•CBN’s new policies hurting our operations, SMEs cry out
From Uche Usim, Abuja Merit Ibe, Joy Imanah and Daramola Eniola, Lagos.
In 2012, the Central Bank of Nigeria (CBN) embarked on the journey to operating a cashless economy and it kindled hopes that the country was willing to play in the global financial ecosystem where digitisation is the unifying word.
But the momentum was retarded due to a plethora of factors, including poor Information and Communication Technology (ICT) infrastructure, poor awareness, illiteracy and cultural barriers, addiction to cash transactions, among others.
So, stakeholders in the finance bloc had to tackle the underlying challenges considerably before rekindling conversations on digital banking and cashless policy.
The CBN, while driving the initiative, began by redesigning the old naira notes (N200, N500 and N1,000) and unveiled the new ones in December 2022. It also pegged weekly cash withdrawals by individuals and corporate bodies at N500,000 and N5 million, with effect from January 9.
The apex bank said the redesigned naira notes would be rationed to encourage the public, regardless of location and social ranking, to use digital platforms for transactions.
These are; internet banking, mobile banking, domestic card (AFRIGO), USSD, PSBS, POS, eNaira app and 1.4 million mobile banking agents spread across the country to attend to the informal sector and those in far-flung settlements.
This is consistent with the practice in developed and developing countries across the globe.
Analysts note that if the experience of India’s demonetization exercise is anything to go by, then it is evident that imposition of cash withdrawal limits by monetary authorities, following a demonetisation exercise, is a norm.
This makes the cash withdrawal limit an integral part of the currency redesign package as both are mutually dependent.
The move, according to the CBN Governor, Mr Godwin Emefiele, became necessary because of the need to deepen financial inclusion, track spending, smoothen monetary policy implementation, reduce the high cost of cash handling and mop up excess cash outside the banks.
As at December 2022, N2.7 trillion out of N3.2 trillion currency in circulation was outside the banks. However, N1.9 trillion has so far been retrieved, leaving a shortfall of N900 billion still expected to return to bank vaults by February 10 or thereabout.
The huge funds outside the banking system meant that kidnappers, terrorists and other criminals could ply their nefarious businesses without appearing on security agencies’ radars, since cash transactions are harder to track.
On plans to deepen financial inclusion, the Director, Development Finance Department of CBN, Mr Yusuf Yila said Nigeria targets to get 95% of the over 200 million population financially included by 2024.
Weighing in on the new initiative, Nigeria’s first professor of capital markets, Prof Uche Uwaleke said that the cash withdrawal limit is an integral part of currency redesign meant to reduce the amount of currency circulating outside the banking system.
He said it will have no negative impact on these businesses given the many alternative payment platforms available to them.
“Rather, the impact will be positive as it reduces the risk associated with carrying huge cash such as armed robbery. The incidence of money laundering is equally likely to reduce.
“In place of cash transactions, these businesses can use more reliable and safer channels such as POS, Debit cards, eNaira and electronic transfers”, he said.
In his view, the former Managing Director/Regional Executive Ecobank Nigeria, Patrick Akinwuntan, expressed confidence that the cashless policy would improve financial security and transparency.
“If you look at the level of theft when people go to buy things in the market, it is cash robbery. It happens when people are coming from the shops, robbers believe that there is money with you. But with this policy, the average Nigerian will know well, maybe this person will not be holding up to N100,000”, Akinwuntan said.
He however urged regulators to monitor and walk with Nigerians on the journey.
“If Nigerians see the support from the regulators, they will fall in line. For instance, we can see that most banks want to be available on Saturday and I actually think some will be available on Sundays also. That process needs to take a lot of feedback. Once the people understand that the regulators are focused on this policy and are supportive in its implementation, I think it has a good opportunity of taking Nigeria to a better monetary environment,” he said.
For analysts, the policy is part of a broader strategy for the CBN to control FX demand.
However, on insinuations that the new naira and the accompanying rules were designed to hurt politicians who have stacked up the old notes for politicking, the CBN Governor, Mr Emefiele, said there was no such motive as CBN interventions are woven around economic exigencies and not the interest of politicians, since the regulatory body remains fully non-partisan.
Meanwhile, small and medium-sized enterprises (SMEs) in many parts of the country are groaning and in dire straits, as the economic crisis brought about by the recent cash swap policy of the Central Bank of Nigeria continues to fester.
The SMEs are also bemoaning the withdrawal limit of N500,000 weekly for individuals and N5million for organizations by the Central Bank of Nigeria (CBN). They insist that the limit is quite low for the nature of their business.
