Charges on deposits, withdrawals: Outrage, condemnation trail directive

The Central Bank of Nigeria (CBN) directive to banks, as part of cashless policy, to charge customers for cash withdrawal and deposits has continued to draw condemnation from Nigerians from all strata, BENJAMIN UMUTEME writes.

Financial inclusion has continued to assume increasing recognition worldwide among policy makers, researchers and development oriented agencies.

Its importance derives from the great promise it holds as a tool for economic development, particularly in the areas of poverty reduction, employment generation, wealth creation and improving welfare and general standard of living.

And when in 2008, a survey was conducted in Nigeria by the Enhancing Financial Innovation and Access which revealed that about 53.0 per cent of adults were excluded from financial services, it was obvious that something needs to be done.

The global pursuit of financial inclusion as a vehicle for economic development had a positive effect in Nigeria as the exclusion rate reduced from 53.0 per cent in 2008 to 46.3 per cent in 2010.

Encouraged by the positive development, the Central Bank of Nigeria in collaboration with stakeholders launched the National Financial Inclusion Strategy on 23rd October, 2012 aimed at further reducing the exclusion rate to 20 per cent by 2020.

Specifically, adult Nigerians with access to payment services is to increase from 21.6 per cent in 2010 to 70 per cent in 2020, while those with access to savings should increase from 24.0 per cent to 60 per cent; and Credit from 2 per cent to 40 per cent, Insurance from1 per cent to 40 per cent and Pensions from 5 per cent to 40 per cent, within the same period.

CBN’s intention

Many Nigerians have come to appreciate the impact of the apex bank’s drive to bring more adult Nigerians into the system.

However, when on Tuesday, the Central Bank of Nigeria (CBN) announced new charges on cash deposits and withdrawals on individual and corporate bank accounts, as part of efforts to further drive financial inclusion, many Nigerians were outraged. They felt the bank had lost its humane nature considering that the economic environment was biting hard on the pocket of Nigeria.

According to a circular signed by the Director, Payments System Management Department at the CBN, Sam Okojere,  daily individual cumulative or single cash withdrawals in excess of N500,000 would attract a three per cent charge, while two per cent would be paid on deposits above the amount. For corporate bodies, the benchmark is N3 million which attracts three per cent for deposit and five per cent for withdrawal.

For the Central Bank, the move would encourage Nigerians to handle less cash and instead embrace digital transactions. The charges do not apply on the first N500,000 for individuals and N3 million for corporate bodies. They apply only on the excess amount.

For instance, if a bank user withdraws N1 million from his individual account, the new policy expects the user to pay N15,000 as a charge, being the 3 per cent on the extra N500,000. If the user lodges the same amount, the charge would be N10,000.

If a business pays N5 million cash into its company account, the charge would be N60,000, being the 3 per cent of the extra N2 million. If it withdraws the same amount, the charge would be N100,000.

To avoid these charges, some Nigerians have hinted at splitting their lodgments or withdrawals, however, this may not be effective on the same day as the charges apply on single or cumulative daily transactions. Splitting transactions can only work if the subsequent transactions are done on another day.

Given this obvious impediment, as well as the fact that the directive came on the heels of recent increase in VAT, most Nigerians are not the announcement with cheer as it is widely perceived as another avenue by the government to further squeeze from them their hard earned money.

Meanwhile, the move is not new as it commenced in Lagos in 2012 before it was extended to Abia, Anambra, Kano, Ogun and Rivers States, and Abuja, in 2013. However, in 2017 the CBN suspended the implementation till further notice.

CBN should show Nigerians some respect

Commenting on the move by the apex body, a former director-general of the Bureau of Public Service Reforms Joe Abah faulted the timing, stating that the CBN should have gone on an enlightenment campaign before directing banks to begin implementation.

He said in a message on Twitter: “Putting aside the merits and demerits (of the cashless policy) for a second. We are no longer in the military era. If, for whatever reason, you are going to introduce charges for deposits, will you just issue a circular?

