Outrageous cost of cashless policy in Nigeria

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Prof. M. K. Othman

The Nigerian economy was once described as a “voodoo” economy, “the more you look, the less you understand”, as it defies all kinds of known remedies. The mystery of Nigeria as a nation is not limited to its economy but includes socio-political and cultural dispositions. Long ago, western pundits postulated, hypothesised, and predicted the disintegration of Nigeria by the year 2015. Time has since revealed their empty prediction; regrettably, however, the nation is still sliding into the abyss of squalor and poverty, exacerbated by the population explosion – a kind of time bomb that must not be allowed to detonate. 

Perhaps, it was the voodoo affair that made the current Governor of the Central Bank of Nigeria, CBN, Godwin Emefiele, to fast-track the full implementation of the cashless policy by redesigning the higher denominations of the naira, the Nigerian currency. It was reported that over N3 trillion was in circulation but just a little over N1 trillion was in the banks’ vaults while nearly N2 trillion was being kept by individuals; a situation that could never allow a full implementation of the cashless policy. These individuals were presumed to be the money bags, the politicians who may be ready to use their money for vote buying. Thus, the naira redesign is the fastest way of opening these private vaults and emptying their contents into the banks’ vaults or being lost. What is cashless policy, its objectives, prerequisite, and requirements? 

 Cashless policy is a policy that discourages the use of raw cash for transactions but encourages the use of bank transfers, ATM cards, PoS, and other financial instruments for transferring cash in transactions. The policy aims to reduce some of the negative consequences associated with the usage of physical cash in the economy, including the costs of cash volume handling, robberies, payments of ransom, and other cash-related crimes as well as loss of physical cash during fire and flooding incidents. 

Nostalgically, I reminisce about my experience as a resident of a society that was operating over 70% cashless economy in 2002, which was 20 years ago when the Internet services were much slower than the 3G, with no online transfer and debit/credit alert system. It was just being operated on debit/credit cards. The card and PoS were the only instruments, yet there were no issues like debiting without crediting or the absence of Internet service or electricity. A story like “no network” was not in existence, and neither was a similar story such as “the service is not available at the moment, try again later”. 

Today, two decades after this nostalgic reminiscence, Nigeria is still poorly prepared to operate a cashless economy for obvious reasons. There is gross inadequate infrastructure for Internet and electricity supplies, low literacy among adults, high poverty, corrupt practices among people, cyber fraud, and poor policing and regulatory systems. The preparation for Nigeria to seamlessly adopt the cashless policy will remain wishful thinking except for strenuous effort in the right direction to achieve it. Are we making such an effort? 

In several outings, the CBN governor exhibited confidence in achieving a cashless economy in the near future. During the launch of the e-Naira in Lagos late last year, he said, “The destination as far as I am concerned is to achieve a 100 percent cashless economy in Nigeria”; perhaps, a tall ambition. Is the nation technologically and educationally developed to move in this direction? What is happening with e-Naira? Has CBN abandoned the idea? I think e-Naira with e-Wallet is a better shortcut to the implementation of a cashless economy.

CBN’s adoption of the naira redesign over three months as a shortcut to implementing a cashless policy has boomeranged, costing Nigerians outrageously. First, the three-month period for cash swap was more theoretical than real as many Nigerians began seeing the new currency last month (January 2023).

The new currency became scarce, and several places started rejecting the old notes a week before the January 31, 2023, deadline for its expiration before the 10 days extension. The old currencies were mopped up while the new ones became inaccessible. 

Thus, the naira redesign policy bites harder, and the scarcity of new notes continues to disrupt business activities in markets, restaurants, banks, and major sales outlets across Nigeria. The online banking system became inefficient due to overwhelming demands. 

The PoS operators across the nation jacked up their charges by 1000%, charging N1,000 for every N10,000 withdrawn. In one of the video clips, street hawkers were seen selling new naira notes at the rate of N60,000 through a transfer for new currency notes of N50,000.

Banks’ halls and ATMs joints became overcrowded with people subjected to circle of hopelessness and wearing glooming faces as if in national mourning. They were doing nothing other than expecting the uncertainty, awaiting the bank’s officials to load some cash into their ATMs. In one bank, people were given a paltry N2,000 each after several hours of waiting. 

There were allegations of new cash hoarding by the bank officials who negotiate a better deal with some mobile cash point vendors. These vendors are said to be exploiting the situation by dispensing the new notes to customers at skyrocketed prices. 

There are massive disruptions in economic activities, the crisis has led to an unprecedented spike in the cost of essential goods and transportation services across states in the country. If the man-hour losses and loss of productivity are quantified monetarily, the cost of the cashless policy would be very outrageous to the nation. When will this situation improve? 

The federal government needs to urgently address this crisis before it degenerates and blossoms beyond control. February, being a month of election, is a critical period for the nation. The upheavals of political campaigns and elections are enough crises at hand, we cannot afford to have more crises from the socio-economic sector. 

Last note: There are several examples of countries that adopted a cashless economy as well as redesigned their currencies. We should not reinvent the wheel, we simply study other systems, identify all the factors for or against, modify, customise, and adopt at a small scale before upscaling. May God show us the way, amen.

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