The proposed policy on electronic cash payment, minimum and maximum bank deposit and withdrawals that will herald a cashless society in Nigeria is expected to be implemented in a matter of days from now. In this report, ADEYEMI ADEPETUN examines the race towards a cashless economy in Nigeria, efforts put in place by government and possible challenges that must, according to stakeholders be overcome for a seamless implementation. Excerpts:THE convergence of communications and information systems is enabling a rapid move to electronic commerce and the empowerment of the individual to have an unprecedented level of control over his or her own finances.Globally, this move has been bolstered, majorly by proper regulations, infrastructure upgrade and security networks, especially in advanced nations.Besides, combined market for all types of mobile payments is expected to reach more than $600 billion globally by 2013, which will double the current figure.In Nigeria, the Central Bank is championing this course and has set January 1, 2012 as kick off date for the pilot scheme, billed to start in Lagos. The CBN had stressed among other things that the need to provide financial inclusion for the over 80 million Nigerians who have never owned bank accounts before and to reduce huge heavy cash handling by making e-payment channels available were the major thrust of the initiative.According to the CBN, the new policy would also aimed at reducing high usage of cash, moderate its cost management and encourage the use of electronic channel. It added that the policy became a sine qua non, due to the increasing dominance of cash in the economy with its implication for cost of cash management to the banking industry, security and money laundering.Besides, the Apex bank argued that, given the rapid technological advancements and increasing consumer demand, positive transition towards increased acceptance of electronic payment systems and channels, the policy when fully implemented is expected to ultimately shift Nigeria to a cashless society in the 21st century knowledge economy.A cashless economy is one that allows for little or very low cash flow in a given society, thus every other purchases and transactions will be made by electronic channels, examples of which are direct debit, electronic funds transfer, mobile payments, multi-functional Automated Teller Machines, internet banking and a significant increase in point of sale (POS) penetration and usage.Simply put, it refers to the widespread application of computer technology in our financial system.Accordingly, the Sanusi Lamido Sanusi led CBN had disclosed its intention to limit the amount of cash withdrawal and deposit to N150, 000 for individual account and N1 million for corporate entities by June 2012, and emphasised that the policy is expected to moderate the volume of cash flow in the system.Furthermore, the CBN noted that the importance of an efficient, secure and sound payments system in nation building is well acknowledged in economic development literature, adding that sustainable economic growth requires a well-functioning, efficient and reliable clearing and payments system to lubricate local and international business transactions by providing liquidity in the financial system, adding that, it is also expected that the government will benefit from cashless economy in the area of adequate budgeting and taxation, improved regulatory services, improved administrative processes (automation), and reduced cost of currency administration and management.Speaking at a seminar organised by Committee of e-Banking Industry Head (ceBIH), CBN deputy governor in charge of Operations, Tunde Lemo said the high dependence on cash for settlements has resulted in the inefficient allocation of resources and a low depth of financial intermediation with downside effects on monetary operations and monetary policy management.Continuing, Lemo said strengthening currently available modes of electronic payments; further deployment of ATMs is being encouraged, although to drive more cashless transactions as opposed to its traditional cash dispensing functions. He said ATMs are now equipped to facilitate electronic payments of bills and account-to-account transfers; banks are therefore poised to deploy additional 75,000 ATMs by December 2015.But he pointed out that the tariff structure imposed by the Nigerian Customs Service on the importation of PoS is on the high side.Ahead of the kick off of the scheme, the CBN deputy governor informed that in a bid to meet the objective of deploying 40,000 PoS in preparation for the January 1st take-off date for the pilot scheme of the cashless policy in Lagos, the 23 banks, acting under a CBN negotiated deal with PoS manufacturers, had ordered mass importation of the terminals.According to him, the importation is, however, being frustrated by a 20 per cent import tariff imposed on the terminals by the Customs.'We have a hiccup, many of them have arrived and are actually at the ports but the Customs said we should pay 20 per cent, instead of five per cent as tariff.'We are petitioning them, though we have been advised to pay and clear the PoS so that they don't frustrate the programme. But we would ensure that we get the money back. We are doing a letter to the Minister of Finance to report the Custom's people, because I took a letter to the Head of Customs and the response was not good at all'.Besides, one of the PoS operators confirmed to The Guardian that operators would require about $90 billion to be