The House of Representative might have directed the Central Bank of Nigeria (CBN) to reverse to reverse itself with regards the directive on charges to be accrued by individual and corporate accounts on withdrawals and deposits, however, it is important to understand that CBN’s decision is driven by the need to promote and support the online transactions viz-a-viz cashless policy.
As expected, the CBN’s directive to banks elicited divergent views; both supportive and disapproving opinions.
Truth be told, the directive is a strategic move and might have an impact on the Policy’s effectiveness, but it also makes one wonder about its sufficiency as a standalone move towards the achievement of a cashless economy.
Nigerians are already paying needless charges to banks. For instance, CBN and the banks have not been able to explain the rationale for collecting “Monthly ATM maintenance charge”; even when a card holder may not have used such ATM card for the whole month.
We understand that cost of maintaining cash is huge. Secondly, allowing cash “that free movement” without much traceable ‘route’ spur the sponsorship for illicit acts like terrorism, human trafficking, kidnapping, and money laundering.
Thus, this directive may prove to be a nuisance on the financial operations of Nigerians and may make some grudgingly do fewer cash transactions, but it is not sufficient for complete adherence and/or compliance to the cashless policy.
Consider these reasons:
The CBN directive stipulates that there would be a “‘cash charge’ on daily cash withdrawals that exceed N500,000 for Individuals and N3,000,000 for Corporate bodies. 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.)”
Following the last sentence in the above-quoted words, the recent revelation of the FIRS’ plan to tax online transactions appears to be counterproductive as it appears that both the financial regulator and the taxing body put Nigerians between the proverbial devil and the deep, blue sea.
Either way, Nigerians are being charged, this means that the individuals will have to pick which charge favours them. Also, this might give individuals a need to check for loopholes in the directive to avoid the incurring the charges.
It is necessary for the different regulators of the country to cooperate and proffer unified solutions to issues so that their individual solutions don’t confuse and contradict themselves.
Also, in a country of about 200million people only about 50million have bank accounts, what the country needs now are incentives to encourage people to embrace the modern banking system. Failure to do that, only a few will carry the burden of all; especially when it comes to collecting taxes. After all, the Fintechs are here to assist too.
There is a baseless and mostly untrue belief that paying with cash is cheaper than paying with cards. This is one of the hindrances to a cashless economy. An awareness of the advantages of a cashless economy is almost absent among citizens and this makes the directive appear, to many, to be just another avenue for the government to rip some cash off the citizens, making the environment more disabling for growth and prosperity.
Revealing to the people the different advantages associated with cashless economies makes it easier for the citizens to make the right decisions for themselves and their businesses. This will make the transition, from a cash economy to cashless one, easier on both Nigerians and the regulator.
The CBN should educate the people on what a cashless policy or economy is, what it entails and why it should be embraced and not feared. Until this awareness is done throughout the nation and the people can educate each other, it would be a case of taking a horse to the river but being unable to make it drink.
Knowledge is power and until the people have the power, the economy won’t be changed.
The Present State of digitalization is not enough
Let’s face it, a cashless economy runs on digitalization and the present state of digitalization in Nigeria is nothing satisfying.
Erratic power supply, unstable internet connections, largely uninformed and unserved population, etc., all add to the weak digital economy of the nation. Despite the many startups in the country and the widening tech space, the digitalization of Nigeria is held back by many issues, majorly foundational.
Until the government embraces and promotes digital processes by ensuring that the basic needs are met, the digital state of the country will never be enough to support a cashless economy. This means that the cashless policy will be among the many government policies which are only on paper and not adhered to.
Agnishwar Basu shares on Research Gate that Responsive Regulation, Robust Infrastructure, Effective Supervision and Customer Centricity should be worked on and taken into consideration if the Indian economy will become cashless.
Nigeria is not India, but with the similarities like large, youthful population, unemployment and other challenges, we may need to use a thing or two from the research results.