SEGUN EDWARDS writes that despite the good intentions which the initiative holds for the nation in terms of financial inclusion for all and sundry as well as economic development, various challenges are still being posed to it.
THE Nigerian financial system is witnessing a redirection, with the Central Bank of Nigeria’s (CBN) latest effort called the Cashless policy initiative, which commenced with Lagos on January 1, 2012, as a pilot scheme.
The initiative, which is aimed at transforming the payments system, according to the apex bank, is a major plank of the shared services programme, whose target is to significantly reduce costs in the banking industry- by a minimum of 30 per cent. It is being targetted to commence on a nationwide scale from January 1, 2013.
At the just concluded 17th Finance Correspondents and Business Editors, in Akure, Ondo State, last week, the Governor of the CBN, Mallam Lamido Sanusi, reiterated the apex bank’s determination to use the initiative to achieve its financial inclusion for Nigerians with the intention to explore the platform to bring at least 50 million more Nigerians into the formal banking system in the next eight years.
In his address at the seminar, Sanusi said that as part of the CBN’s effort to fulfill its mandate, the bank has instituted a drastic review of the nation’s payment system, with which the country would be brought at par with the leading global economies.
According to him, before the commencement of the policy, through the pilot scheme with Lagos, the money deposit banks in the country were incurring about N192 billion as cost of cash management a year
He said the policy will help achieve the CBN’s objective of expanding, deepening and modernising the payments system in Nigeria and also galvinise it in ensuring that the country ranks among the top 20 economies of the world, in line with the nation’s Vision 2020 aspirations stating, that the policy will also impact positively on economic growth and development
The CBN Governor also said the Cashless policy was designed to break the barriers hindering financial inclusion for millions of Nigerians and bring low- cost,and secure convinient financial inclusion to semi-urban and rural areas across the country, especially through the mobile payment services.
‘’An efficient and modern payment system is positively correlated with economic development and serves as a key enabler for economic growth. From the regulatory angle, this policy will create an environment for more effective monetary policy implementation, create a more stable pricing system and curb the menace of inflation which is a deterrent to the growth anbd development of any economy.
It is our belief that through the cashless programme, we will be able to mitigate some of the nagative consequences associated with the high usage of physical cash in the economy and the high cost of handling cash. From the CBN to the deposit money banks and other financial institutions, to private and public corporations and traders, everyone experiences the high costs associated with volume cash handling,’’he said.
As lofty as the initiative appears, it is however said to be confronted with various imperative challenges as well as critical positions on why the initiative need to be properly channeled with utmost seriousness to achieve its desired objective of bringing the country’s financial atmosphere to par with other developed economies.
Although the CBN has given reasons for the desirability of the initiative to lift the financial system out of its present static situation, revealing that the basic infrastructure needed for the actualisation of the scheme in terms of cost of transactions being provided by the point of sale (POS) terminal for the initiative across the country from the mobile agents network stood at N4.67 trillion, as at May 2012.
According to Mr Titus Fatokun, Director, Banking and Payment Department in CBN, who dwelt on a paper titled: “Cash-Less Policy as a vehicle to achieve financial inclusion at the seminar for Journalists the transactions was through the use of mobile agent network spread across the country.
He said that out of this, the total number of subscribers was 1.7 billion, agents enrolled stood at 19,042 while total volume of transactions was 468,312.
The apex bank Director added that the figure was expected to grow as awareness increases but saying that illiteracy was one of the identified challenges of financial inclusion.
He also said that having access to high quality financial education to enable them make the best choice for their needs when selecting financial product was also a challenge.
Fatokun also stated that mobile payment as a vehicle for financial inclusion had shown that presently, only 22 million individuals had bank accounts out of 150 million Nigerians
He noted that out of the figure, there was a high ratio of 22.710 people per bank branch with 67 per cent exclusion level stating that with over 90 million mobile phone subscriber base, there presents an opportunity and way of bringing financial services to over 86 per cent unbanked population who were at the pyramid through their mobile phones
He explained that a study on the impact of financial access on poverty in the country by Economists, Robin Burgess and Rohini Pande estimated that ‘one per cent increase in the number of rural locations banked par capital reduced rural poverty by 0.42 per cent’.
