This paper tends to examine the cashless
policy introduced by the apex bank of Nigeria in 2012 and placing it side by
side with vision 20, 2020 of the country and then ascertaining the feasibility
of actualizing this vision in the next five years.
1.0 INTRODUCTION
In
2012, the Central Bank of Nigeria (CBN) introduced a new policy on cash-based
transactions which stipulates a ‘cash handling charge’ on daily cash
withdrawals that exceedN150,000 ( now N500, 000) for individuals and N1,000,000
( now N3, 000,000) for corporate bodies. Third
party cheques above N150, 000 shall not be eligible for encashment over the
counter. Value for such cheques shall be received through the clearing house.
The new policy on cash-based transactions (withdrawals) in banks, aims at
reducing not eliminating the amount of physical cash (coins and notes)
circulating in the economy, and encouraging more electronic-based transactions
(payments for goods, services, transfers, etc.). The pilot (Phase 1) was run in
Lagos State from January 1 2012( the Charges took effect on March 30th,
2012) while Phase 2 of the policy took effect in Rivers, Anambra, Abia, Kano,
Ogun and the Federal Capital Territory (FCT) on the 1st July, 2013 whereas the
charges for these five states started to apply on October 1, 2013. The policy was
implemented nationwide on July 1st, 2014, whereas the charges on withdrawals
for both individual and corporate account holders, the regulator said, would
only take effect in the 30 States from July 1, 2015. However, while the policy
applies to all accounts, the exceptions are Government revenue generation
account, Primary Mortgage Institutions, Microfinance Banks and Embassies.
Cashless
economy is not the complete absence of cash, it is an economic setting in which
goods and services are bought and paid for through electronic media. According
to Woodford (2003), Cashless economy is defined as one in which there are
assumed to be no transactions frictions that can be reduced through the use of
money balances, and that accordingly provide a reason for holding such balances
even when they earn rate of return. In a cashless economy, how much cash in
your wallet is practically irrelevant. You can pay for your purchases by any
one of a plethora of credit cards or bank transfer (Roth, 2010). Cashless
economy is an economy where transaction can be done without necessarily
carrying physical cash as a means of exchange of transaction but rather with
the use of credit or debit card payment for goods and services. The cashless
economy policy initiative of the Central Bank of Nigeria (CBN) is a move to
improve the financial terrain but in the long run sustainability of the policy
will be a function of endorsement and compliance by end-users (Ejiro, 2012).
The
Nigerian economy is one of the most developed economies in Africa, however,
outside the petroleum sector, the economy is underdeveloped and it suffers
primarily due to the country’s deficiencies in basic infrastructure.
Widespread poverty, unskilled labor, and lack of industrial resources are also
big challenges for Nigeria.
The
government’s “Vision 20:2020” Plan seeks to position Nigeria as one of the top
20 economies in the world by the year 2020. However ambitious the goal is
in reaching a US$900 billion Gross Domestic Product (GDP) by 2020, the
challenge remains to lay the foundation for industrial competitiveness through
development of adequate infrastructure, economic models, technical training,
and professional experience. Sound fiscal management will
be required to maintain low interest and inflation rates, enabling
industries to prosper and hire workers which in turn will create taxable
revenue for the government and contribute to the stability of the naira.
Vision 20:2020 Development Plan
Focuses on Physical Infrastructure (i.e Power, Transportation, Oil
& Gas Infrastructure, Housing,
Water Resources), Productive Sector ( i.e
Agriculture & Food Security, Oil & Gas, Manufacturing, Small
& Medium Enterprises (SMEs), Solid Mineral & Steel Development, Culture
& Tourism, Trade & Commerce,
Human Capital and Social Development ( i.e Education,
Health, Labour, Employment & Productivity, Women Affairs & Social
Development, Youth Development, Sports Development, Food & Nutrition,
Social Protection & Safety Nets)and
Developing a Knowledge-based Economy( i.e Information &
Communications Technology Sectors, Postal Services Sub-Sector, Science,
Technology & Innovation Sector). Vision 20:20 20 blueprint expresses
Nigeria’s intent to improve the living standards of her citizens, taking
cognizance of the enormous human and material resources in Nigeria and drive
the economy to be among the top 20 economies in the World with a minimum GDP of
$900 billion and a per capita income of no less than $4000 per annum. The
economic blueprint intent is aptly captured in the vision statement: “By 2020
Nigeria will have a strong diversified, sustainable and competitive economy
that effectively harnesses the talents and energies of its people and
responsibly exploits its natural endowments to guarantee a high standard of
living and quality of life to its citizens”
Among
the various reasons that informed the introduction and implementation of
cashless policy in Nigeria is, according to the apex bank, ‘‘to
drive development and modernization of our payment system in line with
Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year
2020. An efficient and modern payment system is positively correlated with
economic development, and is a key enabler for economic growth’’. Whilst
holding constant every other focus of vision 20, 2020 development plan, this
paper examines the feasibility of attaining a near-100% cashless economy in
Nigeria in the next five years.
