaining states.

The policy, which commenced in Lagos in 2012, was in July extended to the Federal Capital Territory, Kano, Rivers, Ogun, Abia and Anambra States, and by July 1, 2014 it would be rolled out to the remaining 30 states of the federation.

In the circular by Dipo Fatokun, director, banking and payment systems department, the CBN said such activities included the enlightenment of their customers on the cashless policy, including the existing limits on cash withdrawal and deposit for individuals and corporate bodies, as well as the available payment options, training of their staff in the affected states on the policy in order to provide answers to enquiries, give useful advice and handle issues and complaints on the policy.

But at his inaugural briefing, Emefiele said the CBN hoped to better align the cashless policy.

“Over the course of the pilot, we have become aware of complaints by customers, particularly regarding the charges being imposed for cash deposits. This has resulted in customers devising various means to avoid the charges through opening of multiplicity of accounts and other disingenuous behaviour, all aimed at undermining the objective of this policy,” he said.

“Given these outcomes and to better reflect our goal of having more cash under our control, all charges on deposits are hereby stopped with immediate effect,” he added.

John Omachonu