One of the prerequisites for the development of national economy is to encourage a cashless policy, a payment system that is secure, convenient and affordable.
A cashless economy is an environment in which money is spent without being physically carried from one place to another.
In this regard, developed countries of the world, to a large extent are moving away from the physical payment instruments toward electronic ones.
To this effect, to encourage faster transactions through reduction in queue at the banking halls, as well as improve on the speed of rendering banking services, the Federal Government, through the Central Bank of Nigeria (CBN) on Tuesday, September 17, 2019, in a circular sent to commercial banks, said the implementation of cashless policy will take effect from Wednesday, September 18, 2019, starting from Abuja, Lagos, Ogun, Kano, Abia, Anambra and Rivers states, while its nationwide implementation will begin by March 2020.
The apex bank said the implementation of the policy would signal the imposition of charges on deposits in addition to already existing charges on withdrawals.
According to the circular, the charges will attract three per cent processing fees for withdrawals and two per cent processing fees for lodgements of amounts above N500,000 for individual accounts.
For corporate accounts, the circular reveal that Deposit Money Banks (DMBs) would charge five per cent processing fees for withdrawals and three processing fee for lodgements of amounts above N3m.
According to the bank, some of the benefits of the cashless policy include:
- Prompting settlement of transactions locally and internationally
- Reduction in the frequency of visits to banks: unlike before customers can now transact electronically
- Paving way for cashless society
- Reduction of theft
- Help facilitate easy clearance of goods by importers, etc.
In truth, the cashless system will increase convenience in financial transactions, reduce risk of cash-related crimes, reduce banks’ cost of operations, paves way for faster access to capital as well as help government in the area of adequate budgeting, but some of its after-effects are not so good, as this will definitely lead to replacement of workforce by machine, thereby translating to increase in the rate of unemployment in the country.
The issue of cyber crime in the country is a threat on the cashless policy. Computer hackers can easily leverage on the system to steal data by breaking the codes or passwords of bank customers.
Also to have a successful cashless economy there is a need of having individuals who are literate enough to understand how to deal in electronic transactions which is not a very common sight in developing countries like Nigeria.
Another negative effect of the policy is the high bank charges that comes with it. Aside commissions on ATM transactions, which many still frown at, the new policy comes with charges on deposits and withdrawal of monies. Deposits of amounts above N1m to N5m will attract 2% while withdrawals attract 3% charge. Deposits and withdrawals above N5m will attract 3% and 7.5% charge respectively. This will further heap more burden on already traumatized customers.
Finance experts have also argued that the move would discourage the culture of savings among Nigerians.
The Registrar, Chartered Institute of Finance and Control of Nigeria, Mr Godwin Eohoi, urged the Apex Bank for a downward review of the charges to 0.5 per cent for individuals and 1.5 per cent for corporate organisations.
He said customers were already suffering the burden of various charges from banks for carrying out various financial transactions.
He says: “The move by the CBN to promote cashless policy is commendable because it has some benefits such as reducing the amount spent by the apex bank in cash management. However, the Nigerian economy is still fragile and at a time when the CBN is promoting financial inclusion, it would not be fair to impose additional charges on bank customers that are already overburdened with different types of charges from banks.
It’s our opinion that the Apex Bank should make the re-introduction of the new cashless regime gradual while educating consumers and bank customers on the need to transact business without carrying cash. This will definitely take sometime and already impoverished consumers should not be made to start bearing this needless burden.
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