Earlier this year the unpredictable populace of Lagos staged a 6-day strike over the removal of the fuel subsidy, and unfortunately some protesters lost their lives. The Federal Government quickly realized that Lagos residents could not be coerced into accepting anything thrown at them. Fast forward to March 31st 2012 and it is of no surprise that the Central Bank of Nigeria (CBN) held its breath as its controversial ’Cashless’ policy was about to come into full effect. Individuals and companies were determined to avoid incurring any unnecessary charges for depositing or withdrawing cash over the counter at banks. Both parties were armed with their weapons of choice: ATM debit cards, Cheque books, Mobile banking, Internet banking, Point of Sale (POS) Terminals and Fund Transfer Instructions. With agitated customers at one end and a ‘discerning’ government body at the other, guess who was going to be caught in the middle of crossfire? Me! – the bloody banker! But before any blood is shed I would like to shed more light on this issue.
If you walked into a Lagos-based bank today to withdraw more than N500,000 in cash ($3,175) from your bank account you would incur a 3% fee on the excess. If you were to deposit more than N500,000 in cash into your bank account you would incur a 2% fee on the excess. Similarly, if you own a company and you deposited or withdrew more than N3,000,000 in one day you would incur a 3% and 5% fee respectively on the excess. The underlying idea is to discourage the use of cash. But in a highly cash-driven economy such as Nigeria does CBN have any clue just how attached the people are to those Naira notes and how unprepared the system is for this ambitious project?
Prior to this cash-policy there was an older version released last year that raised eyebrows (and jolted machetes) amongst the Nigerian community. The thought of potentially having to pay fees as high as 10% and 20% (for individuals and companies) all because you were paying in or withdrawing more than the stipulated CBN cash limit was worrisome. The evil eyes usually rested with the banks because we were the ones keeping these fees by the time they were automatically deducted from account holders.
However there are some ‘artful dodgers’ who’ve simply decided to open multiple bank accounts in order to spread significant lodgment or withdrawals. Those who are ‘strategists’ (and probably avid fans of Sun Tzu) have formally written to the banks instructing that no lodgement over the CBN cash limit be paid into their corporate accounts. Some ‘desperadoes’ withdrew as much of their money as possible before March 31st even though they couldn’t escape the ’COT’ (Cost of Turnover) which Nigerian banks have gotten away with charging for charging sake, allegedly (but that’s another story).
At the moment the cash-less initiative is still at the pilot stage in Lagos till the end of 2012 when the policy will impact the rest of Nigeria. Meanwhile, some ATMs still have periodic downtimes for reasons other than being out of cash; some POS terminals still decline transactions based on card type used or signal strength in the POS location; Internet banking is sometimes cumbersome when you have to rely on choppy connectivity from telecom companies, whom I believe do not have the capacity or infrastructure yet to cater for Lagos let alone Nigeria as a whole.
While the rest of us watch and wait, only time will tell if CBN will go full circle; from clueless to cashless to clueless…