By Emeka Okoroanyanwu and Babajide Okeowo
Are you a businessman or woman who likes to transact business in cash? There is bad news for you. You will now be paying dearly for doing so as the Central Bank of Nigeria (CBN) in furtherance of its cashless policy initiative has imposed surcharges on transactions from N500,000 and above for individuals and N3,000,000 for organizations.
In a circular released mid last week to Deposit Money Banks, DMBs, the Central Bank of Nigeria stated that from Wednesday, September 18, 2019, it would impose three per cent processing fees for withdrawals of above N500,000 and two per cent fees for lodgments of the same amount for individual accounts. And for corporate accounts, CBN said that banks would charge five per cent processing fees for withdrawals and three per cent fee for lodgments of amounts above N3 million.
According to the CBN, the new policy began operational in Lagos, Ogun, Kano, Abia, Anambra and Rivers states and the Federal Capital Territory, Abuja on Wednesday last week, while a nationwide rollout is set to begin on March 31, 2020. The CBN said the policy is aimed at reducing the amount of cash in circulation as well as giving fillip to its cashless policy initiative.
The apex bank also said the charges were introduced to drive development and modernisation of the country’s payment system in line with the vision 2020 goal of being amongst the top 20 economies by the year 2020. It would also reduce the cost of banking services, including the cost of credit and drive financial inclusion by providing more efficient transaction options and more reach. The policy, according to the CBN, would also curb some of the negative consequences associated with high usage of physical cash in the economy, such as high incidences of robberies and losses from fire etc.
The new policy, according to the CBN, applies to all cash transactions irrespective of channels of payments, whether over the counter, at ATMs and third party cheques cashed over the counter.
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If for instance, an individual withdraws N400,000 over the counter and goes to an ATM to withdraw another N150,00 the same day, the total amount withdrawn by the customer that day would amount to N550,000, he would, therefore, be required to pay a service surcharge on the excess N50,000, which is the excess amount above the limit for that day.
Expectedly, the policy has generated mixed reactions amongst Nigerians with some hailing and others condemning the policy.
Some analysts have welcomed the policy initiative, saying it would largely impact positively on banks’ earnings and commission income, especially for cash and e-Business related transactions. Even though banks already charge fees on withdrawals in excess of the regulatory limits, it is believed that the introduction of charges on deposits would increase the scope for additional income for the banks.
According to finance analysts at Proshare, the policy would induce migration to alternative channels and is likely to increase deployment of POS and ATM terminals as well as encourage debit card issuances. This, in their view, would likely lead to increase adoption of banks’ USSD and online platforms by customers. The result is that customers who fail to migrate will have to pay the required processing fees, which will ultimately push up the income of banks. It is, however bad news for BDCs, petrol stations, traders and small businesses who handle a lot of cash. These small operators are likely to be negatively impacted by the new charges, the analysts said.
The analysts are also of the view that the timing of the new charges may stoke negative sentiments, given the recent spate of fiscal measures such as increase in Value Added Tax, VAT from 5 per cent to 7.2 per cent and introduction of VAT on online transactions, which are likely to shrink household incomes.
Policy will impact negatively on small businesses – NECA
The Nigerian Employers Consultative Association (NECA) said the policy would increase the burden on bank customers, saying implementing the policy means double taxation as customers are already burdened on charges imposed by banks on deposits. The Director –General of NECA, Mr Timothy Olawale said CBN would have given enough notice before announcing the policy, even as he said the policy would enhance cashless policy and reduce cash induced crimes. He lamented that the policy would increase the cost of doing business and push individuals and organizations to operate multiple accounts to beat the charges. Olawale said the policy would have greatest impact on retail businesses and other medium-scale retailers in the Consumer Goods sector.
For the Lagos Chamber of Commerce (LCCI) Director General, Mr Muda Yusuf, the notice from the CBN is too short as it would have disruptive effect on banks customers and other stakeholders. He asked for a longer notice such as two months for adjustments before its implementation.
Policy, desperate measure to generate revenue- Nigerians
According to Brian-Gabriel Chiedozie Ndubuisi this new policy looks like another desperate measure by the Federal Government to generate revenue.
“This new CBN policy of charging 5% (N25, 000) on every 500,000 cash deposit looks like another desperate measure for government to raise money, disguised as a strategy to push a cashless policy. You can’t have POS in every shop, especially given that they’re electronic devices that require powering, in a country where electricity supply is still very unreliable, not to talk of unstable network reception. A lot of retailers would still rely on cash payment. N25, 000 on N500,000 is a lot of money for retailers to give away, considering they deal with very slim margins and count on high turnover to scrape out any profit, I can understand if this is done for withdrawals… but not for deposits. This would hit retailers really hard’ he said.
Similarly, Chukwuonu David, an Architect and Principal Partner at Davis Exotic Homes Ltd, the timing of the re-introduction of policy is wrong with many Nigerians already battling with many issues.