able to deploy their services effectively across the country in the coming year and subsequently.On the policy of cash limit, Lemo said the policy which has been slated to start by June, noted that: 'We have a target of deploying 150,000 PoS by December 2012 which will be scaled up to 375,000 PoS by end 2015 when we hope to have attained our benchmark PoS penetration of 2,247 PoS per 100,000 adult population as obtainable currently in Brazil.'Similarly, we are strengthening currently available modes of electronic payments. Further deployment of ATMs is being encouraged, although 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 to deploy additional 75,000 ATMs by December 2015.'On the growing infrastructure challenges in the country, the CBN deputy governor said: 'Whilst striving to grow and develop the available channels for retail payments, the CBN is also mindful of the infrastructure and the security challenges posed by this ambitious programme. We have therefore progressed in forging effective partnership with telecommunication companies with the cooperation of the NCC while ensuring that structural impediments such as un-interoperability of payments networks of stakeholders are removed.'Chairman, CeBIH, Mr. Chuma Ezirim, said: 'Recent academic findings based on empirical data, revealed that shifting from paper-based payments to electronic ones could entail yearly savings to a country's economy of about one per cent of its GDP.According to the General Manager Operations, Nigeria Inter-bank Settlement System (NIBSS) Plc, Niyi Ajao, an efficient payment system will lead to higher velocity of money, which in turn promotes economic growth.He stressed that such system will depend less on cash and has great potential to grow the national economy by reducing corruption, providing banks with more liquidity for lending to the needy sectors of the economy, at attractive interest rate among others.Meanwhile, at a recently held Electronic Payment Providers Association of Nigeria (E-PPAN) conference, the CBN called on Nigerians to embrace electronic payment systems in all forms of transactions, insisting that it will boost economic development and reduce financial risks.The conference with the theme: 'Emerging Trends in Payments Systems and Fraud Prevention Strategies', however, saw the CBN Governor, Sanusi harped on the challenges of the planned cashless economy.He stated that the challenges in the electronic payments landscape were increasingly becoming worrisome among stakeholders.According to him, various reasons have been adduced as contributing to the problem, some of which are beyond simple resolution from the CBN as they are better tackled through concerted efforts of the relevant bodies.As such, he said the Apex bank is therefore, very receptive to noble ideas that may help resolve the challenge that card fraud poses to the financial system. The issues of identity management, illiteracy, poor public awareness, and operational lapses of payments services providers, to mention a few, require efficient, effective and practicable solutions.In addition, the President of the of the Institute of Software Practitioners of Nigeria (ISPON) Mr. Chris Uwaje, opined that the apex bank should not be in a great hurry to introduce policy's without taking into cognisance the peculiarities of the country.According to him, no Country in the world today is Cashless, and care must be taken in applying and using that Phrase. Any transaction is a process and it is strategically imperative that Nigeria focuses on the process of the transaction rather than the transaction output called cash.'There are many challenges, ranging from Broadband Infrastructure, Tested and Accredited Application Software, Trust Economy, Legislation, Human Skill Capacities, Call-centre Backbone, Consumers profile data, Data Protection as well as credible regulations security and Credible Regulation that need to be put in place.'On the issue of security, Uwaje stated that the consequences would be monumental to 70 per cent of the population who live in the rural area; 'moreover, viewed on a longer term, e-pay without a National Database System is rather suicidal to a nation with almost zero landline and predominantly mobile wireless -ICT model.Uwaje explained that the technology prerequisite for the scheme is Public Key Infrastructure (PKI); Centralized National Database and e-Legislative Framework, stressing that all the above are still grossly missing. Moreover, he said, we need to build massive skill capacity and Security interfaces, which amounts to an intellectual laziness for a nation to embark on such a magnified venture without a constructive e-Transaction Policy and legislative Framework. 'The best we can do now is a Pilot. We cannot embark on a policy without taking into consideration the present state of e-banking in the country. Migration from cash transaction is not something that should be done in a hurry or without proper consultations. We should talk of issue that is practical and realistic in Nigeria,' he said.Speaking to The Guardian on the condition of anonymity, a senior official in one of the leading telecommunications firm at the weekend said much effort are required by stakeholders, especially in the areas of awareness and security to be able to achieve the maximum result.According to him, the regulator in charge, though on the right path, must ensure that operators get the module operandi right, to avoid any unforeseen circumstances.
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