The Central Bank of Nigeria’s (CBN) plan to reduce the amount of cash in circulation by limiting cash withdrawals by January is likely to see many Nigerians switch to electronic payment channels. The apex bank is hoping this reduces the overwhelming preference for cash transactions which continues to undermine the push for financial inclusion.
The channels the CBN is hoping would gain more traction include the internet (web), Point-of-Sale (PoS), mobile money, NEFT, USSD, mobile app transfers, and ATMs.
The central bank, while insisting there is no going back on the policy, urged Nigerians to embrace the multiple channels for their daily transactions.
It is the most drastic step the apex bank has taken since it began its cold war on cash in 2012 with the introduction of the cashless policy. Cash transactions remain the most preferred payment channel for many Nigerians.
But electronic transactions are also growing significantly. For example, data released by the Nigeria Inter-Bank Settlement Systems (NIBSS) showed that transactions worth N32.8 trillion were performed electronically in September through the NIBSS Instant Payment platform (NIP).
According to the industry data, cashless transactions in Nigeria rose by 41.75 percent to N318.66 trillion in 11 months, this year.
There was a decline of 1.2 percent in September 2022 compared with the value of electronic payment transactions recorded in August, which stood at N33.2 trillion.
The NIP sees the most transaction value. The NIP is an account-number-based, online real-time inter-bank payment solution developed in 2011 by NIBSS. It is the Nigerian financial industry’s preferred funds transfer platform that guarantees instant value to the beneficiary.
Total NIP transactions for the 11-month period was N311.81 trillion and PoS transactions amounted to N6.85 trillion, indicating a solid uptake in digital payments in the country.
NIP transactions rose to N31.7 trillion in June 2022, a 37 percent growth over N23.1 trillion posted at the same time in 2021.
In September, the NIP transactions value rose to N32.8 trillion, a 39.5 percent increase compared with the N23.5 trillion recorded in September last year.
October’s figure stood at 34.5 trillion, also a 42 percent growth over the N24.3 trillion recorded in October 2021.
The policy would not eliminate the use of cash in the financial system. If anything, it might see some bank customers restrategise on how to access cash from the system. Lotan Nwodo, a legal practitioner, said it could lead to the creation of a black market for naira where, for example, people can sell their N100,000 limit for N2,000 (lesser than the applicable charge) and it could also incentivise the opening of multiple banks accounts.
“We will also record growth in the number of new bank accounts, which will not necessarily mean that more Nigerians are using the banks. It would be people opening accounts using fronts (aged parents, students, other proxies), and curbing this will be expensive,” Nwodo said.
The policy doesn’t state clearly whether the N100,000 limit is restricted to individual accounts or tied to Bank Verification Number (BVN).
“This is one area the policy still needs to address. Can Mr. A withdraw N100,000 from different banks per week? Or is the N100,000 strictly per person per week, which will be monitored using BVN? Whatever it is, I think cashless is the way to go. It might not be convenient at first,” Chris Emoghene, a data analyst said.