2.0
WHY GO CASHLESS
In 2012, the CBN had estimated that
over N192 billion was being spent annually on cash handling and management in
the country, an amount that the regulator, the banks and their customers had to
pay for a cash-based economy.
The apex bank had in 2010 commissioned
a study along with the bankers bank to identify possible ways to enhance
service delivery in the financial sector by reducing the industry cost to serve
as well as institutionalize operational efficiency amongst banks and the study
revealed amongst others, high cash usage in the economy and the attendant high
cost implication in the financial value chain.
As a cash-based economy, a rising
volume and value of currency-in-circulation (CIC) will lead to a continuous
increase in the cost of cash management and according to the CBN with retail and
commercial payments primarily made in cash, the cash transactions represent
over 99 per cent of customer activity in banks.
The statistics from the study revealed
that about 86 per cent of in-branch bank cash withdrawals are less than
N100,000 in value, while less than 10 per cent of transactions are more than
N100,000. But only 10 per cent of branch cash transactions are above N150,000
and make up 86 per cent of the volume of cash handled.
This means that about 90 per cent of
bank customers end up paying for servicing the cash of a minority 10 per cent
who actually move the larger chunk of cash in the banking halls. It was also
observed that high cost structures of banks were responsible for poor lending.
This huge amount involved in cash
servicing had kept on growing year-by-year and this formed part of the basis
for the cash-lite economy being initiated by the apex bank that took off with a
pilot stage in Lagos in 2012 and extended to other states last year.
The cash policy aims to curb some of the
negative consequences associated with the high usage of physical cash in the
economy, including:
- High cost of cash: There is a high
cost of cash along the value chain - from the CBN & the banks, to
corporations and traders; everyone bears the high costs associated with
volume cash handling.
- High risk of using cash:
Cash encourages robberies and other cash-related crimes. It also can lead
to financial loss in the case of fire and flooding incidents.
- High subsidy: CBN analysis showed that only
10percent of daily banking transactions are above 150k, but the 10percent
account for majority of the high value transactions. This suggests that
the entire banking population subsidizes the costs that the tiny minority
10percent incur in terms of high cash usage.
- Informal Economy: High cash usage
results in a lot of money outside the formal economy, thus limiting the
effectiveness of monetary policy in managing inflation and encouraging
economic growth.
- Inefficiency & Corruption:
High cash usage enables corruption, leakages and money laundering, amongst
other cash-related fraudulent activities.
3.0
HOW IT WORKS
With the cash-lite policy, individual
customers are allowed to make cumulative withdrawal of N500,000 daily across
the counters and the ATM, however withdrawal above this limit will attract the
payment of a processing fee of three per cent for the amount above the limit.
Also corporate customers are allowed to make cumulative withdrawal of N3
million daily while withdrawal above the limit will attract a processing fee of
five per cent.
Although initially, deposits above the
stated limits attracted similar charges, but the new CBN governor, Godwin
Emefiele as part of efforts to further encourage the policy had recently
scraped the charges on withdrawal.
Emefiele in his maiden speech where he
unveiled his vision for the finance industry, had mentioned customers’s
complaints on the charges on deposits which had made many devise means to avoid
the charges such as opening multiple account, a move which he described as
detrimental to the cashless policy.
Consequently, he had directed that all
charges on deposits be stopped with immediate effect, while charges on
withdrawals in view of their elimination will remain sustained at the current
three per cent for individual transactions exceeding N500,000 and five per cent
for corporate transactions exceeding N3 million.
Also, the CBN has suspended the charges
on withdrawals in the 30 states which would be experiencing the cashless policy
newly. This means that withdrawal charges will continue to apply to
transactions above the specified limits in Abia, Anambra, Lagos, Ogun, Kano,
Rivers States and the Federal Capital Territory (FCT). With this, charges on
withdrawals for both individual and corporate account holders will only take
effect in the 30 States from July 1, 2015, to allow residents in the 30 states
get accustomed to the policy.
