Cashless Lagos

Sanusi Lamido, CBN Governor

With last week’s take-off of the cashless pilot project of the Central Bank of Nigeria (CBN) in Lagos, banks are enveloped by fear of high operations cost, even as the apex bank allays this fear
By Shedrack Ifurueze
Inadequate and poor preparation and enlightenment by the money deposit banks and other electronic payment institutions have characterised the commencement of the cashless policy of the apex bank in Lagos.
On January 1, the policy kicked-off as a pilot scheme in the state precised on but its impact was not felt until the third day, Tuesday, January 3, which was the first working day of this New Year.
Investigation by The Source revealed that many Lagos residents who went to their banks last Tuesday after the long Christmas and New Year holidays, complained of very poor services on the Automated Teller Machines (ATMs), while those who shopped at some retail outlets had a similar experience with the e-payment channels.
Some said that they encountered poor connectivity while trying to use their ATM cards to make payments for goods and services. Others too said that they could not make transactions online as a result of network challenges.
Officials of some of these banks visited by The Source however, revealed that individual account holders were still making transactions beyond the withdrawal limit stipulated by the apex bank, but were quick to point out that “such transactions would cease when the penalty charges take-off.”
There are fears in the banks that the scheme may lead to job loss.
Earlier, investigation by this magazine had shown that more than 7,500 bank workers lost their jobs after the CBN and Nigeria Deposit Insurance Corporation (NDIC) special audit test in 2009, even as the examination also revealed that nine banks were in serious grave condition.’
The Source learnt that all the banks, especially the rescued banks, adjusted their salary structure with many of them cutting salaries by about 100 per cent. And it is believe that with this new cashless policy which had kicked-off in Lagos as a test-run scheme, there is the likelihood that more bank staff will lose their jobs as banks have unanimously endorsed an initiative proposed by the apex bank. This is to enable them to reduce their over-head and operating expenses through a drastic cost-trimming strategy in line with the new payment regime.
According to a source in the Bankers’ Committee, which comprises the CBN, NDIC, Discount Houses and all the 24 banks, “the bankers at their last meeting in December 2011 agreed to cut down operating expenses by as much as 30 per cent with effect from 2012.”
The Source further learnt that some of the banks had already began to make arrangements to establish electronic branches (e-branches), where banking transactions would be made without cash. The e-branches would have not more than one bank officer each who would assist bank customers that may not be literate or knowledgeable enough to perform e-banking business. A cashless policy, according to the CBN, is to promote the use of electronic means of transaction and make Nigeria a cashless economy. Sanusi Lamido Sanusi, CBN, Governor last year while conceiving the idea of electronic banking in the country said that the policy became imperative because of the increasing dominance of cash in the economy. He informed that “the attendant huge cost of cash management to the banking industry as well as its implications for security and money laundering among others call for serious concern in the economy.”
Sanusi stressed then that effective from June 1, this year, that daily cumulative withdrawals and lodgments in banks by individuals would be limited to a maximum of N150,000. The CBN also pegged the daily cumulative withdrawals and lodgments by corporate customers at N1 million effective from the same date this year, just as the programme was billed to take-off in Lagos as a test-run at the end of December 2011.
The e-payment initiative involves a transformation of the payment system and the idea is to permit banks to cut costs and running expenses through moving the country from its present cash- and-carry status to one where people will make payments through electronic channels. Though, this policy has attracted a lot of public reactions and comments, there is no doubt that the expected benefits according to CBN and Bankers’ Committee are enormous. These include reduced cost of banking operations which would dovetail into reduced lending rates, financing of estimated 65 per cent of cash outside the banking system and improved payment system.
The fears trailing this policy by concerned Nigerians and experts were allayed by Bismark Rewane, Managing Director, Financial Derivatives Company Limited (FDCL), who recently said that “there was nothing wrong with the entire policy but cautioned against the rush for its implementations. The transformation from a cash-centric economy to a plastic one would need more than one year. In fact, the introduction should be gradual with the fundamental structures first of all put in place,” Rewane remarked.
The FDCL boss also made a case for a public hearing on the general implementation of the policy for all the people that transact businesses with cash, including the market traders, artisans, retailers and wholesalers so as to sample their opinions. But while these stakeholders and experts views and opinions are being considered, Mohammed Abdullahi, CBN’s Head of Corporate Affairs when contacted on the ragging controversy over this policy said that the policy decision was in view of increasing dominance of cash in the economy with its implication for cost of cash management to the banking industry, security and by extension, money laundering.”