In acknowledging challenges facing the initiative the CBN said that complaints by customers against the use of automated trading machine (ATM), and point of sales services (POS), which are expected to be major components of the scheme, accounted for 90 per cent of petitions it recieved through its help desks in 2011.
Also speaking on the theme: ''Issues, Challenges and Consumer Protection in a Cash-less Economy'', at the Finance Correspondents and Business Editors Seminar, Deputy Director, Consumer and Financial Protection Department in CBN, Mr. T. Nwaoha said the bank has upgraded its financial protection division to a full department with a view to strengthening its capacity to address consumer issues.
He stated that the CBN was prompted by the rising level of adversity to automated financial services provided by banks, which led to increasing complaints being recieved from the banking public.
Nwaoha listed notable cause of complaints received from banking consumers to include porous information technology platforms; low level of consumer enlightenment on product suitability; lack of understanding of security implications of divulging personal information; and access customers information by fraudsters.
Others according to him are weak information technology controls; untrained reversal of POS and ATM errors; and delayed and surpassed transactions notifications.
He noted that part of the apex bank's effort to stem the tide of challenges posed to banks service provisions through the ATM and POS, has led the bank to embark on some measures, like request to banks and financial institutions to expand help desks to accommodate all consumer complaints.
Other measures, he said are the introduction of the Nigerian Unified Bank Account Numbers (NUBAN) account numbers to facilitate direct electronic funds amongst banks towards reducing clearing errors, the introduction of chip and pin cards to replace magnetic stripe cards, and launching of public enlightenment and awareness campaigns on consumer rights and responsibilities among other measures.
On how to reduce the incidence of ineffective provision in the financial system in respect of automated services , the CBN Director said the apex bank effort must be complimented by the stakeholders support in the country, to ensure the effectiveness of the system.
However, critics of the Cashless initiative have argued that the scheme major hurdles are not being addressed or being under rated by the apex bank.
To Mr. Boason Omofaye, a financial system analyst, the apex regulatory authority of the financial system, the CBN need to seriously address the issue relating to the significant per centage of of the population which is outside the formal system, which he puts at about 80 per cent of the Nigerian population.
Critics of the initiative have equally expressed doubts on its workability with the present non circulation or installation usage of facility like the POS terminals in places like lack fuel outlets, eateries, super markets to portray the seriousness of spreading awareness about the initiative.
Defining what a functional cashless system means as obtained in systems where it practiced, expert said it is an electronic payment system that has more than 50 per cent users.
They have listed some of the challenges to the success of the initiative in Nigeria to include availability of required Information and Communication Technology (ICT) infrastructure, but far from being efficient; availability of e-mail facility that is not widespread or easily accessible; increase public enlightenment with significant misunderstanding; inefficient services undermining confidence and acceptability; strong CBN and government commitment not backed by commitment of other tiers of governments.
For instance critics to the scheme argued that apathy and lack of enthusiasm to the initiative, stemming from the challenges has forced the reversal of major key rules attached to the initiative through policy circular.
They argued that while the Lagos pilot scheme commenced at the beginning of the year with the rule which pegged daily withdrawal limit on cash for individual customer at N150,000.00, and corporate organisations at N2 million, the rule has been reversed by the CBN after six months as concession to the banking public, despite been backed by the Money Laundering Act of the year 2004.
The apex bank rescinded its earlier position as it fixed a daily cummulative limit pf 500,000 and N3 million on free cash withdrawals and lodgements by individual and corporate customers respectively, apparently to stem the tide of apathy that trailed the scheme in the last six months.
Critics also opne that the pilot scheme should have been allowed to endured for between 2 and 3 years, due to low level of literacy in the use of the platform, as very little proportion of the even the banking public are willing to cue into the scheme for the moment