4.0
WHAT OTHER MEANS OF PAYMENT
Since the commencement of the pilot
stage in Lagos in 2012, many Lagosians as well as residents of the six other
states, the Federal Capital Territory, Abia, Anambra, Kano, Ogun and Rivers
states where the second phase kicked off, have made use of other channels of
payment with many more making less use of cash for transactions.
With the policy in place, mobile
banking which allows individuals to send and receive money via their mobile
phones have continued to gain popularity. Likewise many stores now possess
point of sale (PoS) terminals which allows customers pay for goods and services
using their ATM cards.
Other electronic means of payment which
have started gaining prominence include:
cheques, the NIBSS- National Electronic Fund Transfer (NEFT), NIBSS
instant payment, internet banking, standing order, direct debit, credit cards,
bank draft and other banking instruments.
5.0 BENEFITS OF THE CASHLESS
ECONOMY
However, experts and
government officials have continued to paint the system in very colorful tones.
For instance, the World Bank says that “operating a cashless society in Nigeria
was strategy for fast-tracking growth in the nations’ financial sector”. If the
World Bank says so, one expects that to be true. Experts have pointed out
specific areas in which the cashless economy will enhance the quality of life.
This includes:
1. Faster transactions – reducing
queues at point of sales.
2. Improving hygiene on
site – eliminating the bacterial spread through handling notes and coins.
3. Increased sales
4. Cash collection made
simple – time spent on collecting; counting and sorting cash is eliminated.
5. Managing staff
entitlements (http://www.wmcltd.com.co.uk/cashlesssystem?2011)
It is also noted that:
It reduces
transfer/processing fees, increases processing/transaction time, offers
multiple payment options and gives immediate notification on all transactions
on customers’ account. It is also beneficial to the banks and merchants; there
are large customer coverage, international products and services, promotion and
branding, increase in customer satisfaction and personalized relationship with
customers and easier documentation and transaction tracking (Ashike, 2011).
E-payments have several
advantages, which were never available through the traditional modes of
payment, some of which are; privacy, integrity, compatibility, good transaction
efficiency, acceptability, convenience, mobility, low financial risk, anonymity
(Keck, 2012).
E-payment tends to benefit
businesses by extending customers base, boosting cash flow, reducing costs,
enhancing customer service and improving competitive advantage (www.electronic-payments.co.uk).
The government will benefit
from the cashless economy in the area of adequate budgeting and taxation,
improved regulatory services, improved administrative processes (automation),
and reduced cost of currency administration and management (Ashike, 2011).
A variety of benefits are
expected to be derived by various stakeholders from an increased utilization of
e payment systems. This includes;
· For Consumers; increased
convenience, more service options, reduced risk of cash-related crimes,cheaper
access to (out-of-branch) banking services and access to credit.
· For Corporations; faster
access to capital, reduced revenue leakage, and reduced cash handling costs.
· For Government; increased
tax collections, greater financial inclusion, increased economic development.
· For Banks; efficiency
through electronic payment processing, reduced cost of operations and increased
banking penetration. (Oyetade and Ofoelue, 2012).
Other expected benefits include:
It
will reduce the cost of minting and transporting of cash around the country.
It would create more employment opportunity for financial
sectors and ensure growth in the real sector of the economy because of the
increase in velocity. This would not only ensure that credit is available to investors
but also provide banks with more liquidity for lending to the needy sectors of
the economy at attractive rates.
6.0
CASHLESS SUCCESS SO FAR
Within two years of implementing the
cashless policy of the CBN, it gladdens the heart to note that the value of
interbank transfers, captured through the Nigerian Inter-Bank Settlement System
(NIBSS), jumped from N51 billion monthly in January 2012 to over N1.5 trillion
as at June 2014. In volume, NIBSS transfers rose from 87,000 transactions a
month in January 2012 to 3.1 million transactions a month as at June 2014.
According to recent figures NIBSS,
volume of Point of Sale (PoS) transactions increased astronomically from less
than 2000 monthly as at January 2012 to 2,637,000 in December 2014, while
transactions in value moved up from N38 million per month in 2012 to N39
Trillion in December 2014. Licensed
payment terminal service providers authorised to increase POS terminal
penetration increased from 5 to 10 with over 150,000 POS terminals across the
country as at June 2014. The CBN has a target to increase the POS terminals to
at least 350,000 by 2015.
In an update report on the cashless
policy, the CBN indicated that at the moment, mobile money transactions value
went up to N819 million monthly while over 18 Mobile Money Service Providers
have already secured licenses and more payment terminal service providers
(PTSPs) have been licensed to facilitate the positioning of POS’s for merchants
who have indicated interest to their banks.
