Lagos – The Central Bank of Nigeria (CBN) on Wednesday waived the daily cash withdrawal limit of N1 million for some customer of Primary Mortgage Institutions (PMIs) and Microfinance Banks (MFBs).
A circular by Mr Giaus Emokpae, Assistant Director (Banking and Payment System) in the CBN, said that the waiver was due to the nature of their businesses.
“It has come to our notice that some Deposit Money Banks apply cash withdrawal/deposit limits for corporate organisations to PMIs and MFBs.
“PMI and MFBs are specialised banks under the new banking model which have customers that maintain savings demand and time deposit accounts with them.
“As deposit-taking institutions, they are obliged to honour the withdrawal requests of their customers and other deposit obligations.
“It is imperative to note that the aggregate withdrawal by the depositors of MFBs and PMIs per day could exceed N1 million.
“Thus necessitating those institutions to withdraw over N1 million from their correspondent banks in order to service their customers,” the circular said.
It streesed that by this directive, withdrawal and deposit by microfinance banks and primary mortgage institutions had been excluded from the policy of N1 million limits for corporate bodies.
The CBN, however, said that the cash withdrawal and deposit limits were applicable to customers of MFBs and PMIs.
The cash withdrawal limit policy started in Lagos on Jan 1 and will be extended to other states by June.
Under the directive, individuals are not allowed to withdraw more than N150,000 per day while withdrawal by corporate organisations should not exceed N1 million.
The objective is to reduce business transactions with cash.
THE much talked about Cashless Lagos, commenced on January 1, 2012, amid anxiety among customers and bank employees. In a country where a greater number of the citizenry are in the informal sector, many wonder how the policy can achieve its set objectives. CHARLES KUMOLU writes
THE beginning of the year is indeed a new one for Nigerians, as it came with a lot of changes which have altered the living habit of Nigerians in different ways.
Before the untold hardship that trailed the new-year day removal of fuel subsidy on petroleum products, took its toll on people, Nigerians, especially Lagosians, were already gripped with the fever of adjusting to the cashless policy introduced by the Central Bank of Nigeria,CBN.
The policy which among other reasons, seek to curb some of the negative consequences associated with the high usage of physical cash in the economy, is already generating divergent feelings across different quarters.
Investigations by VanguardFeatures,VF, indicated that the policy which took effect on January 1, this year, started amid confusion, as customers still engaged in cash transactions above the limit, as most of them claimed ignorant of the policy.
Besides, it was also gathered that most bank operators are yet to know more about the policy.
At some commercial banks visited, customers still made deposits and withdrawals far above the N150, 000 for individuals and N1 million for corporate organisations, specified by the CBN.
“I don’t really understand what it means, I have seen the advert on television but I don’t know which is which. How can this kind of thing work in Nigeria? We are not ready for this scheme because we don’t have the sophistication that it requires,”a customer, Obinna Akuluono told VF at UBA Wharf road branch Apapa.
Also, a visit to Oceanic Bank Randle Road Apapa, indicated that customers conducted transactions in their usual banking manners. But the same issue of the populace not being prepared for it also came up, as most customers expressed frustration that cashless economy would make banking transactions expensive among other reasons.
At Cash and Carry supermarkets at Apapa, customers preferred paying cash for their goods, even though there is an alternative for payment.
Sensitisation of customers
Despite this anxiety, it was gathered that the CBN and most commercial banks had before now, sensitised its customers and staff on what the policy entails.
Accordingly, the apex bank begun its awareness campaign on Monday 26 September 2011 at Ile-Epo market in the Ipaja and Abule-Egba axes of Lagos. The campaign tagged, “Towards Cashless Lagos” was later taken to other major markets within the state to sensitise market men and women. And, according to the CBN, the traders embraced the new initiative. A similar exercise was undertaken by Fidelity Bank Plc within the Lagos area to complement the apex bank’s efforts.
But the growing frustrations on the part of customers and bank employees, have raised questions on whether the policy would actually impact positively on the populace.
Instructively, VF gathered that the emergence of e-payment, as cashless method of transaction is also known, could be traced to early 2011, when CBN announced that single daily cash withdrawal limits for individuals would be N150, 000 and N1 million for corporate bodies cost free.
The policy provided for charges on withdrawal in excess of the specified amounts and also proposed innovative practices that would substantially minimise the operational costs of banks, ensure improved security for transactions, translate to huge benefits for the economy and align the national payment system with internationally recognised order.
Specifically, the apex bank stated that the new cash policy was introduced for the purposes of driving development and modernisation of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020; reducing the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach; improving the effectiveness of monetary policy in managing inflation and driving economic growth.
Tackling of cash related transaction
Other reasons adduced for the imperativeness of the policy are monetary authorities’ plan to curb some of the negative consequences associated with the high usage of physical cash in the economy. These include, reducing the high cost of cash along the value chain; minimising robberies and other cash-related crimes, eliminating all forms of banking transactions subsidy; ensuring effectiveness of monetary policy by bringing huge volume of money in circulation in the informal sector to the banking system and tackling cash-related corruption, leakages and money laundering, amongst other fraudulent activities.
