The Central Bank of Nigeria’s (CBN) cashless policy first introduced in Lagos as a pilot scheme in January 2012 formally took effect nationwide last Tuesday. Latest reports said the success of the policy in Lagos State and its subsequent extension in 2013 to Kano, Rivers, Ogun, Abia and Anambra states, as well as the Federal Capital Territory, Abuja, encouraged the CBN to go national with it. Under the policy, the cumulative cash withdrawal and deposit limit for individual account holders is pegged at N500, 000 per day. For corporate accounts, it is N3 million per day. Withdrawals above the specified limit were initially to attract penalty charges, but this aspect of the policy wa deferred till July 1, 2015. Banks were said to have already sent notices to their customers concerning the new regime and were offering alternative channels, like the social media, mobile and internet banking, for transactions.
If properly executed, transactions based on the Cashless (or Cash-light) Economy Project are said to be easier, safer and faster to handle. Therefore, the policy deserves being given a shot at. Essentially, the policy is geared at reducing the amount of physical cash circulating in the economy and encouraging more electronic-based transactions. Apart from reducing the volume of cash in circulation, it will help eliminate the cumbersomeness of and attendant insecurity involved in heavy direct cash transactions; curtail corruption and reduce the cost of printing and minting currency. It is also meant to reduce or eliminate entirely the subsidy on cash transactions, which the CBN claims run into hundreds of billions of naira annually.
When the CBN commenced the pilot scheme in 2012, it directed commercial banks to strictly enforce the penalties for exceeding the free limits on daily cash withdrawals or deposits, then pegged at N150,000 and N1 million, for individuals and corporate entities respectively. A good guess is that the banks complied with the CBN directive, hence the apex bank’s decision to go full blast with the implementation of the policy nationwide.
But as attractive as the cashless policy would seem, several challenges such as the insufficiency of Point of Sale (PoS) machines on which the effective operation of the Cashless Economy concept is hinged, still beset it. Like we did point out in an earlier editorial on the subject, Internet connectivity in most parts of the country is erratic, while the nation is still grappling with epileptic power supply. There is also the high probability that fraudsters can successfully clone and hack into the electronic payment network.
Other constraints that the nationwide implementation of the policy may face are that customers can convert their naira to foreign currencies and also price their goods and services in such currencies, because the policy which discourages dependence on cash transactions and imposes sanctions on large withdrawals applies only to the local currency – the naira. In addition, with the pegging of cash withdrawal limit at N500,000 (for individuals) and N3 million (for corporate bodies), it is still possible that many bank customers will open more corporate accounts, either by registering a business name or incorporating a liability company, which will increase their cash handling limits without any penalty. Customers may also decide to open multiple individual or corporate accounts with different banks, as they can withdraw above the prescribed limit from two or more accounts in different banks, which will defeat the essence of the cashless policy.
There is also public apprehension that some customers could choose to boycott banks entirely and join millions of Nigerians who operate in the informal sector of the economy and have nothing to do with bank transactions, among others. Consequently, the success or failure of the policy now that it has been applied nationwide will depend on how the CBN and the banks are able to square up to the identified challenges. If not properly implemented, managed and monitored, the scheme may fuel the corruption it aims at eliminating.
