Usman told our reporter that not only was the policy impracticable in the cattle markets, Nigeria’s level of development is not ripe for the implementation of such policy.
Many are barely literate
Nigerian economy is largely agrarian so farmers and herdsmen have a major stake. The unfortunate thing is, majority of them are barely literate and operate informally. Investigations across various cattle markets revealed that most cattle breeders, sellers and dealers as well as their mother umbrella Miyatti Allah have not got the massage of cashless banking policy.
Sunday Trust spoke to many Fulani cattle businessmen in the cattle market. One of them who identified himself as Mallam Isa Hardo said, “There is no cashless magic you can employ not to offer cash to a local Fulani man who brought his cattle to sell in the market to meet an immediate need. It will not be acceptable to him at all.”
Hardo revealed that most herdsmen bring their cattle to the market to sell and immediately buy furniture preparatory for the marriages of their daughters. They also come to sell their animals when they need to buy goods like motorcycles or foodstuffs. They may come to sell to raise money for needs like mdicare.
He said, knowing the psychology of Fulani who spends his lifetime to feed and raise cattle, it is nearly impossible to persuade him to accept anything other than cash in exchange for the animal.
He urged CBN to have a re-think in the implementation of the policy as it will push many of them out of business thereby heightening crime rate in the society.
Similarly, Chief Asema Tyokaa, a big yam farmer in Benue State told our reporter that he was yet to understand what cashless policy means. Tyokaa who lives in Adikpo in Kwande local government area of Benue State wondered how workable the policy can be as there is not a single bank branch in the whole local government area. According to him, those who come to buy yams in Adikpo (mostly Igbo traders) come with raw cash.
The hiccups
The CBN spokesman, Mohammed M. Abdullahi recently explained to our correspondent that the Lagos pilot scheme is challenged by infrastructural issues.
The 40,000 PoS machines procured by dealers to be used for the cash-lite Lagos project were grossly inadequate. “We have experienced hitches but what is important is, we are addressing them and engaging service providers. Our biggest challenge has been infrastructure but we are working hard to address them. The banks are also building massive infrastructure,” he said.
He noted that the telecoms operators, one of the major drivers of the scheme have over 160 percent capacity to drive it. “Globacom alone can supply 70 percent capacity, not to mention the rest operators. The banks are also building massive infrastructure to support cash-lite regime. The PoS runs on battery and the batteries life can last for between 8 and 12 hours. They can also be charged with car batteries. So, the policy will succeed,” he assured.
He dismissed claims that the policy will have a telling effect on transactions because of the cash-limits. “Available data from all the banks show that 70 percent of the transactions in the banks are below N100,000 and 60 percent of these transaction are below N10,000. People still withdraw less than N5,000 even in the banking hall yet there isn’t need for that,” he said.
CBN is hopeful that the policy will succeed in Lagos and other parts of the country. The apex bank has set a target of deploying 150,000 PoS terminals by end of December 2012 which will be scaled up to 375,000 PoS terminals by end of 2015 when Nigeria hopes to have attained a benchmark PoS penetration of 2,247 POS per 100,000 adult population as obtainable currently in Brazil.
ATMs are also being encouraged to drive more cashless transactions as opposed to its traditional cash dispensing functions. ATMs are now equipped to facilitate electronic payments of bills and account to account transfers. Banks are therefore poised at deploying additional 75,000 ATMs by December 2015, CBN said.
Farmers, herdsmen will pay charges
Speaking on how the farmers, farm produce dealers and cattle dealers who transact business largely by cash, the CBN spokesman told our correspondent that they will have to make use of the e-payment channels or face the fines.
He told our correspondent in a text message: “Cashless policy does not mean cash wouldn’t be used. They are free to continue their cash transactions but should be prepared to pay the processing fees, otherwise they should take advantage of any of the electronic options available that is preferred, which they can use with little guidance just like every body uses GSM including so-called illiterates.”
An economist and lecturer at the University of Nigeria Nsukka, Mr David Aku said whilst the policy can help grow the economy, the infrastructural requirements are too huge for the smooth running of the policy. He cited his example on the trouble with ATMs in Nigeria and wondered how the e-payment channels will survive the poor infrastructure. He is also not too comfortable how farmers and cattle dealers will use PoS machines for their produce and cattle.
Similarly, Doyin Omolabi, an ICT expert said PoS isn’t not too difficult to use thus the dealers, particularly can acquire one and use them for their businesses.
But Emeka Obinna a dealer in foodstuffs in Ojodu market in Lagos said they maybe be forced to resort to keeping their cash at home and be transacting in cash.
Lagos pilot place
On the Lagos pilot scheme alone, CBN and the banks will expend well over N2.5 billion which the CBN Deputy Governor, Operations Directorate, Mr Tunde Lemo said will cover the cost of procuring 40,000 units of Point of Sale (POS) terminals at N50,000 per unit.
When an additional 25 percent of the total cost is set aside for logistics and public enlightenment which is costing the CBN alone N500 million is factored into the cost of the terminals, excluding the yet-to-be determined cost of mass mobilisation by each of the banks, it is estimated that the scheme can cost over N2.5 billion for the Lagos area alone.
Lemo noted that the cost of cash management in 2012 is projected to go up to some N200 billion. He however explained that the apex bank is poised at reducing the cost by 10 percent year-by-year.
CBN also said the cost of lending will reduce significantly if the banks save the money that would have been used in managing cash by adopting the use of e-payment platforms. CBN said 90 percent of current banking activities is cash-based rather than electronic as obtained in other economies. CBN hopes that with the introduction of cashless economy, the cost of banking will reduce by 30 percent in the first instance and will reduce even more going forward.
What cashless economy means
The cashless policy is the departure from cash-based economy to electronic payment channels. The cashless policy does not in any way suggest there will no longer be cash in circulation. The policy does not also prohibit withdrawals or deposits but such transactions will be subject to cash handling charges. The cumulative cash withdrawal/lodgement daily limits is pegged at N150,000 and N1 million for individuals and corporate organisations respectively.
The limits apply to the account so far as it involves cash, irrespective of channel (e.g. over the counter, ATM, 3rd party cheques encashed over the counter, etc) in which cash is withdrawn or deposited (e.g. if an individual withdraws N50,000 over the counter and N150,000 from the ATM on the same day, the total amount withdrawn by the customer is N250,000 and the service charged will apply on N100,000—the amount above the daily free limit).
The limit also applies to cash brought through Cash-In-Transit (CIT) licensed companies as the CIT company only serves as a means of transportation. Penalty fees of N100 per thousand and N200 per thousand will be charged for individual and corporate organisation respectively that transact business above the limit. However, the charges shall apply from March 30th 2012 in Lagos and from June in the rest of Nigeria.
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