Adjusting to Reality of Cashless Economy

James Emejo writes that the CBN’s cashless policy bolstered by the recent redesigning of the Naira may have come to stay, ushering in a new dawn for electronic payment in the country.

With the 2023 general elections gradually winding down, many Nigerians are optimistic that the cashless initiative introduced by the Central Bank of Nigeria (CBN) as far back as 2012 – and whose implementation became more evident following the Naira redesign programme – would at least be relaxed.

This is so as a section of the public believed the cashless and currency redesign policies were largely a witch-hunt and politically-motivated – a claim which the CBN Governor, Mr. Godwin Emefiele had vehemently refuted.

Yet, some people appeared not to understand the difference between improving the availability and circulation of the new naira banknotes and the cash withdrawal limits which was unveiled following the currency redesign – which were both meant to address specific objectives.

Therefore, going by the allegations that the naira redesign and cashless programmes were introduced to punish certain persons during the electoral process, it would then be imagined that the policy should be reversed soon after the elections were over.

However, while the new banknotes are expected to be made more accessible to Nigerians, alongside the old naira notes, following the Supreme Court judgement, whenever the CBN deemed it fit – given that the bank has to control money supply; the policies on cashless economy, barring any policy reversal by the incoming administration – appeared to have come to stay as well as ushered in a new normal whereby electronic payments become the preferred means of transaction over cash.

Journey to cashless economy

It is however important to point out that despite speculations that the cashless programme may have been forced down on Nigeria or invented only because of the elections, the policy had been introduced in 2012 by Emefiele’s predecessor.

In fact, Emefiele noted that there had been five reversals in the bank’s attempt to go cashless and promote financial inclusion since 2014 when he was first appointed as CBN Governor, adding that the reversals were born out of the need to deepen the country’s payment system infrastructure, adding that the payment system in Nigeria is now among the best six in the world.

But as could be witnessed over time, the apex bank had invested in infrastructure and evolved measures to encourage the participation and innovation of cashless agents across the country.

Hence Emefiele said, “We believe that we have put in place enough infrastructure that would help us attain or achieve a cashless policy that will be in line with global practices.”

Naira Redesign

On October 26 last year, Emefiele unveiled the central bank’s plan to redesign, produce, and circulate new currency denominations of N200, N500, and N1, 000 denominations, following the approval of President Muhammadu Buhari.

According to him, the move was also aimed towards proper management of money supply, addressing currency counterfeiting, particularly the increasing ease and risk of evidenced by several security reports and the increased risk to financial stability as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank. Others are to discourage vote buying by politicians, curb banditry and terror financing and fight inflation.

New cash withdrawal regime

On December 21, 2022, the CBN reviewed upward its cash withdrawal policy across all payment channels by individuals and corporate organisations.

Under the updated regime, the bank said that effective January 9, 2023, individuals and corporate entities could withdraw a maximum of N500,000 and N5 million respectively compared to N100,000 and N500,000 which was previously announced on December 6, 2022.

During a recent engagement with the diplomatic community, Emefiele noted, “You are all foreign dignitaries representing your countries in Nigeria and you know and you would agree that the level at which people carry cash in Nigeria is unacceptable.

“In your countries, you do not carry cash anyhow. If you carry cash and you are seen, you are questioned and profiled continuously. We want to look at your country and that is why we are saying that Nigeria, being the largest economy in Africa and with the largest population in Africa, really must go cashless. And we are delighted at the CBN that with the support of President Muhammadu Buhari, we would achieve this.”

 Cashless policy bolstered by NFIU

Meanwhile, those who may be speculating that the cashless policy whose immense benefits are currently being felt by Nigerians – would be scaled back may be wrong going by developments that appeared to bolster the cashless policy of the central bank.

Earlier in January, the Nigerian Financial Intelligence Unit (NFIU) unveiled new guidelines aimed at mitigating money laundering, terrorist financing, and proliferation of weapons among others.

