THE IRONY OF GOING CASHLESS TO GROW ECONOMY
Recently, the Central Bank of Nigeria announced a new policy on cash-based transactions that stipulates a cash handling charge on daily cash withdrawals and deposits that exceed N500, 000 for individuals and N3m for corporate bodies. The announcement met an outrage from some stakeholders including members of the House of Representatives, financial experts and National Association of Nigeria Students.
The Apex Bank had directed that implementation should begin from September 18 in Lagos, Ogun, Kano, Abia, Anambra, and Rivers States, as well as the Federal Capital Territory. It stated that nationwide implementation of the cashless policy would take effect from March 31, 2020. Clarifying the directive, the Director, Corporate Communication Department, Mr Isaac Okorafor, said that when an individual deposited N510,000, the two per cent charge would be on the N10,000 excess. This would amount to N200.
He said the same applied to a withdrawal of same amount, adding that the three per cent charge would be on excess of the set limits. The Apex Bank aims at reducing and not eliminating physical cash circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, among others).
With the move, it is hoped that the nation’s economy would be able to compete favourable with 20 other economies by year 2020 in the cashless economy space. It is also expected that the move would catalyse the process of financial inclusion. The PUNCH had reported that currency in circulation in 2019 in the first nine months of the year hovered around N2tn per month.
This implies that the nation’s economy is awash with cash, resulting in a lot of money outside the formal economy. This limits the effectiveness of monetary policy in managing inflation and encouraging economic growth, according to experts. Statistics obtained from CBN showed that in 2018, the currency in circulation stood at an average of N1.9tn. This implies that the currency in circulation has been growing despite growth in modern electronic means of payment.
Some of the negative implications of an economy highly saturated with physical currency include corruption, leakages and money laundering, amongst other cash-related fraudulent activities. The CBN Governor, Mr Godwin Emefiele, says efforts had been geared at driving the cashless initiative across the country.
He said immense efficiency gains would be derived from a cashless policy and that it would have positive impact on the nation’s financial inclusion drive. Highlighting his five-year plan in June, Emefiele said, “A strong emphasis will also be placed on improving speed and efficiency of payments channels, while working to ensure that digital channels are safe and secure. This will help to build confidence in our nation’s payment system.
“In order to improve the utilisation rate, we will continue to ensure that payment channels are interoperable, which will enable individuals with digital devices to transact across different banks or payment modes.
“Through measures such as the cashless initiative, USSD, mobile banking, agent networks and Payments Service Banks, Nigerians can expect to see significant improvements in the payment systems infrastructure over the next five years.”