“The CBN cashless policy has been in existence since 2017 although the deposit (lodgment) was suspended. I have withdrawn above N500,000 from the counter and paid 3% severally. It isn’t actually a new policy, but activating the deposit option at this time is ill-advised. Nigerians are currently battling with lots of things, the economy is coming out of recession and depression. The best way to fund a broke nation is to cut governance expenses, National Assembly members’ salaries and allowances, and so on. We can’t keep robbing the ordinary Nigerians to fund a wasteful government lifestyle,” he said.
Policy, a welcome development- Nigerians
According to Ifeanyi Aniagoh, the Founder, Digipreneur Hub, the policy is a welcomed development. I want to specially thank President Muhammadu Buhari for implementing the cashless policy. A cashless economy eases one’s life, reduces fraud, security risks, enhances transactional transparency, and helps to curb corruption and results in an increase of economic growth as well as reduction in cost of printing and transporting currency notes. Since it has taken off in Anambra, Lagos, Ogun, Kano, Abia, Rivers and the Federal Capital Territory, FCT, I look forward to when other states will join by March next year. This is a welcome development.
On his part, Binbol Wilson believes the policy is the right step in the right direction and does not believe it was a drive by government to generate revenue.
“I think it is a right policy in the right direction. You don’t necessarily need a POS to transfer fund. You can use your bank app, ATM or USSD code. As regards whether the policy was targeted at increasing revenue for the government, I think it’s not. Government just wants to know the purpose for which each fund is being used for. legal or illegal. Rightly amassed or ill gotten.
Policy is discriminatory, inimical to business of affected states- Obaze
On the states that have been chosen for the test phase of the policy, frontline politician and former Anambra State governorship candidate, Oseloka Henry Obaze believed it is discriminatory and inimical to business and commercial interests of the affected states.
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“The just announced CBN cashless policy, even with the best of intentions, is discriminatory as it targets selected states- Lagos, Ogun, Kano, Abia, Anambra, Rivers and FCT – as pilot states, with no obvious statutory justification. Such a policy, which is punitive to affected states and preferential to unaffected states, undermine the sovereign equality of the 36 States. It should either be applied uniformly, or suspended immediately. As it stands, it is an egregious public policy inimical to business and commercial interests of the affected states,” he said.
Government must suspend VAT on online transactions if cashless policy must work- CEO Cowry Asset
Chief Executive Officer of Cowry Assets Management Company, Johnson Chukwu has said that if the cashless policy of the CBN is to have the desired effect, then the Federal Government must be ready to suspend the impending Value Added Tax, VAT for online transactions which expected to take effects from January 2020.
“The aim of the CBN is to drive financial inclusion and move Nigeria from a cash based economy, however, on the other hand, the federal government is intending to impose tax on online transactions, so, if the cashless policy must work, then the FG must be ready to suspend the imposition of taxes on online transactions, otherwise, the aim of the cashless policy will be defeated,” he said in an exclusive interview with The Nigerian Xpress
But according to Kofo Salam-Alada, Director, Consumer Protection, the CBN policy is in the interest of Nigerians in the long run. “We have had complaints in the past regarding cash handling, so with less cash being handled, such complaints will no longer come up. We have also seen an exponential growth in other financial service delivery in the country as more PoS are available for people to use. Other channels are now available. We just want to encourage people to go these other channels and see what is available. If we want to be a transparent economy, it is our expectation that people will want to interface with the financial system that are better captured by the payment systems that we are talking about” he said.
CBN calls for understanding
Speaking on the policy, the Director of Communications, CBN, Mr Isaac Okoroafor called for support from all Nigerians regarding the policy. According to him, the policy is not entirely new but a continuation of an already in existence policy.
“The aim of the policy is to digitize the payment system so that it will be more efficient, cost-effective. What we have now is actually a continuation of what we suspended in the past. We suspended the charges on deposits and withdrawals, now we have reintroduced it. At the time we suspended the policy, there were some few technical issues and some of those issues have now been resolved. Then, the Point of Sales (PoS) machines were not enough, now, there are PoS machines everywhere, so, we are in a comfortable position now to drive the policy. We need to ensure that transactions are getting more efficient, reducing cost and reaping the benefit of cashless policy. Since most people operate below the threshold, like 90 to 95 percent of those who operate banks accounts have a bank balance that is less than N500,000 according to our findings.
Speaking further, Okoroafor said if Nigerian is to achieve its vision of curbing illicit financial flow into the country, then there is need to gravitate towards digitization. “The more we gravitate towards digitization, the more we gravitate towards electronic payment, the better for the system, the lower the cost of transaction. We need to reduce the use of cash in the country. I want to appeal to Nigerians, what we are doing is not to punish anybody, what we are doing is to make transaction easier for the ordinary man on the street. It is only those who carry out transactions
