Subsidy strike: ATM failure highlights flaws in cashless policy

By Tony Chukwunyem

  www.momentng.com

AS industry stakeholders increasingly lament the huge cost to the economy of the nation-wide strike called by labour unions to protest the removal of petrol subsidy, proponents of the Central Bank of Nigeria (CBN) cashless economy policy were probably more concerned about the industrial action mainly due to its timing. 

 

Reason:  coming barely a week into the commencement of the pilot scheme of the policy in Lagos, code named, ‘Cashless Lagos’, the strike has further exposed some of the weaknesses expressed in some quarters about the programme.

 

At the weekend, which was the start of the two day ‘break’ that organisers of the protest declared to allow for more negotiations with the Federal Government and also ‘to give Nigerians the opportunity to replenish their supplies in preparation for a continuation of the strike’, 

 

The Moment’s correspondents saw huge crowds at some banks’ Automated Teller Machines (ATMs) in various parts of Lagos. 

 

According to some of the banks’ customers who spoke with this newspaper,  they were unable to withdraw money from the ATMs during the strike, so being totally broke, they were desperate to get cash in case the leaders of the protest direct workers to continue to stay indoors  for most parts of this week. 

 

For instance, at the Skye Bank branch on Ajao Estate Road, Isolo, the security men on duty had a difficult time trying to control the crowd that had come to make withdrawals from the bank’s ATMs.

 

Speaking with The Moment, Emeka Eze, complained that he had tried to make withdrawals from several banks’ ATMs but that he was not successful because the machines were not dispensing cash.  

 

 He said, ‘I don’t live around this vicinity, but having tried all the ATMs in my area without success, I was on my way to the airport because I learnt that the ATMs there had cash when I saw the crowd here and was told that the ATM was working.  So, I decided to stop to try my luck’.

 

He revealed that even though he thought he had enough money to last him for the duration of the strike, he had spent all he had by last Thursday and since ATMs had run out of cash, he had to resort to borrowing from his wife.  

 

According to him, ‘I did not realise that the strike would last beyond Wednesday, but when it did I thought I could get money from the ATMs at Okota where I live. However, all the ATMs that I tried appeared to have run out of cash.  

 

Of course, I could not drive to other parts of Lagos because the strike was still on. I would have thought that since the banks knew about the strike, they would have made adequate arrangements to ensure that the machines were regularly loaded with cash, especially now that the cashless banking policy has commenced’.

 

Indeed, The Moment’s investigations revealed that particularly from last Thursday, the fourth day of the strike, ATMs at Igando, Iyana-Ipaja and Egbeda all in Alimosho Local Government Area of the state had stopped dispensing cash. 

 

The situation was not different in places such as Gbagada, Palm Grove, Ilupeju and Anthony where the machines were either not dispensing cash or seemed to have network problems.  

 

In areas where a few ATMs were working such as the GT Bank branch on Isolo-Mushin road and First Bank of Nigeria Plc, Akowonjo, there were such long queues that many people could not wait and preferred to return to their homes empty handed.

  

 

In a chat with The Moment, the head of Information Technology (IT) in a leading new generation bank, who requested not to be named, argued that while the financial institution had made adequate plans to ensure that ATMs had cash throughout the duration of the strike, the tense security situation made it impossible for the plans to be carried out.

 

He said, ‘Before the strike commenced, we made sure that all our ATMs were loaded with cash. Staff were also directed to ensure that they reload the machines on Wednesday when they should have run out of cash. 

 

However, on Tuesday there was a false report that banks had told their staff to report for duty in defiance of the Nigerian Labour Congress’ (NLC) directive. We did not want the protesters to target our staff so they were told to stay at home’.

 

Commenting on the issue, a financial analyst, Dafe Edevbi, noted that the failure of the ATMs during the strike has not helped to promote the CBN’s cashless economy project.

 

 Under the project which was unveiled in April last year, individuals withdrawing/lodging amounts exceeding N150, 000 will be penalised N100 for any additional N1, 000 while companies withdrawing/depositing more than N1million will be required to pay a penal fee of N200 for any additional N1, 000. 

 

The CBN and the Bankers’ Committee which are promoting the policy believe that these penal rates will serve as an incentive for Nigerians to migrate to alternative channels of payment such as Point of Sales (PoS), Internet and electronic funds transfer, thus, minimising the dominance of cash in the economy and eliminating the risks and costs that it entails.

 

However, since the introduction of the policy which is expected to take off in other major cities of the federation such as Port Harcourt, Abuja, Aba and Kano in June this year, it has generated intense debate among industry stakeholders with many analysts contending that even though the objectives of the policy are laudable, the CBN and banks are too much in a hurry to implement it.  

 

This is despite an aggressive enlightenment campaign embarked upon by its promoters and the order of 40,000 PoS terminals for the industry.

 

As Edevbi put it, ‘Most bank customers are still reluctant to make use of ATMs because of the fear that they could lose money to fraudsters. Now, the unpleasant experience of those bank customers who tried to use the ATMs during the strike will rubbish all the efforts that the CBN and banks have been making to boost the use of the machines’. 

 

Also speaking, a top banker who pleaded anonymity, argued that the CBN and the banks have so much raised customers’ expectations of ATMs that the failure of the machines last week was a setback to the cashless economy campaign.

 

According to him, ‘many commentators have told the CBN that it is too much in a hurry to implement this policy and that it is not taking the level of sophistication of the average Nigerian bank customer as well as the country’s infrastructural challenges into consideration. For instance, even the 40,000 PoS terminals that they are still expecting are too small for the size of the industry. 

 

'Alaba International market alone will need as much as 2000 PoS terminals, ASPAMDA will require about 1,000 and another 10,000 will be distributed to other markets on the Lagos Mainland.   

 

'So, I don’t think 40,000 PoS will serve the needs of the nation’s 24 banks.’’   

 

It will be recalled that following the take-off of the Cashless Lagos pilot scheme at the beginning of this month, concerns expressed in some quarters about the policy made the CBN to waive service charges to the end of March. 

 

In addition, the apex bank set a new target for commercial banks to deploy 75,000 ATMs across the country by 2015.  And as a further boost to the cash-less economy policy, the banking watchdog has also spoken of plans to deploy 375,000 PoS terminals in different parts of the country in the next four years.