Likewise, the volume and value of
cheques transactions increased to 1.2 Million and N645 Trillion in December
2014 from, 940 Thousand and N584 trillion as at January 2013, reflecting
increases of 27.66 and 10.45 percent respectively.
More so, the Nigeria Interbank
Settlement System Instant Payment (NIP) transactions recorded an increase in
volume and value to 40.8 Million and N19.922 trillion as at December 2014 from
16.1 Million and N10.845 Trillion as at December 2013, indicating increase of
153.42 and 83.70 percent respectively.
Mobile payments (Inter-scheme Transfer)
transactions recorded a whopping increase in volume and value to 419,480 and
N12, 958.25 Trillion as at December 2014 from 56,720 and N1, 389.5 Trillion as
at December 2013 reflecting increases of 639.56 and 832.58 percent
respectively.
The web-based/Internet Payment platform
introduced by NIBSS in 2012 has continued to record tremendous growth. As at
December, 2014, web/internet payment (E-Bills Pay) transactions stood in volume
and value at 112,060 and N9, 156.86 Trillion respectively.
Whilst the number of ATMs stood at
11,702 at end-June 2013 as against the revised figure of 10,727 at end-December
2012, reflecting an increase of 9.09 percent, the volume of ATM transactions
decreased by 30.6 per cent to 136.663 million during the first half of 2013,
from 196.995 million in the second half of 2012. Also, the value of
transactions rose to N1.286 trillion at end-June 2013, from N1.046 trillion in
the second half of 2012, showing an increase of 22.9 per cent.
7.0
A LOOK AT COUNTRIES OF THE WORLD THAT ARE CLOSE TO 100% CASHLESS
The journey towards a cashless world is
like a gradual trek toward electronic payments shaped by local factors even as
cash accounts for about 85% of global consumer transactions. This remains true
even as much of the world’s population is gaining access to a multitude of
non-cash options for making payments.
MasterCard Advisors introduced a
new global report, “The Cashless Journey,” that reveals how major economies are
progressing from cash-based to cashless societies. The cashless journey
explores the evolution of consumer payment patterns in 33 countries from five
regions, representing more than 85% of global GDP, taking in both developed and
developing nations, using a single methodology.
The study focuses on the value of all consumer payments ($63
trillion in total spend), including those that happen beyond retail point-of-sale.
In 2011, 34% ($21 trillion) of total global consumer spend was done with cash,
with cashless payments accounting for 66% ($42 trillion).
In examining consumer payment patterns around the world,
researchers find that nations fall into one of four stages in their cashless
journey. They are:
- Nearly Cashless: Countries at this final stage of
the journey have moved the vast majority of the value of consumer payments
to cashless methods. Many countries at this stage are seeing growth of use
of cashless solutions for low value payments, such as PayPass. They include: Belgium (93%), France (92%),
Canada (90%), Sweden (89%), the UK (89%), Netherlands (85%), Australia
(86%).
- Tipping Point: Countries at this stage of the
journey have moved most large consumer payments to cashless methods, but
significant use of cash may still persist at retail point of sale. They
are at the point where consumer preferences will drive future share shift.
They include: the United States (80%), Germany (76%), South Korea
(70%), Singapore (69%), Japan (62%).
- Transitioning: Countries at this stage have
created the requisite infrastructure to go cashless, and are shifting
share of consumer payments, often quite rapidly. These countries are
underway on their cashless journey. Countries like Brazil (57%),
China (55%), Spain (54%), Mexico (53%), Malaysia (45%), Greece (44%),
Italy (44%), South Africa (43%), Taiwan (43%), Poland (41%),
Thailand (41%).
- Inception: Countries
just beginning their cashless journey. Many of these countries are still
building the infrastructure necessary to move away from cash. In these
places cash still accounts for the large majority of the value of all
consumer payments. They Include: India (where 32% of the value of
consumer spend is cashless), Russia, Indonesia (both 31%), Kenya (27%),
United Arab Emirates (26%), Colombia (24% ), Peru (23%), Saudi Arabia
(19%), Nigeria (10%), Egypt (7%).
Each
of the countries at the first stage above is an illustration that a true
cashless society is indeed possible and that once the relative barriers are
eliminated, any country can rapidly switch to cashless payment methodologies. A
brief description of them will shed more lights on how they attained their
respective heights.