“You do not just issue circular introducing charges for depositing money, with no notice, no explanation, no justification, and no sensitization. The CBN should show Nigerians some respect.”

Confusion reigns

For public affairs analyst Dipo Awojide the policy has created confusion among the banking public, noting that many are confused on how it would work.

Awojide, who said the policy would further burden Nigerians stated: “Why do I need to pay an extra two per cent when I deposit over N500,000 or pay three per cent when I withdraw the same? After paying account maintenance charges monthly, ATM maintenance charge, stamp duty charges and transaction charges when I transfer to other banks? This cashless policy is confusing.”

Not a great move

Also speaking on the directives, Stephen Jones said the CBN is going about its cashless policy drive the wrong way. According to him, cashless policies are best implemented through the introduction and use of innovative and easier alternatives for transactions; not by charging people under the guise of cashless policy.

“Charging people under the guise of #cashlesspolicy is not a great move. You get to a place of cashless society through innovation and creating easier alternatives for example wireless POS payment, Phone pay, USSD among others,” he maintained.

Economy not ripe for policy

For the Nigeria Employers’ Consultative Association (NECA) believes the country’s economic environment is not ripe for full implementation of cashless policy as recently announced by the Central Bank of Nigeria (CBN).

The association’s Director-General, Mr Timothy Olawale, said the full implementation of the policy would impact negatively on several sub-sectors of the economy.

Although Olawale said that the initiative was laudable, he however, noted that the current business environment and the available infrastructure were not ready for such a development.

“Several sub-sectors of the economy, including the fast-moving consumer goods and retailing, downstream oil and gas, and transportation, among others, will be negatively impacted by the policy, as they are still predominantly cash-dominated.

“Corporate account holders are still battling with the N50 stamp duty charge on every transaction above N1,000, commission on turnover of 0.1 per cent, with the about-to-come-on-stream 7.5 percent VAT.

“Also, with the additional five percent as processing fee for withdrawals and three percent as processing fee for lodgements of any amount above N3 million, it is needless to say that the policy is an overkill, exploitative and will impact negatively on the citizens,” he said.

Need to tailor products, services to culture

However, the Deputy Managing Director, eTranzact International Plc, Hakeem Adeniji-Adele, has identified the Nigerian culture and penchant for cash transaction as the bane of digital payments in the country.

According to a statement by the Nigeria Inter-Bank Settlement System (NIBSS) on released the latest transaction figure put the total value of transactions on automated teller machines (ATMs) at N1.5 trillion in the first quarter of 2019, while mobile money operations and web payments were N810.1 billion and N107.6 billion; respectively.

Adeniji-Adele said the figures point to the fact that Nigeria is still predominantly a cash-based economy. He said that interestingly, in first quarter there were more transactions on electronic transfer like ACH — (NIBSS Electronic Fund Transfer) — and NIBSS Instant Pay (NIP) than there were on ATMs, even though both options had bank branches as part of their channels.

“So far, the Central Bank of Nigeria (CBN) has granted 79 licences to players in the payment system while another 26 have approvals in principle; this calls into question the level of cash circulating in the country. Nigerians love to handle tangible money, it’s a mindset thing,” he stated.

He pointed out that the total value of transactions using ATMs in first quarter 2019 and the fact that it’s almost impossible to go a day without cash in Nigeria, lends credence to the claim that the country is predominantly a cash-based economy.

Also, the eTranzact DMD believes the culture is being eroded as this aligns with NIBSS’ recent figures in comparison with Q1 2018 where ATM transactions with a total value of N1.57 trillion was higher than Q1 2019 by N70 billion.

For inclusion, he said players in the digital payment system need to develop products and services according to people’s culture.

“The people that should be enabled are not because the ecosystem hasn’t really grown that much to service the under-banked and unbanked,” he affirmed.

Olawale opined that for the policy to work seamlessly there was need for the CBN to ensure that all deposit money banks improved their facilities as against inefficiency in payment platforms as many continue to carry out carry transactions because they have been disappointed severally by electronic means of payment.

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