AMECHI OGBONNA, CHIMA TITUS NWOKOJI and BLAISE UDUNZE
nigerianbestforum.com 
• Sanusi Lamido, CBN Governor
Less than five weeks after the official launch of the cashless banking policy, which has Lagos as a pilot scheme, strong indications have emerged that its promoters may require more strategy sessions to drum the message into the ears of the Nigerian business community.
This is because initial policy outcomes from the novel scheme, which aims at de-emphasising the use of large amount of cash for transaction settlement across the country are all pointing to the fact that neither the operators nor their customers are ever at home with realities of the policy.
For instance, while it would be recalled that the Central Bank of Nigeria (CBN) had, during the sensitisation programmes, outlined its potential benefits, including its propensity to check fraud and corruption in Nigerian public and private sectors and other cost-saving attributes, early signs of malaise capable of disrupting the objectives of the scheme are becoming rather prominent.
According to Daily Sun checks last week, perhaps, a most compelling reason the financial sector regulators may soon return to the drawing board to perfect its strategies could be linked to the growing apathy and lack of interest often demonstrated by both merchants and bank customers by most end users of the facility, who appear more comfortable with the use of cash for settlement of contractual obligations.
Customers' negative perception of the scheme may have been accentuated by concerns in some quarters that the proposed deployment of an estimated 40,000 Point of Sales terminals expected to complement existing e-payment channels in the country was not achieved before the official launch of the scheme last January due to tariff bottlenecks encountered with the Nigeria Customs Service late last year.
Among other advantages, the Central Bank of Nigeria (CBN) had assured that the essence of its new cash management policies was aimed at further reducing the cost of banks' shared services and thereby minimizing cost of banking services to customers.
The apex bank's explanations came against the backdrop of growing disenchantment by the Nigerian business community over the high cost of banking services in the country considered too outrageous in the face of improved financial technology and infrastructure.
As stated, the highpoints of the cashless banking policy was the decision to peg customer's daily withdrawal or deposits to a maximum of N150, 000 per individual customer and N1million for corporate clients.
Giving details of the policy objectives recently in Lagos, Sanusi Lamido, Governor of the Central Bank said the limit does stop customers from withdrawing or depositing beyond the limit set by the apex bank, but that such a customer should be ready to pay a premium of about 100 naira per 1000 in bank charges to enjoy his desires.
Speaking on radio link, a radio Nigeria network programme last year for instance, Director of currency operations at the CBN, Alhaji Mohammed Ndah, hinted that in its effort to successfully implement cashless economy, the apex bank would deploy about 40,000 Point of Sales (PoS) terminals in Lagos by the end of last year.
Nda explained that each bank will commit itself to rollout a target number of PoS terminals depending on its strength in the market. The banks were also expected to rollout more Automated Teller Machines (ATMs) even outside their premises, but must ensure there was no overcrowding of ATMs in a particular public place.
He stated that "a cash heavy economy was bad for the banking industry as it fuels robberies and burglaries, pointing out that the huge costs of cash management are often transferred to customers in form of high interests charges.
Nda stated further that such a cash heavy economy will facilitate money laundering and corruption as opposed to the multiple efficient alternatives, that are safe and cost-effective payments/transactions systems that are currently available to customers and shoppers; ATMs, Point of sale (POS), Internet, Instant Electronic Transfers (NIBS), Mobile banking," it stated. Nda's comment at that event only buttressed an earlier statement by Mr Tunde Lemo, deputy governor in charge of operations at a similar sensitization programme in Lagos where he, said the successful implementation of the policy would significantly reduce banks' operating costs to a reasonable level.
Lemo who was represented by a deputy director in charge of currency operations, Mr Albert Ikuseedun said it was against this background that the apex bank recently licensed three private firms to manage some of the industry's non- core services including Cash In-transit, (CIT) and currency sorting so that the institutions can concentrate on their core mandates of servicing the business community better. He argued that the reduced cost arising from shared services could then be passed to customers in form of lower charges for financial transactions.
Besides helping to check possible revenue leakages in the economy, CBN also believes that the policy has potentials for ameliorating societal hazards like armed robbery, bribery and corrupt practices in both public and private sectors of the economy. The CBN boss noted that the apex bank was committed to ensuring that financial services in the country would match what was obtainable in other part of the world, stressing that the CBN would be saving an estimated N114billion or more, annually when the current policies become operational.
Under its cashless banking model, the Central Bank of Nigeria, is insisting that the use of cash in the daily economic transaction should be moderated to reduce its financial and social cost on the economy.
