Cashless Policy: Dream Still Far From Reality

In what can best be described as an attempt to broaden the scope of electronic payments for goods and services, five states and the FCT are set to join Lagos which adopted the cashless initiative last year, owing to the high level of commercial activities and cash deposits they record.
On its part, the Central Bank of Nigeria, CBN, disclosed that the expanded cashless initiative would include Aba (Abia State), Onitsha (Anambra State), Kano (Kano State), Port Harcourt (Rivers State), Abeokuta/Agbara (Ogun State) and the Federal Capital Territory, Abuja. Indeed, the trend, which has for long been embraced by the industrialised European countries and the USA, is yet to fully gain ground in Nigeria. But the CBN, which is the main driver of the effort, explains that it is aimed at reducing the heavy volume of paper money or cash in the economic system.
While acknowledging the challenges inherent in implementing electronic financial transactions, Ugochukwu Okoroafor, Director of Corporate Affairs, CBN, assured that extending the policy to the aforementioned cities would also be successful as the Lagos experience had shown. “If we think too much about the challenges such as inadequate infrastructure which can be surmounted in the course of time, the nation may not be able to achieve desired results,” he said.
According to him, the beauty of the system is that even at home, the public can transact business with relative ease, adding that “the cashless policy will provide convenience, efficiency, speed and security for people involved.” Meanwhile, there is still a major hurdle to be scaled. Nigeria is not yet highly industrialised, with so much illiteracy and poverty even in the 21st century. This makes efforts to replace hard cash with digital transactions more difficult.
So as the cashless policy continues to expand its scope, there is a need for more policy advocacy, public enlightenment and capacity building, provision of infrastructure such as electricity and internet access to make for a smooth sail. Other incentives required to facilitate electronic financial transactions in this mould include: Laptops, cell phones, computers, I-pads, credit cards, debit cards and the installation of Automatic Teller Machines (ATM) at strategic points such as markets, banking premises, town and city centres, manufacturing or industrial zones and commercial layouts.
But the point must be made that both the formal and informal sectors of the economy must key into the policy if it is to achieve anything meaningful results in the long run. With massive public enlightenment, citizens will appreciate the need to have internet facilities in order to speedily access their bank accounts, pay bills and make transfers just by clicking their mouse or GSM phones. Stephen Temisan, a banker who spoke with Saturday Vanguard, noted that “Nigerians now have the option of Point Of Sales (POS) terminals where they can buy and pay without cash.”
He also reacted to questions regarding the effectiveness of the cashless policy in Nigeria: How has the policy worked in Lagos? As regards the payment option for POS, it is working in Lagos – although considering the informal sector, it’s still cash. Don’t expect success here. To a considerable extent, the informal sector drives the economy. But at department stores for consumers, cashless Lagos seems to be working, as there is less volume of cash. For manufacturers producing wholesale and major distributors, there is now less cash in payment as more of cheques and online payment are done.
Is there a chance that the informal sector will catchup? I think so. People’s spending power is in the street. It’s fine to pay your bills by the electronic system. But if you go to the markets to buy, transactions are still done with cash. If you are talking of say N3 million in fast food ventures, then it can be electronic. When you command a lot of sales, payment may not be cash. About 90 per cent of financial transactions in the formal sector are done using electronic payment. What about in the states? It may not be like that.
For anything above N150,000, it’s a third party cheque which must be cleared within a stipulated time before payment can be made. There are 3 platforms available to customers: Nigerian Electronic Fund Transfer (NEFT) which takes 2 days, Nigerian Interbank Settlement System which is instant and Real Time Gross Settlement (RTGS) which is owned by the CBN. Your bank avails you with these platforms. But for RTGS, only the big corporations and banks use the facility. It’s immediate gross settlement.
Is there any hope for the cashless initiative? I don’t see any hope in the immediate future, given the level of our economy. I don’t see the cashless society coming into existence fully as in the developed world in the next 10 years. A lot of infrastructure are still missing. Everybody who wants to move from informal to formal will have to create a suitable payment system which can be electronic. There should be Point Of Sales terminal machines for collection of payments.
That way, cash volume will be reduced, while electronic payment will increase. Big businesses transact with less less cash. For businesses of N5 million and above, a bank draft is preferred. Charges on the expanded cashless transactions for the new entries have been suspended. They will not pay penalties or charges till October 1, 2013. The CBN has communicated this directive to the banks.