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The recent directive from the Central Bank of Nigeria (CBN) that bank customers making cash deposits or withdrawals will pay a wide range of charges has, expectedly, begun to attract reactions and controversy across the country. It seems the new policy is a desperate move to raise more revenues for the government and Deposit Money Banks and fleece customers under the guise of promoting cashless economy. The implementation of the charges has already started in Lagos, Ogun, Abia, Anambra, Kano, Rivers states and the Federal Capital Territory(FCT) since September 18. But its implementation nationwide will take effect from March 31, 2020, according to CBN Payments System Management Department Director, Mr. Sam Okojere, who announced the take-off of the charges.
Under the new cashless policy guidelines, transactions will attract three per cent processing fees for withdrawals and two per cent processing fees for lodgments above N500,000 per day for individual accounts. Corporate accounts will attract five per cent processing fees for withdrawals and three per cent fee for lodgments above N3 million.
Justifying the cashless policy, the CBN stated that the latest statement was, among other things, to integrate Nigerians into the global financial system, adding that Nigeria’s payment system must be successfully benchmarked against the global best practices as is the case with developed economies of the world.
This is where we differ with the CBN cashless policy as regards the implementation of charges on cash deposits in banks. Although cashless system is good for transparency and payment efficiency in well-managed economy, however, you cannot ask people to be cashless and at the same time fleece them by imposing charges on them on the use of the platform. That will amount to double jeopardy and discourage full cash-based transactions. This is not a well-thought policy measure, even though it is a purely monetary policy matter within the powers of the apex regulator to make. No wonder the CBN rushed the implementation without consultations, knowing full well that it will face strong opposition. But the CBN should have considered the negative impact of the implementation of the policy at this time of harsh economic environment, especially on small, and medium enterprises, which are the engine room for growth of our economy. Clearly, this will lead to significant decrease in deposit mobilisation and credit extension by the deposit money banks.
Moreover, the implementation of new charges on cash deposits is untimely and defeats the CBN’s recent policy to capture the ‘unbanked’ as part of its National Financial Inclusion strategy designed to ensure that at least 80 per cent of the population has access to banking and other financial services. It will be recalled that the CBN had at a world conference in Mexico in 2010, made a commitment before a global audience to reduce the unbanked in Nigeria by no fewer than 20 per cent in 2020, the same year it intends to make the new charges go nationwide. What a contradiction by the CBN on financial inclusion. Of course, that will derail the lofty objectives of the financial inclusion. From its own statistics released early this year, CBN disclosed that over 37 per cent or about 60 million of our population is unbanked and that about 46 million of bankable Nigerians lack access to other financial services. Also, the World Bank figures revealed that Nigeria has the “highest unbanked and undeserved” banking population. Therefore, the CBN has, either deliberately or desperately, ‘killed’ one of its dreams and visions to bring more Nigerians into the banking system through excessive charges on deposits.
Beyond the negative impact that this controversial policy will have on individual accounts, CBN seems to have taken its eyes off the negative effect it may have on corporate businesses that are currently operating under severe economic conditions. The fact is that the cashless policy is not feasible in an economy as ours that is still dominated with huge cash transactions. The electronic platform and infrastructure that ought to make such a policy to work efficiently are not properly in place in the country.
This is one of the reasons the charges are astonishingly too high and needs to be suspended or outrightly stopped. If the CBN insists, the average trader, thrift savers and small investors may have no better option than to carry cash about with its attendant security risk. The new policy amounts to ‘robbing Peter to pay Paul’. Such a punitive measure is unacceptable. This defeats the essence of banking and the core mandates of commercial banks as financial intermediaries that supply financial services to diverse needs of both the ultimate borrowers and lenders in our economy.
Before now, banks earned their reputation based on efficient services to their customers and other diverse sectors of the economy and being discreet and commonsensical in matters concerning their customers deposits. Maybe not exactly anymore. Before now, customers earned interests on savings and current accounts. Today, banks charge customers for banking with them. And, currently, customers pay several, excessive bank charges, some for services not rendered. Such are these excessive charges that many Nigerian bank customers are in court with their banks. That trust that used to be the cutting-edge between banks and their customers has taken a hit for some years now, and has become more evident since the financial meltdown of 2008/2009.
We believe Nigerians are willing to pay for bank services that are reasonable and efficient, but definitely not for poor and inefficient services. Very often, we have had cause to say that every economy is as strong as its banking sector and respected based on the quality of services it renders to the diverse demands of the sectors in the country. The banks should be creative in the way they handle their business. Our banking industry will be at the backseat of global bank ranking if they fail to factor in customer service satisfaction as part of their competitive edge. It is disheartening, too, when apex regulator becomes the instrument of a perceived customer dissatisfaction with the banks.
We, therefore, urge the CBN to halt the implementation of the policy. If people are discouraged from saving, that will adversely affect the economy. CBN should at all times be alive to its monetary policy/regulatory control of the banking system. It should be cautious not to kill the ‘goose that lays the golden egg’.
