Two weeks ago, July 1 to be precise, the Central Bank of Nigeria (CBN) commenced the implementation of the cashless policy throughout the country. Introduced to reduce the amount of physical cash used in business transactions in the economy as well as encourage more electronic-based transactions, it is a policy that we endorse even as we hope that the critical stakeholders will be faithful to its implementation. That is very important against the background that the policy could very well facilitate economic development, reduce the cost of banking services and improve the effectiveness of monetary policy in Nigeria.
However, while the policy was initially conceived to include a penalty on cash deposits, the new CBN Governor, Mr. Godwin Emefiele has removed such charge on deposits so as to encourage people and businesses to put their funds in the banking system. The intervention, we believe, is well-meaning and correct, but it is our hope that it would not open room for abuse that would eventually render the entire policy ineffectual. It is noteworthy, however, that as a form of disincentive for Nigerians who still prefer to deal in cash, the policy stipulates a handling charge on daily cash withdrawals that exceed N500,000 for individuals and N3,000,000 for corporate bodies.
While we commend Emefiele and his predecessor Mallam Sanusi Lamido Sanusi (now the Emir of Kano) who actually launched the initiative some 30 months ago (the pilot scheme) it may be necessary to have an overview of its implications for our economy. The benefits are many but the most poignant is that the more transactions take place within the banking system, the more effective monetary policy will be in managing inflation and driving economic growth. It is also cost-efficient in that the policy reduces the risks (and of course, expenses) associated with handling large volume of cash and there is already evidence that it is working.
In Nigeria today, the cashless policy has resulted in the modernisation of the payments system, which is an enabler for economic growth. It has led to the use of various channels to deliver financial services and such channels include but are not limited to mobile phones and the internet. Consequently, there has been an increase in access points for financial services and a resultant increase in the use of such services. Put simply, the introduction of the cashless policy has spurred financial inclusion and the participation of poor, geographically distant and more vulnerable members of society in economic activities.
However, despite what can be seen as the early successes of the cashless policy, there are challenges that limit its efficacy. Such challenges include illiteracy, limited knowledge of computing/use of internet and lack of trust and confidence in the system, among others. Many people are not conversant with using electronic channels and thereby breach security by giving their PINs to strangers to transact on their behalf. In addition, infrastructural challenges persist, internet access remains erratic, ATMs debit accounts without dispensing cash and merchant's apathy to using POS terminals remain due to a loss in tips.
Nevertheless, the upside is that Nigerians are witnessing an increase in the usage of technology and the growth of technology-enabled businesses such as e-commerce and social-media blogs. Therefore, we expect this full-scale implementation to result in a deepening of these activities, new business opportunities and new jobs. As the implementation of this policy expands, we also expect to witness a reduction in cash-related fraud, an improvement in the efficiency of the financial system and further job growth in agent banking and the technology sector.