Thread by @yinkanubi

Nigerians actually have time majoring on the minor. They have been focused on the CBN charge on deposits when in reality the real focus shd have been on additional taxes that'll now be incurred on POS transactions.

On the 16th Sept, the @cenbank released two circulars

A THREAD

The first circular was titled "Implementation of the Cash Policy". It is the one we've been debating since yesterday. But the second one was titled "Review of Process For Merchants Collections on Electronic Payment". Now this one is the real deal. It prescribes two regulations.

1. Banks shall unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by regulations and

2. Merchant Service Charges (MSC) has been reviewed downward from 0.75% cap (N1,200) to 0.50% cap (N1,000)

What does this mean?

Unbundling transactions - Usually all transactions are bundled together irrespective of bank & credited into the merchant account. By the EOD, when settlement is done, all transactions are settled as one. So the CBN is now telling banks to separate each individual transactions...

..and apply charges where necessary. What are these charges? Stamp Duty. In other words all transactions from ₦1,000 and above will attract the N50 charge. With electronic transactions totalling over 1 trillion transactions on 2018, you get the idea what the FG is aiming at here

The second regulation reduces the cost of Merchant Service Charge (MSC) from 0.75% to 0.50%. with a cap of N1,000 down from N1,200. What this means is that merchants will be charged 33% less on their POS transactions than they used to. Looks nice right? Yes but matched with the..

...first regulation on the unbundling of transactions? Hmmm not quite nice. In fact, it seems counter productive. Allow me explain what I mean. It'll look to some that while govt is enforcing tax on individual transactions, it is also reducing cost for merchants. But do the maths

The Stamp Duty will be applied on every transaction above N1,000. So imagine I buy an item worth N1,000 now I would have to pay to govt an additional N50 as stamp duty. On the other side, the charge the merchant will pay on the N1,000 will reduce from ₦7.5 to N5 (excluding VAT).

In other words, while the merchant has saved N2.5 on my purchase, I've had to cough out N50 extra on mine. Of course of you're buying something more expensive like N50k, you probably wld not mind paying the ₦50. But regardless, it looks counter productive seeing that majority...

...of online transactions are likely to be on the lower end of the value curve.

So IMO, this is the one issue that should be dominating conversations and not the implementation of another element of a cashless policy that has been on since 7 years.