However, wonderful as the aims of this project may seem, analysts are worried that while there appears to be some level of enlightenment among the elite, the same cannot be said of the informal sector where majority of Nigerians belong to.
Speaking on this, the President of Stovey Finance Group, Mr. Shupo Williams, observed that the policy is commendable, given that it is in line with global practices. But he was quick to add that infrastructure on ground may constitute a challenge to the project.
“What the CBN has done is in line with what obtains in developed societies. E-payement is a good initiative but we must not deny that we don’t have the needed infrastructure for the success of this programme. This cashless drive provides ample opportunity for banks to improve the performance of their service delivery infrastructure. What motivate us from an e-banking perspective are convenience, safety and security. Those are the watch word for us,” Williams stated.
Continuing, he said, “Our economic system is based on cash and carry basis. I am of the view that it is not so developed to the level that people should be mandated to make use of card money.”
In addition, Williams insisted that the policy will enhance convenience and savings on the part of Nigerians and the government, as well as elevate the economy to a more competitive stance internationally.
For Mr. Peter Adegboye, Chairman of Petra Funds and Securities, “ the idea to transform the economy to a cashless one is laudable, all the stress of queuing in the bank, cost of transportation and the danger of carrying large sum of money about will possibly reduce and you can even buy and sell using electronic banking products, but we need to update our existing infrastructure in order to get efficient cashless society.”
Adegboye however faulted the idea of Lagos being selected as a starting point.
He said, “I am against the idea of Lagos being selected for the pilot scheme. They may not get the needed result from Lagos because most people in Nigeria are in the informal sector. States like Edo, Delta or Ogun, should have been used as pilot states..”
New year economic disaster package
Chairman of Lagos State Chapter of African Renaissance Party,ARP, Chief Udoka Udeogaranya, described the policy as a new year economic disaster package to Lagosians, noting that the policy is doomed to a colossal failure right from the point of commencement.
“After an extensive study of the CBN cash-less policy , the African Renaissance Party (ARP) Lagos state chapter wishes to establish that the CBN cash-less policy is.a disaster package,” he noted.
As far as he is concerned, “Lagos state chosen by CBN to experiment their cash-less policy is not ripe for a programme that has to be effective right from the word go. The effectual implementation of an all encompassing cash-less policy has no chance in a state that struggles with poor electricity supply, poor information technology services, poor ITC maintenance units and poor ITC literacy.”
Accordingly, Udeogaranya, said, “Lagos State has the highest number of traders in Nigeria, Lagos state could be called a state of merchants and merchants are allowed to transact by cash world over.
“We dare the CBN governor to visit a merchant city like Guangzhou in China and see how the Chinese government that is austere with economy, yet allowed merchants to have their way there, while industrial cities like Ningbo, Yiwu and Xiemen can thrive with over regulatory financial policies. In the livelihoods of merchants; it’s cash first and prices varies, therefore regulations are minimised.”
Retrenchment of bank staff
He however regretted that the policy might lead to retrenchment in the banking sector, as most bank jobs will be done electronically.
“This Cash-less policy will see retrenchment of bank staff as much of the work will now be pilled up for information technology gadgets to handle and that will culminate into high rate of unemployment that is already a threat to the nation’s security,” he submited.
On the vexed issue of the poor state of the needed infrastructure for the project, Udeogaranya said, “Nigeria does not exist in the world of Information and communications technology (ICT), therefore an introduction of cash-less policy in a state like Lagos will receive a besiege of Cybercrime of which Nigeria has not yet developed enough capacity, including an effective insurance system that can safeguard peoples hard earn money.
“We advice CBN to forgo this policy, until Nigeria has put in place the necessary infrastructure, but if they insist, CBN may commence their tryouts of cashless policy in States like Zamfara or Yobe, where there are less merchants and any mishap of cash-less policy would not amount to a high cost to the nation.”
With an estimate of N3.5 trillion circulating yearly within the unbanked and under-banked (constituting over 10 million traders), operators in microfinance banks have expressed their readiness to be in the vanguard of achieving a cashless economy in Nigeria.
The Central Bank of Nigeria (CBN) had announced that effective June 1, 2012, daily cumulative free cash withdrawals and lodgments by individual and corporate customers should not exceed a maximum of N150,000 and N1 million, respectively.
This, according to CBN, is expected to reduce the amount of currency outside the banking system by discouraging the use of cash in financial transactions.
Part of the benefits to be derived from operating a cashless economy, according to the CBN, include bridging the gap between lending and deposit rates, reduced cases of robbery and revenue leakages, reduced cost of processing cash and improved treasury management, and saving the nation an estimated N192bn cost of managing cash in the economy by 2012, among others.
Data from banks show that only about 10 per cent of cash withdrawals from banks are of more than N100,000, meaning only 10 per cent of banking customers who also account for over 75 per cent of all banking transactions, thus accounting for the lion share of the cost of cash management, would be affected by the policy.
