ATM saga: CBN, a victim of its flawed policies

Apparently in response to civil society protests and general public outcry condemning the hike in ATM charges by the Central Bank of Nigeria (CBN), they came out to say that the hike will be implemented. If we go down memory lane, we will see that the CBN is struggling to solve the problem it created. Yes, the CBN, through its policies over the years, especially in the 1970s and 1980s, created a cash-driven economy. Yet, in 2012, it came up with guidelines on cashless policy in response to the global trend in the banking world.

Thus, the CBN is presently acting like a bird caught in its own trap; the more it makes frantic efforts to free itself from the trap, the more it is entangled in the trap. In this case, the trap is CASH, Naira notes, and coins. Like we said earlier, the CBN, by its rural banking policy in the 1970s and 1980s, created and expanded the culture of use of cash in business transactions. By the policy, the CBN compelled banks to open allocated rural branches within a stated time frame so that cash can be made available through loans or withdrawals. The CBN itself opened branches and currency centres in all state capitals so that banks can be adequately served with cash.

Some businesspersons in response designed plaques hanging on their shop walls with the picture of the two of me. One of the men is very robust, and the other is very thin. The robust man with a smile said, “I sold it in cash.” The thin man in a dejected mood lamented, “I sold on credit.” The problem of CBN while insisting on raising ATM charges is the failure of the cashless policy of 2012. The CBN is trying to force Nigerians to go cashless. An ATM is a cash-dispensing point, but that is the smaller picture.

The bigger picture is that handling cash has become very expensive and a big burden to both the CBN and deposit money banks. The cost of printing Naira notes far outweighs the value of the Naira. The scenario is like this: CBN can spend as much as N1,500 to print N500 notes because of security features and annotated diagrams and pictures, which make forgery difficult and expensive, making forgery of the notes unattractive. Apart from that, the CBN for safety has to fly boxes of Naira notes to all the state capitals where CBN branches are located. Bullion van operators that move the boxes to the airport have to be paid. Some are those who move the boxes from the destination airports to CBN branches. That is at the level of CBN.

For deposit money banks, the story is the same. High cost of handling cash.That is why the CBN is complicit in passing the cost of handling cash to bank customers. When you deposit or withdraw a certain volume of cash, you pay some penalty fee aimed at discouraging you from carrying out transactions in cash. So cash has become an ill wind that blows neither the CBN nor deposit money banks any good.

But bank customers became wiser by avoiding depositing or withdrawing cash in banks where they pay penalty fees. They moved such transactions to point of sale (POS) operators, where they pay fewer charges while depositing or withdrawing cash. Have you bothered to ask yourself why a roadside POS operator can pay you N100,000 or more in cash while many deposit money banks cannot pay more than N20,000 when you enter the banking hall to withdraw funds? The CBN, with their prohibitive penalty charges, has driven bank customers away from the banking halls to the roadside POS operators, or more appropriately, agency bankers. POS operators are bank agents to pay and receive cash, open accounts, transfer funds, etc. Call them roadside bankers if you like. This policy is good in terms of creating employment, but it also has its rough edges, which are within the tolerance limit. The POS operators have rendered bank ATMs redundant to a large extent.

Read also: The cash war between ‘ATMs’ and ‘PoS Agents’ in Nigeria

The hike in ATM charges will even make it more redundant. The policy will end up creating more business for ATM operators. Their charges may be raised, but the convenience and transaction time it saves bank customers will make it more attractive. That is why this writer took the position that the CBN cashless policy has not recorded much success, short of saying it has failed in realising the objective to a large extent.

It failed because of high transaction costs. The electronic funds transfer cost is very high when you consider all the multiple charges. The rate of failed transactions due to irregular power supply has made electronic funds transfer particularly unattractive. Too many funds transferred electronically are hanging. The funds hardly get to the transferee’s account, whereas the transferor’s account is debited instantly. When you go to the bank to lodge your complaint, the bank counter is not different from the police counter. “We are still investigating the matter. Come today, come tomorrow” is the usual answer you get. It takes months to rectify these failed transactions, which has become worrisome. Worse still, there is no robust and clear-cut electronic banking law similar to the Bills of Exchange Act 1990 to guide the operation of electronic banking transactions such that bank customers will have a law to rely upon to lay claim for redress when they lose money in electronic banking transactions. That’s another reason why many bank customers do not want to embrace the CBN cashless banking policy.

In light of the above submissions, the CBN should put on its thinking cap and find a way to absorb the cost of handling cash without passing it on to bank customers as its own sign of good faith to make the cashless policy work. This is against the background that the CBN is a “not-for-profit” organisation, but it is reporting an operating surplus.” As a regulator, the CBN should not be a revenue-earning entity for the government. No matter how high the cost of handling cash is, they should explore using their capacity to create money to absorb it.

The cashless policy is the modern trend in the international banking system, and the cost of sustaining it should be normal business expenses to the CBN.

Going forward, the CBN should make the Nigerian economy a credit- and non-cash-driven economy by going back to the drawing board. A lead time of five years should be the target so that the issue of handling cash or transacting in cash will be a thing of the past. Elsewhere in the banking world, their central bank is not talking about ATM charges. In fact, ATMs are being phased out due to reduced cash transactions.

Unlike Nigeria, where banks issue ATM cards to every savings and current account customer, ATM cards are optional. You get an ATM card if you need it or request for it, the reason being that theirs is not a cash driven economy, in fact any bank customer that wants to draw a high volume of cash is a suspect in shady transactions like drug peddling where the dealers want to deal without leaving any trace.

ATM has become an albatross in the Nigerian banking system, which the CBN should work very hard to change the narrative. Nigerians insist on cash transactions because there is no other secure financial payment instrument to use in transacting their business. The CBN should consider ordering deposit money banks to reintroduce cheque guarantee cards to personal and corporate current accounts to replace ATM cards. This instrument will give assurance to the payee of checks of high probability for the check to be paid on presentation. No more bounced checks. The reduced time for clearing third-party checks is an added confidence boost. Successful implementation of this option will effectively reduce demand for cash for business transactions and make ATMs obsolete machines, thereby settling the ATM saga once and for all.

Chris Enyinnaya, author and Fellow Chartered Institute of Bankers [email protected]