At present, a typical transaction at the retail end of banking services in the country would go something like this.
I receive funds into my domiciliary account from some offshore source. The nature of service I may have rendered in consideration is immaterial to the discussion at this point. Still, it may just be that I have a sibling who, tired of the irreconcilable contradiction that Nigeria is fast becoming, travelled abroad several years back, and is minded to keep his brother in good cheer. Point is that I need to convert the foreign currency into naira, if it is to be of any use. In a country increasingly obsessed with fair prices (and the role of the market in determining this), I proceed to shop around for the best bargain available.
It would have been convenient to ask the bank where I maintain my domiciliary account to debit the foreign currency account and credit my naira account. But this transaction ignores the fact that there is a subsidy (oh yes, there is) on the official price of the domestic currency. At the parallel market, a dollar for instance will fetch more than it would using the official exchange rate. So, I go looking for the “Mallam”. We agree a price. Agree also to meet at a mutually convenient bank branch, where all things going well, I hand over the foreign currency to him, and he pays the naira equivalent into my account.
Depending on the size of my foreign currency receipts, the dynamics of this transaction will, however, change with the CBN’s new cashless (or “cashlite”) Lagos policy. Individual lodgements into (and withdrawals from) bank accounts in excess of N150,000.00 would, effective end-March 2012, attract as yet unstipulated cash-handling charges. Essentially, this policy aims to reduce the amount of cash-based transactions in (and the associated costs to) the economy.
Laudable though this goal is, its preference for the penalty as opposed to the deployment of incentives, is its main failing. Arguably, there is a short list of sweeteners available to the CBN to drive its cashless policy. One is also not too sure about its enforcement capabilities either. For without much argument, the single biggest reason why the economy has been this dependent on cash is the failure of the Dud Cheques Act. Imagine that it has been possible, since the Dud Cheque Act came into being, to successfully proceed against the issuer of a dud cheque, and secure conviction? We would over the years have gotten in the habit of paying our bills with cheques, and the culture of trust necessary to sustain business would have been strengthened in the same measure.
Now without addressing the failure of the infrastructure required to build the needed levels of trust (the criminal justice system), the regulatory authorities are embarked on forcing a leap of faith on all large users of cash in the most important economy in the country. And yet, the trust deficit is not the only reason why the market woman at Oke Arin has failed to take up the rich offering of electronic banking products currently available in the country today. On one estimate, the largest single un-reconciled balance in banks’ suspense accounts is the consequence of ATM-based transactions. Each time the ATM short-changes a customer, the cashless initiative will suffer a body blow. It helps little that a number of the banks take an eternity to address the customer complaints arising from these transactions.
In a sense, then, it is fair to assume that those with a stomach for the teething problems associated with cashless banking in the country have already taken it up. (The rest will need further convincing). As with the GSM phones, one solution, that this group of early adopters has come up with is to engineer for redundancy. A look into a typical wallet of an e-banking service user reveals at least two cards, i.e. two bank accounts. Epileptic internet access, downtimes at the banks (“your financial institution is not available”) make the recourse to several bank accounts inevitable.
Invariably, if this experience serves any purpose, one unintended consequence of the cashless economy initiative would be an increase in the number of deposit accounts in the banking system. The easiest way to transfer upwards of a million naira while still avoiding the cash-handling charges associated with transactions in excess of N150,000.00 is to split this over 10 different accounts.
Given the number of Nigerians capable of affording this type of fudge, I’d wager that the one gain from strict enforcement of the cashless economy initiative as it is presently structured would be to exacerbate two existing divides in the economy: the digital one and the banking one.
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