Nationwide Cash-less Policy: Is Nigeria Ready?

When the Central Bank of Nigeria (CBN) introduced the cash-less policy in January 2012, it was kicked off in Lagos, the country’s commercial hub, with a promise to extend it to other parts of the country by July 1, pending a successful flagship roll out. The apex bank was clear about the advantages of the innovative policy, which it said included driving development and modernization of the country’s payment system in line with its vision 2020 goal of mingling among the top 20 economies by the year 2020. The CBN also said it would reduce the cost of banking services and drive financial inclusion as well as improve the effectiveness of monetary policy in managing inflation. This is all intended to foster economic growth. The policy therefore sought to limit the amount of daily cash handling in circulation by increasing charges on daily withdrawals and deposits that exceeded N500,000 ($3,000) for individuals and N3 million ($18,600) for corporate bodies, encouraging individuals to rather patronize electronic forms of payment. With the policy proven to be effective in Lagos, the CBN extended it to six other states; Kano, Rivers, Anambra, Abia, Ogun and Abuja, Nigeria’s capital city. These cities largely experienced success within this period, with little or no challenges posed. It is however uncertain how a national launch will be received by less developed cities. The policy may have been well received in seven Nigerian states, but it should be noted that these are some of the most industrialised states in the country, with diversified economies. Other states largely regarded as ‘civil servant states’ with most of the working population employed by the government, may not easily adopt the system. Many small scale enterprises have cited irregularities that have attended the use of the system in some parts of the country as a put-off. During a recent trip to Calabar, while my flight was delayed, I tried to grab a quick bite, but couldn’t because I was without cash. The only retailer who had a Point of Sale (PoS) was a seller of high-end wristwatches. One may argue that the policy was yet to kick-off in Cross River State. However, if by mid-June, retailers in an airport through which thousands of tourists – foreigners inclusive – travel annually are yet to adopt the payment service, how hard will it be convincing them to embrace it in July? In cities like Osogbo, Ilorin, Yenegoa and Gusau, the story is the same; many would rather deal with cash than get paid for services rendered electronically. The overriding challenge facing this policy is the lack of trust for electronic payment in the country. Technology infrastructure will also be a major impeder. While Nigeria has recorded commendable growth in IT adoption and mobile penetration, internet or broadband penetration remains low. The latest figures placed Nigeria’s broadband adoption rate at 16 percent, well below the global average of 35 percent. This figure is lower in the remaining states yet to experience the wave of the cashless policy. This will not discourage the CBN in extending the policy, with the country said to be spending $5.1 billion annually on printing and handling cash. The policy is therefore expected to curb excessive spending used in minting currency. These funds can be diverted to address other developmental issues. General elections are coming up in 2015 and it has been acknowledged by several financial analysts, including investment firm Renaissance Capital in a February report, that spending will increase in the run up to the election. Cash is moved around by political aspirants seeking favours; if the policy proves a national success, the random distribution of cash to potential voters, will significantly reduce. The success of the cash-less policy across Nigeria is key to the country’s economic progress and furtherance of its recently crowned status as Africa’s largest economy. The CBN does stipulate that “an efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth.” The onus therefore lies on the CBN to ensure a seamless transition from the traditional cash-driven economy to a more secure, electronic system of financial services delivery