The provisions of the framework prohibited cash withdrawal from public accounts and ban the payment of estacodes and overseas allowances to civil and public servants in cash effective March 1, 2023 – in an apparent drive to complement the efforts by the central bank to tackle terrorism-related financing as well as promote a cashless economy.

The Enforcement, Guidelines, and Policies for Mitigation of Money Laundering, Terrorist Financing, Proliferation of Weapons and Prevention of Predicate Crimes, was signed by the NFIU Director/Chief, Mr. Modibbo Hamman Tukur – and restricts cash payments of a sum exceeding N5 million (or its equivalent) for individuals, and N10 million or its equivalent for a body corporate and imposes a fine of at least N10 million or imprisonment for a term of at least three years (or both), in the case of individuals; and a fine of N25 million in the case of a body corporate. Section 26 of POCA, 2022 makes provision for the seizure and detention of cash over the prescribed amount under the law.”

Tukur said, “There is nothing in these guidelines to suggest or indicate there is reason to compel or warrant a public official at federal, state, and local government to go to a financial institution to withdraw cash. In the unlikely event that a public official feels he may need cash withdrawal, he may apply for approval for a waiver from the presidency which may be granted on a case-by-case basis.

“Under no circumstance, shall any category of public officers be given a standing or continuous waiver to withdraw cash from any public account in any financial institution or designated non-financial institution.”

 Analysts’ perspectives

Commenting on the development, analysts in separate interviews with THISDAY agreed that the cashless policy may have come to stay barring any policy changes especially as the country awaits the incoming administration.

The analyst particularly backed the cashless and naira redesign policy of the apex bank noting that these have helped to tackle the serious security challenges bedevilling the country including kidnapping and ransom taking which appeared to have reduced following the challenges in accessing physical cash.

They said implementation of the policy, however, needed to be fine-tuned.

Wealth Management and Business Development Consultant, Mr. Ibrahim Shelleng, said, “I think it is tough to determine at this point whether the policy will be sustained. The pressure leading up to the elections may not have been able to change the policy but perhaps with an incoming government, there may be need to revisit the policy.

“Personally, I do not have a problem with the policy, but I do have an issue with the implementation. Adherence to the policy would undoubtedly be good for the economy in the long run, but without adequate measures in place to mitigate against the effects, it has certainly created hardship for the entire population.”

Shelleng argued that the benefits of the policy outweigh the drawbacks, adding that more efforts needed to be made in easing the burden of the sudden implementation.

He said in order to encourage the adoption of e-channels; the government must do more to persuade the public about the benefits, adding that the adoption of the e-Naira had been poor even though it remained a potential game changer for the CBN.

He noted that the cashless policy was a fantastic opportunity for the central bank to push for the use of digital currency, adding however that little was done in terms of publicity and mass education leading up to the implementation of the cashless policy.

He said, “With the right incentives, more people would have been compelled to use it and become ambassadors of the product. Paper cash is simply a means of exchange that has been widely adopted and extremely convenient. An informal economy like Nigeria thrives on cash but with the penetration of mobile phones to every nook and cranny, there is an opportunity to gradually introduce a new form of exchange. However, we must be mindful that change takes time.”

Managing Director/Chief Executive, Dignity Finance and Investment Limited, Dr. Chijioke Ekechukwu, stressed the need for the political will to carry through with the policy.

He said, “If the political will exists and does not change with a change of government, then, it has come to stay. If there is no distortion in the policy, Nigerians will gradually get accustomed to it and adjust.

“Let us, therefore, watch the incoming government and see whether they will consider the policy plausible enough to continue.”

On his part, Managing Director/Chief Executive, SD&D Capital Management Limited, Mr. Idakolo Gbolade said the cashless policy is envisaged to be the next stage of economic advancement if properly implemented.

He said, “The negative impact of the policy presently is based on implementation.  The country’s network backbone has not been able to support the millions of transactions occasioned by the cashless policy daily and so we are presently witnessing more failed transactions than before the commencement of the policy.”

He noted that policy remained a commendable initiative by the central bank and should be fine-tuned to ensure that it brings a better economic experience to the people.