Indeed, for point of sale (PoS) agents, terminals and organisations such as Moniepoint that facilitate these transactions, cash is the greatest asset . These PoS agents, like everyone else, get their cash from banks and the cash withdrawal limit automatically makes it difficult for them to serve customers.
This inconvenience also extends to individuals such as artisans who accept cash for their services. With the new policy, those who do not have bank accounts are finding it hard to receive payments.
While the CBN indicated that its latest policy is to drive its cashless policy further, the country still needs the proper infrastructure to support digital transactions. Besides the fact that Nigerians pay more for data, Internet connectivity failure is a well-known phenomenon in the country.
Other digital payment infrastructure, such as USSD, has also been known to fail often.
Reacting to the policy, Chairman, National Association of Small Scale Industrialists (NASSI), Gertrude Akhimien, applauded the CBN’s cashless policy, noting that it would tame the rising inflation, curb corruption and herald the cashless banking. He, however, noted that many of its members in the manufacturing sector buy raw materials from rural areas that are under-banked.
She said transactions are done with cash in these areas, where most of the traders don’t have bank accounts, adding that with the new policy, government needs to put a lot of things in place.
“The cashless economy is a good policy. But till today, many still go around with cash because sometimes transactions fail in banks. The bank attendants give excuses ranging from no internet, cyber is down and all sorts; meanwhile goods are on ground waiting to be cleared.
“For the cashless policy to be more effective, these issues need to be taken care of. Government needs to put a lot of things in place like improving the internet infrastructure, community banking in remote areas and others.
“Though I see it as a process, with time things will stabilise. It needs to be closely monitored, so that it does not affect the business environment negatively.”
For the Chairman, SMEs Group of the Lagos Chamber of Commerce and Industry (LCCI), Daniel Dickson-Okezie, the policy is a good one, saying when a new policy comes on board, it affects every strata of the economy.
For SMEs, he said, it has been really difficult, especially for the ones at the micro level who are not banked.
“They are not connecting in terms of ICT. This group is suffering the more. However, the world is changing and our society is changing too. We need to adapt to changes. In my company, all of them now have bank accounts and cash payments above N5,000 are no longer allowed in all divisions of the company.
“Being a new policy, SME’s are not finding things easy. However, the positive side of the story is that more and more SMEs have come to embrace the cashless policy which is good for business, the economy and for everybody. In some remote areas , the point of service (PoS) exists. Some remote areas are keying in to the trend.”
Dickson-Okezie pointed out that government has to create the enabling environment for investors to come into these remote areas and establish SME banks for easy transactions.
“The policy has instigated more artisans to open accounts and have tried to link up with PoS operators to continue in business. Even some small business owners that are not well informed or have bank accounts still do some transactions using PoS operators.
“The earlier we get used to the fact that cashless is the way to go, the better for us all. The hitches for now are temporal but in a short while, they will be resolved and we will move forward.”
He noted that the withdrawal limit was working out, though not without difficulties.
“More people are now banking. They are coming to the reality of the situation. No more carrying cash around. This policy is actually to the disadvantage of criminals. Investors don’t invest in a corrupt system. When the financial and the ICT systems are stabilized, investors will come in because the confidence will be there when things get better.”
Mr George, founder of Spark Varieties, a small fast food chain at the University of Lagos, said the current scarcity of cash was grossly affecting business operations for SMEs. He lamented that the cash shortage was having a devastating effect on businesses, as many entrepreneurs are finding it increasingly difficult to access cash to purchase goods, pay workers and transact business. George pointed out that the situation was already threatening the economy as businesses are not thriving.
The CEO, who agreed that the country was already bedevilled by inflation and hardship, highlighted the problem of unemployment and the need for entrepreneurship to be encouraged by the government through soft loans and enabling environments for businesses to thrive.
George stated that he has to use a POS machine to withdraw money and was charged more for it, lamenting that the extra charge is passed on to his customers. The scarcity of the Naira is also affecting the movement of goods, as many distributors do not accept transfers, making it more difficult for businesses to receive and purchase the supplies they need to keep their operations running.
He said the recent push towards a cashless system is also having a negative impact, as many people in Nigeria are either illiterate or don’t know how to do online transactions.
On his experience with the commercial bank within his local community, George stated that it was a horrible one that sapped his productive time as he had to spend time queuing for cash.
He called for new Naira notes to be pushed into circulation, urging government to allow the old and new naira notes to be in operation until the old naira is phased out to abate the current state of the economy. Nigerians need cash and it’s been difficult for every business owner right now, George said.