It would be recalled that the CBN had a few months ago granted operating licenses to three cash management companies as part of strategies to reduce cost of cash management services in the banking industry. It expects the benefit of the franchise given to the three operators to impact positively on cost of financial services in the country, against the backdrop of the outcry by customers over banks outrageous bank charges. W
ith less than two weeks to the take-off of the pilot scheme of the cashless economy policy in Lagos (Cashless Lagos), divergent views have started trailing the Central Bank of Nigeria's (CBN) decision to postpone the commencement date of penalties on cash transactions that exceed the stated limits in the policy.
Indications are emerging that the cash-lite policy is being riddled with confusion as some customers and bank workers particularly tellers are yet to understand the nitty-gritty of the policy.
A banker in one of the old generation banks complained that teller staff and customers alike are yet to be adequately enlightened, saying there is "need for massive education of bankers and customers on various aspects and issues of electronic payment transactions."
The customer, who prefers anonymity, said that no adequate enlightenment was done before the take off of the policy in Lagos.
A bank customer, Mr. Uche Ogadimma bemoaned the policy and its adverse effect on his business, pointing out that the CBN policy will discourage customers from patronizing him.
Ogadimma who said his trade was cash intensive and requires cash transactions before goods would be offered out to them argued, "My business involves using money before I can give out my goods. If a customer should call me that he wants his goods immediately, I can't wait till he transfers the money into my account. Sometimes customers buy goods worth more than N300, 000 and none of them will be willing to pay that much in interest as extra charges because we don't make much profit like those who deal in oil and gas sector," he explained.
Mr. Ade, an optometrist said the cashless banking would have a salutary effect on businesses in the Nigerian economy, but urged the CBN to put adequate infrastructure to support the system. He also called for more enlightenment for the banking public, saying that such requirement should have been made available before the policy kick starts."As a new phenomenon in Nigeria, if the operational hitches are not taken care of, the objective will be defeated. These problems ranges from infrastructure because we lack it and not everybody even the educated ones in the society have good understanding of how it works talk less of the market woman out there," he said.
In the same vein, another customer who prefers not to be attributed lamented that the policy cannot work in Nigeria as the system lacks the right infrastructure to implement it."The cashless policy, I doubt if it will succeed in Nigeria. If you visit some of the ATMs in banks sometimes, they are either unable to dispense cash or have network failure. This is so alarming and frustrating. I went to the bank some weeks ago, but was alarmed that, due to network failure, my bank's ATM could not work." He said
He adds, "It might have been an infrastructural problem, and the banks expect everyone to understand this. So, why are we being forced to depend on ATMs or pos terminals that might just refuse to work when we need them? The Point of Sale terminals are used only by few merchants, and because of the additional transaction charges, the bulk of retailers would rather opt for cash for their sales. This is aside from the problems those terminals might be down with. It is the consumers that bear the brunt of all the infrastructural problems as well as suffer from CBN's policies. I don't think this is a fair policy." He lamented.
Meanwhile another customer had expressed dissatisfaction with the new policy which he described as a calculated attempt by the banks in connivance with the CBN to extort money from depositors. Sincerely, I must say that the introduction of the policy is another avenue to rob the poor people in the society. Another major problem is that CBN will have to look into the excessive charges of the banks on transactions withdrawal charges."
But in a telephone interview, president of the Chartered Institute of Bankers of Nigeria, Mr. Jaiyeola Olaoye, described the cashless policy as a desirable policy as it will reduce the cost of minting and transporting of cash around the country. He said the policy will help forestall the risk inherit in dealing with cash such as armed robbery, theft, bribery and corruption. Today people are becoming very conversant with their ATM cards and other e-payment medium. All they need to do is to carry a plastic card, although somebody may come out and say there are Internet frauds.
He however admitted that the CBIN did not make adequate preparation in terms of enlightenment of the public before launching the scheme, adding that what was needed at the moment was to fine tune aspects of the policy to make it work better. The CBN boss said it would not be advisable to suspend the scheme because of its teething problems otherwise it would delay the implementation of the reform programmes.
Asked to comment on the policy, director general of Lagos chamber of commerce and industry, Mr Muda Yusuf said reactions from members of the chamber were still being expected as it was yet to hold its quarterly meeting to assess the impact of the policy.
Yusuf pointed out that analysis of the cashless policy would form a major plank of the chambers discussions at its next quarterly meeting. But according to Dr Oladimeji Alo, a former chief executive of financial institutions training center (FITC), the CBN's strategies for marketing the project fell short of expectations hence the not too impressive outcome since January. While he admitted the apex bank did much to market the scheme, its effort was not good enough to market what can be termed a hard sale to Nigerian business community.