Belgium
Noncash payments’ share of total value
of consumer payments: 93%
Percent of population with a debit
card: 86%
Belgium has clearly become one of the
most advanced countries in the cashless world. The nation’s government has
given a high priority to making payment systems more efficient. A majority
of the population in the country is urban and has a high level of access
to financial services, modern infrastructure and latest technologies. An
interesting fact to be noted is that the Belgian government has imposed a limit
on cash payments limiting it to 3000 euros. There are many instances of
revolutionary payment propositions in Belgium. A new mobile payments venture
was recently launched in Belgium dubbed as “Sixdots”. Available as a mobile app
for iOS and Android users, it allows users to set up digital payments wallets.
These wallets are supported by Belgian banks and the mobile operator Proximus.
France
Noncash payments’ share of total value
of consumer payments: 92%
Percent of population with a debit
card: 69%
France’s success in moving away from
cash comes in part from its high level of banked population (97%) and also from
a long-standing government focus on the efficiency and financial inclusion aspects
of payments. France has been actively focused on payments innovation, bringing
to market new solutions such as mobile payments, contactless cards, and m-POS
to meet the diverse payment needs of French consumers. On February 13th,
2014, Visa Europe and Orange announced the commercial launch of Orange Cash in
Strasbourg and Caen. These two cities are considered to have the highest usage
of contactless payments in France. This launch made Orange the first mobile
network operator in France to offer contactless mobile payments to its
customers.
Canada
Noncash payments’ share of total value
of consumer payments: 90%
Percent of population with a debit
card: 88%
Canada has shown a high level of
progress as highlighted by its nearly comprehensive financial inclusion
(96% of Canadians aged 15 and over have a bank account) and a long-standing
government focus on optimizing national payments systems. Much of the nation’s
success in cashless initiatives can be attributed to early adoption of debit
card POS usage, and the early, rapid uptake of MasterCard PayPass, which has
opened up the category for other networks’ NFC-enabled low value payment
solutions. In Canada, 78.1% merchants have adopted POS systems, and there are
about 2.13 POS per merchant store in the country. The market size of mobile POS
and contactless POS are growing at rates of 9.2% and 16.4% respectively.
United
Kingdom
Noncash payments’ share of total value
of consumer payments: 89%
Percent of population with a debit
card: 88%
UK is typically seeing cash used for
low value retail purchases, and even these are being targeted with new
solutions like PayPass. Very few locations in UK remain where cash is the only
means of payment, and new access points are coming up where consumers can use
contactless cards, like on toll roads and transport, as there is greater
consumer interest in such solutions. In UK, there are 1,326,333 POS terminals,
and within that base, the mPOS and contactless POS markets are growing at rates
of 14.3% and 26.7% respectively. UK’s popular mobile payment system. Paym. has
crossed 26 million pounds in transaction volume. Two thirds (66%) of the UK
population is aware of mobile payments, with more than half (52%) of those with
knowledge of mobile payments aware of Paym.
Sweden
Noncash payments’ share of total value
of consumer payments: 89%
Percent of population with a debit
card: 96%
The country has witnessed broad usage
of debit cards for retail payments. Further movement away from cash continues
to come slowly through erosion of cash share of low value payments, through
uptake of products like PayPass and emerging solutions for transit payments
using smartphone applications. As Sweden has long set out to reduce cash usage,
Swedish governments have strived to make electronic payments available,
affordable and ubiquitous. Contactless payments represent a €9.5 billion
opportunity in Sweden. Top Swedish mobile operators such as Telia, Tele2,
Telenor and Three had launched WyWallet, a mobile payments offering that
provides mobile wallet services to 97% of Swedish mobile phone users and
includes support for NFC.
Australia
Noncash payments’ share of total value
of consumer payments: 86%
Percent of population with a debit
card: 79%
In Australia, efforts are being taken
to reduce the share of cash for low value transactions. Payments networks in
Australia including MasterCard and EFTPOS have recently introduced new pricing
regimes designed to capture a greater number of low value payments, and efforts
are now being made to improve acceptance of low value payment solutions across
the country. Australians are favoring contactless payments day-by-day, ditching
traditional payment methods. Even merchants are seeing a high demand and are
rolling out specialized terminals to cope up with the trend. More than 58
million Visa PayWave payments were made in July alone last year. In Australia,
mobile-based contactless payments have accounted for 60% of all debit-card
transactions in a 12 month period starting November 2013.
