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From Uche Usim, Abuja
For economists and digital experts, paper currency is not an asset of the future. It belongs to yesterday, having served as a means of payment and store of value for centuries.
Today, the world has embraced digital money for a plethora of reasons, especially its ability to be transferred and received at the speed of a click.
From Africa to Europe and Asia, the financial ecosystems in many jurisdictions have evolved to digital systems for online, real time transactions.
According to tech enthusiasts, there are strong advantages of going cashless. It makes life easier and helps verify the transactions that are done, therefore reducing theft and fraud cases. It also reduces the expenditure incurred in printing and transportation of currency notes considering the fact that the average lifespan of paper currencies is about six years.
Cashless policy will eliminate corruption, reduce poverty and ensure that funds can easily be tracked and monitored and this will further provide for greater transparency and accountability by those who administer the resources.
For a country like Nigeria where illiteracy has eclipsed many from enjoying formal banking services, going cashless and digitising the economy will help ensure such individuals are financially included and monetary policy administrators can plan better.
Riding on the aforementioned reasons, the Central Bank of Nigeria (CBN) mooted the idea of going cashless in 2012, not only to drive financial inclusion, but also book its pavilion on the global business scene, rather than being a spectator.
In Africa, Nigeria is not the only country fast embracing the digital economy. Rwanda, Kenya, South Africa and others are on the cashless train. The idea is to prioritize mobile money and other digital transactions, while downplaying cash.
Rwanda is implementing a green policy on National Payment System Strategy with the aim to stop using paper money by 2024 (next year).
While Nigeria may not beat Rwanda’s target, the CBN Governor Mr Godwin Emefiele, said the policy has come to stay due to the inherent benefits.
The journey to cashless economy took off on October 26, 2022 with the redesigning of the N200, N500 and N1,000 denominations, and the subsequent announcements including the cash withdrawal limit.
It elicited divergent reactions and even led to some state governors dragging the federal government to the Supreme Court.
Besides, the CBN, in its examination of the economy, realised that as at December 2022, N2.7 trillion out of N3.2 trillion currency in circulation was outside the banks. However, about N2 trillion has so far been retrieved, leaving a shortfall of N700 billion still expected to return to bank vaults. 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.
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.
However, considering the timing of the policies – being an election year – some Nigerians particularly politicians believed that the apex bank’s move was targeted against certain individuals and have refused to see beyond their noses that the actions are in the best interest of Nigerians and the economy if the country must address the current gale of insecurity, corruption and economic sabotage among other actions of some privileged elites who continued to take advantage of a dysfunctional system to short-change.
Apart from improving financial inclusion, a cashless Nigeria could accommodate the large informal economy. But with the growth of technology and a population that is able to easily adapt to digital platforms, growing a cashless economy can have a major impact on the country’s growth.
On plans to deepen financial inclusion, the Director, Development Finance Department of CBN, Mr Yusuf Yila, said Nigeria targets to get 95 per cent of the over 200 million population financially included by 2024.
While the cashless policy blueprint gains momentum, ICT experts have called for huge investment in technology to reduce glitches currently experienced in Nigeria.
Rogba Adeoye, Executive Secretary, Information Technology Systems and Security Professionals (ITSSP) described the online banking challenges as multifaceted.
“Currently in the country, there is no bank that is running any dedicated line to all the services. You have to depend on other infrastructure providers. Those infrastructure providers, all of them, with the reality of time, we cannot guarantee their effective functionalities.
“The banks are not prepared for the influx of population they are experiencing”, he said.
He charged the CBN and banks to involve more ICT experts in their service offerings.
“We have less hands. The hands supporting the technology are reducing everyday because of rushing out to other countries in search of greener pastures. They call it ‘japa’. We need to sit down and tackle all these”, he advised.
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.
According to Nigeria’s first professor of capital markets, Prof Uche Uwaleke, 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.
Philip Ngarambe, the chief operations officer of AC Group, a digital payment systems company in Rwanda, explains that previously, “by the time [cash] gets to the company there are so many hands it has gone through—from the conductor to the bus driver to the person collecting it, to taking it to finance and the bank account,” that businesses lost between 40 per cent and 60 per cent of revenues through cash pilfering.