Considering that more than 3 billion of the world’s population live on less than $2 per day, about 50 million entrepreneurs using microfinance, while only 4 per cent of Africa’s population having access to bank accounts with only one per cent having obtained loans or other forms of credit from formal financial institutions, it makes economic sense for MfB operators to be involved in this cashless business.
Pointing out that though the trend towards a cashless society is a global one, the Chief Executive Officer, Accion International, Mr. Michael Schlein, noted that Nigeria is not ready for such yet.
“Cashless society is a global trend and Nigerian regulators want to encourage such here, but the truth is that, considering all the factors, it is still a long way away for Nigeria because 5-10 years from now, people would still be using cash in Nigeria. Though we are optimistic that it would succeed as it did in Kenya, Pakistan and other countries, we urged Accion MfB to take advantage of the situation and provide the needed services to our clients.”
Explaining how MfBs can help promote cashless economy, MD, Moneycom MfB, Mr. Sola Olubode, urged MfB operators to register as mobile money operators as a lot of them are in positions to reach those at the bottom of the pyramid.
“Mobile banking is a service that is done through mobile device provided by mobile money operators aimed at promoting cashless economy and it has financial inclusion benefits as many people spend money but most don’t have bank accounts.
“Most MfBs’ customers have mobile phones, so all they need do is registering to open account with their phone numbers. When the bank loads money unto their phones, they just take it to a registered agent, show their PIN codes and collect the money. So the stress of queuing in the banks is removed.
“MfBs’ clients have the advantage of using some of the medium to transfer money and have access to diverse payment options as the CBN is synergizing all the payment services at the least cost to the customers.”
Pointing out that the policy does not mean that cash would no longer be in existence in the country, but that it was aimed at moderating the volume of cash in the system, the Chairman, National Association of Microfinance Banks, Lagos Chapter, Mr. Olufemi Babajide, said the policy would increase staff capacity and create more employment.
“Chances of MfBs being promoters of cashless economy are very feasible as we have already started doing it without any established structure. We are moving to a larger economy and we can’t continue to carry cash about. This policy would increase staff capacity and create more employment.”
For Mr. Godwin Ehigiamusoe, MD, LAPO MfB, the role of MfBs in the success of the policy is anchored on the fact that they touch a large number of people at the bottom of the pyramid.
“If this policy is properly implemented at the level where the under-banked and unbanked would be affected, a large number of Nigerians would benefit and transit into the cashless economy.”
Urging MfB operators to be the end mile to the users by becoming agents to provide the needed services, the Managing Director, Accion MfB, Mrs. Bunmi Lawson, said linking clients’ e-wallets to their bank accounts would increase financial inclusion.
“One of the key things people who are financially excluded want is convenience because they are too busy with their businesses and may not have the time to waste at the banks. This makes putting banking in their hands key and any serious MfB should know that it has to provide that service.
“Surveys have shown that 97per cent of our clients have mobile phones while the number of those that are financially excluded are much more. This means that those that don’t have bank accounts have phones and the advent of mobile money would enable us reach the financially excluded.
“I urge MfBs to embrace it to provide services that are relevant to our clients. It is achievable because the people we deal with know numbers, so they can enter the PIN and codes they need to access their money. It is designed to enable the unschooled operate it.”
By Amaka Abayomi, Vanguard
The Central Bank of Nigeria (CBN) has said the cash policy will enhance the efficacy of monetary policy as more economic agents will resort to more use of cheques and e-payments while more currency in circulation will be captured within the banking system.
Speaking on ‘Cashless Economy: The Role Of Microfinance Banks’ at a capacity building programme organized by the Lagos State Chapter of the National Association Of Microfinance Banks (NAMB), Mr. David Adelana, Senior Bank Examiner, OFISD, CBN, said CBN’s stabilization measures will become more effective as higher proportions of transactions will be done through cheques and electronic payments (e-payments).
“The policy would enhance the efficacy of monetary policy operations and economic stabilization measures and balance genuine currency transaction demands and speculative market behaviours.
“As at March 2011, currency in circulation stood at N1.42 trillion while that outside banks’ vaults stood at N1.025 trillion as at February, 2011. Cashless banking is the route to financial inclusiveness and inclusive development.”
Speaking on the role of MfBs in the cashless economy, Adelana said MfBs who become agents to mobile payment service providers can offer mobile deposit and withdrawal of money, anytime, anywhere nationwide.
“Mobile payment revolu-tion is currently sweeping across the African continent and Nigeria shouldn’t be out of the modern and global trend in enjoying such initiatives by adopting technological practices that make lives easier.
“The mobile payment industry will play a huge role in the development of the Nigerian economy.
“Already, 11 Mobile Payment Service Providers (MPSP) – Pagatech, Fortis Mobile, UBA/Afripay, GTBank, eTranzact, Monetise, Eartholeum, Paycom, FET, Ecobank, and Kudi – have been licensed.
“16 MfB operators applied for MPSP licenses and ran pilot tests for about 6 months. Agents can provide payment services like social pay-outs (airtime top-up, loan repayment, local money transfer, bill payment government collections, etc), funds transfer.”