The
Netherlands
Noncash payments’ share of total value
of consumer payments: 85%
Percent of population with a debit
card: 98%
The number of cashless or ‘cards only’
registers in Dutch supermarkets have increased significantly over the past few
years. In part, this growth came as a result of the national Hotspot Project
that began in early 2012 by the Foundation for Promoting Efficient Payments
(SBEB). The goal of the initiative was to increase safety and convenience for
consumers in stores that accept debit cards. Last year, shoppers used direct
debit cards to buy goods and services over 2.9 billion times. Scan-only
payments are also witnessing considerable growth and accounted for 8.3 million
sales last year. (Source: MasterCard Advisors’ “Cashless
Journey”, CNBC)
7.1 WHERE IS NIGERIA STANDING?
Based
on the research findings above, it is evident that Nigeria is still at the
inception stage on her journey to cashless economy. This, if considered on the
surface, may suggest that Nigeria is still backward, but then, considering the
fact that Nigeria just joined the cashless journey in January, 2012, this
result can be excused, as other countries have put in many years to the
journey, hence their heights!.
However,
Nigeria’s journey to becoming one of the top 20 countries in 2020 has been a
remarkable one. In terms of GDP, Nigeria has moved up 11 steps to number 26th
largest economy globally ahead of South Africa, following the outcome of the
April 2014 reclassification of the based year of the Gross Domestic Product
(GDP) from 1990 to 2010.
The country’s GDP increased by 75.58 per cent from $258.55 billion before the
rebasing to $453.96 billion. The new GDP places Nigeria ahead of countries like
Austria with $394.7 billion; Venezuela with $381.26 billion as well as
Columbia, Thailand, Denmark, Malaysia and Singapore among others which has
$369.6 billion, $$365.96 billion, $$314.88 billion, $274.7 billion and $269.86
billion respectively. On the continent, Nigeria now ranks number one ahead of
South Africa which currently has a GDP of $384.3.
Even
in the midst of this encouraging result, greater percentage of Nigerians have
expressed mixed feelings regarding the real-life positive impact of this
hypothetical rebasing. Majority opined that this rebasing has not added food on
their table, that ‘Nigerians cannot eat GDP’, that it has not added one kobo in
their bank account. It is not yet time to rejoice since this result has not
made poverty, unemployment among others, to disappear.
The
reasons why Nigeria’s journey to cashless economy has not been so smooth cannot
be far-fetched. First on the list is the issue of
security. As electronic banking continues to gain popularity on the back of the
cashless policy, electronic fraud has also upped its tempo with many
unsuspecting bank customers falling victim to the fraudsters. Unauthorized
withdrawals from ATM have continued to be on the increase, even as fraudsters
hack into the online banking platform to dupe bank customers.
Aside this is the infrastructural
challenges which apply to many of the channels as well as the charges that
customers incur. Not all ATMs in the country function optimally and some are
mostly without network frustrating bank customers who want to make withdrawals.
Most customers after having stayed on the queue for so long and it gets to
their turn to make withdrawal, the message such as ‘Your financial
institution is not available’ or ‘The ATM machine is out of service’, unfortunately
crowns their efforts, leaving them frustrated.
Incidences where customers are debited
without being paid by the machine and instances when customers are debited
twice in course of transaction while using the ATM’s machine are still rampant.
This issue will have to be tackled too.
Similarly, the problem of poor network
connectivity has not been addressed as expected. Due to vast number of people
using the cell-phones, telecommunications companies pay more attention to voice
clarity services rather than network connectivity because they make more money
on voice than data. Therefore, network availability is still inconsistent. This
is also a hindrance to mobile money transactions.
Besides, experience has shown that many banks are still in
the habit of charging high rates on transactions especially when one needs to
transfer money from his bank account to another bank account either within same
bank or to another bank.
Other
challenges include:
Literacy Levels (“Numeracy” versus
literacy): As noted in any
developing country, the literacy rate in Nigeria is still very low especially
in the Northern part of the country. Hence, the business men there prefer to
keep their money in their own vault while there are banks scattered all over
the country.
v. Religious beliefs: Recently there has been psychological war
in the country over the proposed Islamic bank by the CBN. The Muslims believe
that the conventional banks are guilty of sinning against God by their interest
charges. This has been one of the reasons why the achievement of the cashless
Nigerian society is doubted.
8.0
ESSENTIALS OF A CASHLESS
ECONOMY
For a cashless economy to
work certain factors must be present, not just present but in the right
quantity and quality. It is for this reason that many analysts question the
readiness of Nigeria for a cashless system, amongst others. Very vital among
these factors is infrastructure. The following factors below are essential for
Cashless economy to be seamlessly achieved:
·
Power ;
power must be improved dramatically to accommodate for smooth operations of
financial activities.
