THE pilot scheme of the cashlite policy designed by the Central Bank of Nigeria (CBN) to reduce the use of cash kicked off in Lagos, Nigeria's commercial capital on 01 January 2012. Another key derivative of this policy - mobile money services ' appears to have kicked in too with the launch of the service by a number of institutions such as Stanbic IBTC Bank in partnership with Telcos like Globacom. Both policies are expected to expand and deepen formal banking in Nigeria by drawing the unbanked or under-banked into the formal financial services sector, while also enabling the economy to shift to more efficient and reliable modes of financial transactions.For a country with an estimated population of over 150 million and, which curiously, has less than 22 million bank accounts, such policies are not only good, but are necessary. About 74 per cent of the adult Nigerian population, as it was revealed in recent surveys, has never been banked, while 85 per cent of adult females are completely unbanked. On the other hand, 61 per cent of the unbanked would like to have a bank account, according to the Central Bank of Nigeria (CBN). Overall, 73 percent of adult Nigerians have no formal or informal access to finance and therefore are excluded from access to credit facilities. Even more astounding is that the unbanked money in the informal sector is estimated at a staggering N1.2 trillion by the CBN.This situation has impacted negatively on the country's economic growth and development because access to financial services, and indeed overall financial development, is crucial to economic growth and poverty reduction. The lack of access to formal financial services limits market exchanges, increases risk and limits opportunities to save. Without formal financial services, households rely on informal services that are associated with high transaction costs. Thus, increasing access to formal financial services to the majority of households remains an important policy goal, not just in Nigeria, but in all emerging markets.Many have expressed doubts about Nigeria's readiness for a cashlite economy, mainly due to the unavailability of requisite infrastructure and low literacy levels, while others have also argued that ongoing reforms have generated ample momentum to leverage on all forms of e-payment, especially mobile payment to enhance financial inclusion and facilitate Nigeria's transformation from cash-based to a cashlite economy.Figures released by the apex bank appear to support the case for significant reduction in cash-based transactions. CBN's Deputy Director for Currency Operations, Mr. Albert Ikmseedun, disclosed that an all-time high loss of N192 billion will be incurred on cash management by 2012, if not checked. The figure, he stated, stood at N114.5 billion in 2009, with N27.3 billion spent on cash-in-transit and N69 billion on cash processing. This trend, he stated, underlined CBN's policy on daily cash withdrawal limits, which pegged withdrawals at a daily cumulative limit of N150,000 for individuals and N1 million for corporate entities.Ikmseedun singled out robbery, high cost of processing cash, revenue leakages, and inefficient treasury management as major drawbacks of a cash-based economy, noting that, 'If there is reduced cash in the system, banks would be able to compete favourably. There are so many alternative payment systems in Nigeria which are even more convenient and safe, but people are not using them.'Head of Personal and Business Banking at Stanbic IBTC Bank, Mr. Obinnia Abajue, during a recent Mobile Money Roundtable, argued that the adoption of mobile money services in Nigeria would enhance economic planning by unraveling the country's actual Gross Domestic Product (GDP) matrix, with a reduction in the cost of cash handling as well as cost of funds, besides being convenient and secure.Abajue stated: 'Government and banks have been at the forefront of efforts seeking to channel the huge funds in the informal sector through the formal banking system to bolster economic development. Mobile money will fast track this harmonization and identify economically active people previously in the shadows of the huge informal cash economy, enabling them to have access to credit facilities.''Mobile money,' he stressed, 'will bring about transparency, improved remittances and economic activities across various sectors of the economy, both in urban and rural areas. To achieve this, it is imperative for the regulators, licensed operators and other stakeholders to embark on an awareness campaign to educate Nigerians about the benefits of mobile money. This will drive its acceptance, and subsequently unravel its enormous benefits to the economy.'Across Africa, mobile banking is projected to become a $22 billion industry by 2015, according to Juniper Research, a consultancy outfit, buoyed by soaring cell-phone use and growing financial services demand. Correspondingly, mobile network operators will earn $7.8 billion in direct and indirect revenues from serving a projected 364 million low income, unbanked people in about 147 countries who are projected to use financial services by 2012.Nigeria should take a cue from Europe if the country hopes to maximize benefits derivable from e-payment Managing Director of E-Transact International Limited, Mr. Valentine Obi stated, anchoring his position on the enormous opportunities embedded in the huge customer base which a cashless economy engenders.'It reduces cost of operation; it increases customer satisfaction because you can render personalized service. When transactions are electronic, they are easier to track and document. For government, it helps in the area of taxation, budgeting, planning, accountability and improved government services. All payments are made easier with mobile payment system. For instance, you can pay your utility bills through your mobile phone. With PHCN top up system of electricity payment, it is going to be a lot easier in a couple of months when you can actually pick up your mobile phone and pay for electricity bills especially for those using top up meter,' he stated.Other services to be powered through this platform include accounts information and updates, alerts, bill payments, person-to-person transactions and remittances. In addition, even people without formal identification documents are availed basic services just by providing a name and a phone number.For emphasis, CBN's Deputy Governor for Operations, Mr. Tunde Lemo, stated, 'The overriding vision (of mobile payment policy) is to achieve nationally utilized and internationally recognized payment systems. This regulatory framework is developed to conform to international best practices and standards. It is also a product of vigorous engagement and consultations with stakeholders.'Indeed, Africa boasts of the world's most successful mobile payment system. Though mobile money was first introduced in the Philippines in 2001, Kenya's M-Pesa continues to be the most successful mobile money deployment globally with over 700 million domestic and international money transfer transactions, accounting for $130 million revenues in 2010 financial year.A joint venture between Vodafone and Safaricom, M-Pesa transformed Kenya's entire economic system. Its pervasiveness and wide acceptance has made Safaricom the biggest mobile money operator in East Africa. Today, the service provides mobile banking facilities to more than 70% of the country's adult population (14 million people) that use their mobile phones to pay taxi fares, wages of field workers, utility bills, get money out of ATMs without owning an ATM card or a traditional bank account.Standard Bank Group, to which Stanbic IBTC belongs, currently operates mobile money services in various markets in Africa, including Ghana, Uganda, Kenya and South Africa. Nigeria with an estimated population of over 150 million people, over 20 million bank accounts and almost 90 million mobile phone subscribers is on the threshold of deploying mobile money with the potential to become Africa's biggest mobile money market, in spite of late adoption of mobile business.Financial inclusion and cashless settlements in all transactions will definitely play a significant role in shaping Nigeria's economy in the near future. An illuminating case of expanding financial frontier was undertaken by Stanbic IBTC Bank with an alternative banking service platform known as e.susu. The platform, which enables the unbanked and underbanked make financial transactions, represents a good example of how low-cost approaches that use modern technology can effectively expand the financial services landscape. As the policies are about to come into effect, key stakeholders are optimistic about their success, moreso given CBN's farsightedness in evolving a framework that encapsulates the entire value chain of basic mobile money services targeting the unbanked segments of the population and the informal sectorNwachukwu is a Lagos-based Economic analyst
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