CASHLESS LAGOS: Are we Ready? YES!

IS Lagos ready to go cashless? With the hiccups that have attended the take-off of the initiative since January 3, doubts about the readiness of the financial institutions for its take-off have mounted, so are worries about the preparedness of citizens to migrate into alternative payment platforms. The clearest indication is one of an apex bank caught flat-footed, yet determined to plod on willy-nilly. We start with the question of the PoS terminals – basic to transacting business on the electronic platform. By the apex bank’s schedules, a total of 40,000 ought to have been deployed before commencement. If the well-publicised lamentation by Tunde Lemo – Central Bank of Nigeria’s (CBN) deputy governor is anything to go by, the equipment are currently subject of a bureaucratic tussle. Whereas the Nigeria Customs Service insists that PoS terminals are cash registers for which it slams a 20 percent duty – the apex bank argues that the applicable rate is five percent. The result: the equipment lie, uncleared, at the ports. How can we reconcile the assurances by the CBN that the pilot scheme is on course with the knowledge that some of its critical equipment are at the ports? How truly ready is the infrastructure needed to drive the initiative at this time? The greater question of course is: how many of our sales outlets have adopted electronic platforms? Even without the strictures posed by the poor state of infrastructure, which is daunting enough, the idea of migrating a largely cash-driven society into some advanced, electronic payment platforms would seem particularly herculean. There are already reports of rejection of the PoS/ATM machines in settling payments even in the so-called elite outlets. The result is predictable in the highly informal sector, which, despite official denials, holds considerable ace. Only the CBN deludes itself to think that the prevalence of electronic payment terminals would, in the near-term, eliminate Nigerians’ propensity to hold cash. This is why we are aghast that the CBN seems – or pretends – to be oblivious of the nation’s huge network of the informal sector in its determination to implement the cashless initiative. The danger of this oversight– if that is what it is, as against plain myopia – is to potentially deepen the informal network, as against abolishing it, with consequences in further eroding confidence in the formal payment instruments. As for the financial services operators, the apex bank seems to have under-estimated or glossed over the challenges of interface under the new payment system. We cannot but ask: what has the apex bank done since April 2011 when the policy was announced, to educate its primary constituency – the financial institutions, not to talk of the consumers of financial products, on the merits of the cut-over to the new technology? Rather than being seen to aggressively promote the new payment platforms, the apex bank has spent a good deal of time marketing its regime of sanctions for those harbouring the preference for cash. We shudder to imagine what would happen by April when the CBN would start imposing sanctions on those exceeding cash withdrawal/deposit limits in the Lagos area – a development that is bound to be seen as discriminatory. The summary of course is that the CBN needs to proceed more methodically. For something as novel as the cashless initiative, stakeholders need to be given adequate time to buy into it. More would certainly be gained through adequate enlightenment and mass education. By plodding on as the CBN is wont to do, it stands in great risk of leaving a sizeable chunk of economic players behind. Much as we endorse the general principles behind the cashless initiative, our point of departure lies in the haste with which the CBN plans to bring it about.