·
The state of infrastructures ; the financial infrastructure in Nigeria is not adequate to carry
the load of a cashless society, ATMs, point of sales system, mobile banking and
other mediums have to dramatically expand to touch at least 40% of the whole
economy before any meaningful effect can be achieved.
·
Availability of real data ; proper and accurate identification of account holders must be
maintained and shared when necessary by all financial institutions; also CBN must
collaborate with all other government and private agency responsible for
collection of identification of individuals in Nigeria for reconciliation of
any identification.
·
Investments ; CBN must be ready to invest heavily to make these transition
possible. Technology is not cheap and ever changing at a very fast pace.
Investments in billions of dollars made in infrastructure, training, marketing,
security, maintaining its networks and so on will be on a yearly basis for the
years to come and should be a collaboration of efforts by all invested parties.
·
Security ; as it relates to laws, there are needs to enforce new methods of
transactions and a changing culture, the CBN must partner and work with the
National Assembly to ensure proper legislation is been formulated. Enforcements
of new legislation would be carried by the CBN and all other executive arms
that are empowered such as the EFCC. They must commit to training of personnel
and the judiciary must be prudent and up to the task (www.reinventrebuild.com/nigerione.php). Also, the security of
the proposed and existing systems of payment must be enhanced to protect the
users from malware, hackers, fraudsters, viruses and identity theft.
·
Sensitization ; there is still need for the greater populace to get acquainted
with this policy thrust, appraise them of its merits, address their concerns
and enlist their commitment.
·
Technical Know-how/ Expertise
The production of POS machines should be awarded to companies that
have the technical expertise. Sufficient Quality and durable POS Machines
should be available and deployed accordingly. Experienced and skillful
repairers should be handy to handle breakdown cases.
·
Network Service Providers: Information technology
security experts in Nigeria have warned that, except the Central Bank of
Nigeria and other regulatory agencies in the financial sector ensures that
service providers adhere to minimum security standards on their web-based
platform, the current move by the country towards a cashless economy may end up
being a fruitless exercise
9.0 HOW FAR, HOW WELL?
The road to cashless
economy in Nigeria has not been a smooth one. Granted, there have been lots of
detours, potholes, gallops and gullies on the road. Nevertheless, the apex bank
has not been resting on its oars: so many policies, decisions, programs have
been initiated towards achieving the cashless economy cum 2020 vision. Permit
the writer to enumerate some of them below:
·
Communication/
Sensitisation: Extensive stakeholder sessions were held in Lagos ans other
states to get feedback from the users of the Cash policy. Mass communication on
TV and Radio (multi-language); Social media (Facebook, Twitter, cashless
website), billboards, public transport, etc has been on full swing and is
ongoing. The sensitization of
CBN staff bank-wide began with the Bank’s Knowledge Sharing Session in May
2012. Collaborating with Branch Controllers for seamless rollout to other
states. There has been various interviews on radio and TV in different states,
while engagement of groups, associations, etc. is ongoing on invitation basis.
·
POS
Deployment Status: In August 2011, CBN Issued POS Guidelines, Negotiated
discounts with POS manufacturers, Licensed Payment Terminal Service Providers (PTSPs)
and Payment Terminal Service Aggregators ( PTSA), Encouraged banks to order and
deploy POS Monitor performances of banks, PTSA, PTSPs in respect of POS
deployment. POS deployment has been on the increase since December 2011. The
cumulative number of POS deployed /connected to NIBSS CTMS stood at over
150,000 as at June 2014. The target of purchasing at least 10,000 POS terminals
per vendor has been met for three vendors. Just recently, the CBN has granted
approval of 3GEE Pay Ltd as a new PTSP to pioneer biometric Point of Sale (POS)
system. Registered merchants reached an all-time high at 151,717 as at July
2012. The gap between registered vs deployed, is mostly due to lack of capacity
on the part of the PTSPs to meet the demand.
