Did You Get The Memo? Cashless Lagos Takes Effect on April 2. But…

by Loy Okezie / Friday, March 30th, 2012

You’ve probably heard that Lagos is going cashless. Now by that, I mean, that various sectors of the economy would ONLY accept electronic payments via PoS terminals, etc from you starting from April 2, 2012.

Oh no, this is not a pre-April Fool’s Day joke!

It’s an initiative of the Central Bank of Nigeria (CBN) that aims to reduce — not entirely eliminate — the amount of physical cash that circulates in the economy, and encourage more electronic-based transactions, such as payments for goods, services, transfers, etc.

Already, banks and other organisations such as Cable TV companies, ISPs, etc have been encouraging their customers to migrate to available electronic channels in order to make payments and other transactions.

Thus, instead of moving cash here and there, the CBN wants you to transfer money from bank to bank using internet banking, pay at shops or online with your debit card, withdraw from an ATM instead of going to the bank, send and receive money, pay bills with mobile money.

That’s probably not news any longer. But what’s news is that the CBN has made significant amendments to the new cashless policy in relation to cash withdrawal limits and processing fees at various commercial banks in Nigeria.

According to the CBN:

• The daily cumulative limits has been reviewed from N150,000.00 for individuals to N500,000.00 and from N1,000,000.00 for corporate customers to N3,000,000.00
• The processing fee above the limit for any withdrawal above N500,000.00 for individual is now 3% above the limit and not 10% as was previously announced by the CBN and for corporates it has been reduced to 5% from the initial 20% for any withdrawal above N3,000,000.00
• For lodgment, the processing fee for any individual depositing more than N500,000.00 is now 2% and for any corporate depositing more than N3,000,000.00 cash, the processing fee is 3%.

Of course, these processing fees only apply to withdrawals and lodgements beyond the approved cap stipulated by the CBN for individual and corporate customers and to transactions done in bank branches in Lagos State alone during the Cashless Lagos pilot phase which runs till December 31, 2012.

So if an individual wants to make a cash withdrawal of N1, 000,000, he/she will be charged N15,000 for that transaction, which represents a 3% processing fee. [See image below].

However, the only exemptions granted are for accounts operated by Ministries, Departments and Agencies of the Federal and State Governments, for the purpose of Revenue collections only and Embassies and Foreign donor Agencies, such as USAID.

The CBN envisages that several benefits are expected to be derived from this new cashless policy:

For consumers, it would mean increased convenience, more service options, reduced risk of cash-related crimes and cheaper access to (out-of-branch) banking services. For corporations, it could mean faster access to capital, reduced revenue leakage and reduced cash handling costs.

However, there have been mixed reactions over this new policy, despite its benefits, particularly because over 45 percent of Nigerians operate in the informal sector, thus may not have access to a debit card for PoS transactions, online shopping, ATMs etc and even access to Internet banking transactions.

Others who do may experience difficulties in using such electronic channels especially when they become unavailable for hours, even days, as has beenexperienced in recent times.

But while we wait to see whether the Cashless Lagos initiative would be a success or failure, we can only imagine the huge volume of transactions that would be done via electronic and mobile channels.