He said faulted the timing and sequencing for both the policy and the penalty which he described as too stiff for Nigerians who have a strong habit of using cash for most of their transactions. Alo stated, that what we are talking about at this point borders on habit and habit don't die easily. Another problem is the penalty which I consider too stiff for the people. Consider for instance how much that operators of the Lekki tollgate generate daily and if have to penalize them for depositing more than n1million daily while will the excess go since banks are not allowed to pick cash from such institutions anymore."
According to him, the central bank would need to make the equipment available to end users as the merchants seem to be having problems deploying them for efficient service delivery. While advocating a gradual implementation of the cashless policy, the former (FITC boss noted that so far both the financial sector and customers appear not too enthusiastic about the policy, stressing that the apex bank would need to embark on a more comprehensive enlightenment programme to deepen the message and achieve greater successes.
Commenting on some of the policy outcome, a financial consultant, Biodun Adeboye, noted that the shift in the date shows that the policy was not well thought out in the first place, wondering why the penalties should be made to apply to cash withdrawals and deposits too.
Adeboye questions ''If CBN is serious about wanting to boost financial inclusion, there should not be any charge on deposits at all.' Similarly a former president of the Association of National Accountants of Nigeria (ANAN), Dr. Sam Nzekwe, advised that Nigerian customers' confidence in the banking system must first be strengthened before the cashless banking policy could be implemented. He said that 'if all of us are within the banking net, you don't need to talk about cash withdrawal limit of N150,000 and things like that.
What the policy will do is that it will encourage people who need a huge amount for a project to be withdrawing it in bits and keeping in their homes until the entire sum is withdrawn so as to escape paying the charges.
The implication of this according to Dr Nzekwe is that robbers will get to know that people are keeping money at home and this will increase the level of crime in the society' But a top official of a new generation bank who spoke on condition of anonymity noted that whatever were the weaknesses of the policy, they were outweighed by its benefits.'The cost savings alone that banks would get from this policy are enough to override its disadvantages,' he stated.
According to CBN schedule, the Lagos pilot scheme in Lagos would be followed by a take off in June 2012 in major cities across the country including Aba, Port Harcourt, Abuja and Kano among others.
What perhaps is not certain is whether the CBN would stick to its existing timelines for the next phase of its cashless policy rollout plan slated for later this year.
Meanwhile in compliance with the cash-lite policy initiative of the Central Bank of Nigeria (CBN), banks in Lagos have since the commencement of the programme began rejecting individual deposit and withdrawals above N150, 000, amidst complaints that the time was not ripe for the policy. Daily Sun investigation revealed that some banks are bent on enforcement of the policy, while others are yet to comply. A staff of United Bank for Africa (UBA) at Oyingbo branch, who turned down a cash deposit of N180, 000 from a customer, confirmed that the bank has started adhering to the policy.
The Branch Manager of UBA, Mrs. Shade Ajeleye, said the bank can allow a customer to withdraw above N150,000 but cannot pay above N150,000 into a third party account. "After March 30, each N1000 above N150, 000 will attract N100 charge," she noted.
Although, banks such as First Bank Nigeria Plc. at Apapa Road, Ebute Metta, UBA and Diamond Bank were in full compliance with the policy, but Wema Bank, Access bank at Oyingbo still run business as usual
A bank staff of Diamond Bank told our reporter that the bank has started to observe the CBN policy on cashless society: "In excess of N150, 000, a customer stand to pay a penalty charges action is allowed for both deposit and withdrawal, but a customer must pay a charge of N200 for every N1,000.
"It is important to inform your supplier or whoever you are paying as a 3rd party about the charges," the banker advised
One objective of government's cashless policy was transformation of the country's economy from its current cash-based status to an electronic dominated payment system which will facilitate commercial transaction across the country. Daily Sun investigations reveal that transaction above these limits attracts N100 penalty on every N1000 above the N150,000 limit for individuals and N200 for every additional N1000 withdrawn or deposited by a corporate organisation. However, the charges will take effect from March 31, 2012.
The CBN's Head, Shared Services Department, Mrs. Eyitope St. Matthew-Daniel, stated that the primary purpose of the policy was to reduce cost of cash management, cost of banking operations and enhance quick payment system. Available reports had it that the CBN, in 2009, spent n114.5billion on cash management services alone and projected that the cost would rise to about N192 billion by 2012 if Nigeria did not move away from cash transactions.
Matthew-Daniel said that the cost of lending would reduce significantly if the banks save the N192 billion that would be used to manage cash by adopting the use of e-payment platforms, pointing out that 99 per cent of current banking activities were cash-based rather than electronic transactions as obtained in other economies.
She expressed the hope that with the introduction of cash-less economy, the cost of banking would be reduced by 30 per cent in the first instance and reduced even more going forward.
While defending the policy, CBN's Deputy Governor, Mr. Tunde Lemo, disclosed that five key areas, which had been identified for cost saving in banks, included cash management, payments system transformation, shared IT infrastructure and services, IT standards and industrialization and shared back office operations.