·
Fraud
management on the electronic payments landscape: Nigeria achieved changeover from magnetic
stripe based payment tokens and channels to CHIP +PIN compliant channel and
tokens in 2010 in a bid to stem fraud in electronic payments thereby recording
over 90% drop in card related fraud incidences. The CBN instituted an industry
ATM Anti-Fraud Committee which has been recently up scaled to E-Payment Fraud
Forum. This group ensures that CBN anti-fraud mechanism is kept abreast of new
challenges for proactive response. Credit/ Settlement Risk has been reduced by
shorter clearing cycle. The CBN now has a Payments System Policy and Oversight
Office which is saddled with the effective monitoring and regulation of the
payments system. Just recently, the CBN has introduced Bank Verification Number
(BVN) Initiative to strengthen the security of banking transactions and to
ensure that fraudulent transactions are minimized, if not totally eliminated.
·
Consumer
Protection and Dispute Resolution: The CBN Created
The Nigerian Electronic Fraud Forum (NEFF) to formulate cohesive and effective
fraud risk management strategies. Additionally banks were made to publicise
their complaint desk contacts as CBN leads the way in equally informing the
public to contact our desks when there are deviations from the guidelines in
the resolutions of their issues as promptly as stipulated. While the process of
establishing the Office of the Ombudsman for financial services is ongoing, the
CBN has created a Consumer and Financial Protection Department to strengthen
users’ confidence and promote adoption.
10.0
CONCLUSION
This paper has examined the
cashless policy introduced in Nigeria vis-à-vis the vision 20: 2020. Whereas it
has been noted that Nigeria is still at the inception stage when compared to
other countries of the world, and whereas it is also evident that so many
challenges militate against the success of the policy in Nigeria, and whereas
the apex bank has not rested on its oars with respect to addressing the
challenges; it is the submission of the writer that “all hands must be on deck”
for the policy to scale through and the vision to be actualized.
Granted, it is barely five (5)
years to year 2020. But with the right system(s)/ institution(s) in place,
there will be a positive turnaround. The secrets behind the success stories of
countries like Belgium, France, Canada, UK, Sweden, to mention but few, can be
copied and pasted in Nigeria.
In the meantime, as an individual
reading this paper, all you need to do is simple:
·
Sign-up
for a Debit Card with your bank today! (Various types, many benefits)
·
Use
your card for payments –ask merchants for their card options
·
Sign-up
for electronic products (Internet Banking, Mobile Banking, etc)
·
Inform
and educate your circle of influence –spread the word!
Also, as an Organisation/Institution/Corperation:
·
Report
positive of the Cash policy and e-payment drive. As well as users-industries,
stores, churches, etc.
·
Use
Electronic payment Methods for Salaries
·
Provide
customers with electronic options for payments to you (discourage use of cash
payments –e.g. cash limits)
·
Pay
your contractors/3rdparties electronically
With
this in place, the road to cashless economy in Nigeria will be smoother and by
2020, Nigeria would have migrated from the Inception Stage to an advanced
stage, while still actualizing her vision of being among the top 20 economies
of the World. Don’t forget, Nigeria at present is the 26th economy
of the world. It is feasible!
REFERENCES:
3. Central
Bank of Nigeria (2012). “Towards a
Cashless Nigeria: Tools and Strategies.” CBN Presentation at the 24th
National Conference of Nigeria Computer Society Held at Uyo, Nigeria. From
Wednesday 25th –Friday 27th July. Retrieved from http://www.NCS.org/presentations/
5. Central Bank of Nigeria (2011).”Guidelines On Point Of Sale
(POS) Card Acceptance Services” Retrieved
from http://www.cenbank.org
6. Ejiro,
O. (2012): What Nigerians Think of the Cashless Economy Policy. Nigerian
Journal of Economy. 4(6), 97 –102.
9. http://www.nibss-plc.com.ng/reports/
10. Nigeria
Vision 20: 20 20 (2009). “Economic Transformation Blueprint”.
Nigeria: National Planning Commission.
12. P.V.C
Okoye and Raymond Ezejiofor(2013). “An Appraisal of Cashless Economy Policy
in Development of Nigerian Economy”. Retrieved from Research Journal of Finance and Accounting, Vol. 4,
No. 7, 2013(www.iiste.org)
13. Roth,
B. L. (2010). “The Future of Money: The
Cashless Economy – Part 1”. Retrieved from
https://www.x.com/.../
14. Sola Alabadan(2014, August 3). “Ensuring the
success of cashless policy in Nigeria”. Retrieved
from http://dailyindependentnig.com/2014/08/
15. Tope
Aladenusi and Amaka Azike(2011, December 19) “Cashless Society: Is Nigeria ready
for the information security challenges?”. Retrieved
from http://www.vanguardngr.com/2011/12/
*Nwaokocha,
Courage C. is an Associate member of the Institute of Chartered Accountants of Nigeria
(ICAN).