The payment systems transformation, according to him, was a major priority, given that it represents about 60 per cent of the industry's operating cost, noting that the application of mobile technology for financial services especially in rural areas would ensure that a large percentage of the population outside the formal banking system would have access to financial services using one of the three models of card-based, account-based and virtual account.
A member of the Committee of e-Banking Industry Heads in Nigeria (CeBIH), Mr. Chuma Ezirim, said that Nigeria's economy was tipped to grow by at least one per cent when it would significantly shift its payment system from paper based to electronic payment regime. Ezirim said: "Recent academic findings based on empirical data revealed that shifting from paper-based payments to electronic ones could entail yearly savings to a country's economy of about 1 percent of its GDP.
"This is mainly explained by the realisation of economies of scale in the provision of electronic payments, the overall increase in the total number of payment transactions, a greater reliance on cost-efficient service delivery channels as well as impact on the technological change in terms of lower telecommunication and processing costs," he stated.
He urged Nigerians to embrace the policy, as the policy would offer a lot of benefits for the country and for the citizens, stressing that the examples of other countries had shown that transiting from cash to electronic payment would lead to one per cent increase in economic growth. Only a fortnight ago, the central Bank of Nigeria (CBN) issued a statement which reassured customers that they will not incur extra charges for using Point of Sale (PoS) machines.
The apex bank explained that the cost of such deals will be borne by merchants, which will be expected to pay 1.25 per cent of the transaction fee. The fee is to be distributed to different parties for playing different roles in ensuring that the PoS system works well. The fees according to the statement enable the parties to recover the cost of the PoS; support; maintenance and connectivity among others.
It explained that where the merchants do not use the PoS, they will still be charged a penal fee of 20per cent per cent of cash transaction in excess of the cash limit policy. Merchants are also advised to recognize that there are other ways in which the PoS terminal can benefit them, such as selling other services and earning commissions. For instance, mobile credit can be sold through the terminals, or used to collect bill payment for firms such as the Power Holding Company of Nigeria (PHCN). Also training will be provided by the acquirer's payment terminal service provider (PTSP). Part of the deployment process is to ensure a practical training of how to use the POS for the merchant and their staff.
"However, if the POS or mobile phone is stolen, the money for the user is safe as the devices do not hold the money. In terms of infrastructure, the CBN is working with Nigeria Communication Commission and telecoms to ensure that there are dedicated communication links for the PoS system. Also, all PoS must have a minimum of two Sims such as MTN and Glo. However, this does not guarantee 100 per cent connectivity but does increase the uptime of PoS system. In terms of power, there is minimum of 24 hours battery life, and they can sometimes come with car charges," the statement said.
However, in terms of security of platforms, it said that ATM fraud was prevalent when Nigeria was using magnetic stripe cards. But last year, Nigeria migrated, all their cards to chip and pin which is more secured, and drastically reduced the fraud level. With chip and Pin, the chances of fraud are reduced provided a customer keeps his PIN secret.
Besides, the CBN Automated Teller Machine (ATM) Fraud Prevention Committee comprising banks, Economic and Financial Crimes Commission (IFCC), InterSwitch, ValuCard among others deliberate monthly to make e-payments more secured. Also, the Nigerian Electronic Payment Fraud Forum has been inaugurated to share strategy for fraud prevention. "The literacy required in operating the PoS is minimal as many Nigerians can use a mobile phone, needed to make mobile payments. Biometrics is also being installed in some ATMs and PoS to further check fraud in the industry.
"Nigeria Inter-bank Settlement Systems (NIBSS) has also introduced NIBSS Instant Payment that enables people to transfer funds immediately between two accounts within same banks or in different banks. This is currently being offered by a few banks. The apex bank has already issued a circular to break exclusivity of card. Within Nigeria, all cards will be accepted at any terminal. The PoS, going forward, will accept both VISA and MasterCard at ATMS or POS terminals," the CBN said.
The banking watchdog said that it has released guidelines and standards for PoS operations. It also appointed NIBSS to serve as a central aggregator for all POS transactions. In addition, 96 Payment Terminal Service Providers companies were licensed to maintain/support POS. With all these, the apex bank said the PoS and other electronic payment platforms are supposed to be up and running at all times. But contrary to expectation, the scheme appears destined to fail unless some radical steps are applied by the central bank of Nigeria.
Microfinance banks operating in the country have been granted waiver for cash collection and lodgment processing charges by the Central Bank of Nigeria (CBN). Meanwhile, microfinance banks’ customers are not exempted from the cash-lite economy in terms of cash withdrawal and deposit limit processing charges.
