Thread by @LewdakrisHov

So I’ve noticed the backlash so far on social media with respect to the reintroduction of Cash Handling Charges above the thresholds for individuals and Corporate Bank 🏦 Clients by the Central Bank of Nigeria (CBN)🇳🇬. I’d like to educate folks. This is a thread. #CashlessPolicy

The Cashless Policy of the Apex Bank began as far back as 2012. The thrust behind the policy was to reduce (not end) the amount of physical cash circulating in the economy in a bid to encourage more electronic based transactions.

These include Point of Sale Terminals (POS), InterBank Transfers (NIBBS Instant Payment), Mobile & Internet Banking , QR Code and Unstructured Supplementary Service Data (USSD) amongst others.

The Cashless Policy aims to curb the negative consequences associated with the high use of physical cash. Cash encourages robberies (a bank robbery in the south west this year led to the death of bank staff & clients). Other vices include reducing corruption and money laundering.

There is a high cost associated with handling cash. Counting machines (procurement & servicing), opex for Cash-in-transit companies servicing banks, reprinting new bank notes, man-hour invested in sorting & counting cash. All these services increase cash handling costs for Banks.

All of these costs affect the cost of credit to the deficit side of the economy as they continue to increase deposit money bank operating costs.

The #CashlessPolicy also aids in financial inclusion by providing more efficient transaction options. Agent Banking is an initiative of the CBN aimed at achieving financial inclusion by targeting the unbanked in rural areas and locations without a bank branch.

Agent banking can be defined as the act of providing financial services by an individual who is otherwise known as the agent, on behalf of a licensed deposit money bank (financial institution) or a mobile money operator. #CashlessPolicy

Deposit Money Banks have deployed Agents in bid to increase their network. FirstBank has over 28,000 agents nationwide. Agents greatly reduce the use of cash. A Bank agent handles transactions such as withdrawals, bank deposits, transfers & bill payments. #CashlessPolicy

Some businesses have keyed into this service to reach their customers in locations where bank branches are not available. These include Fintechs and PayAsYouGo Solar service providers #CashlessPolicy

The Nigerian banking sector has evolved from the days of mostly cash based transactions where one would withdraw money from one bank to make deposits in another for the payment of goods & services. The Clearing System at the time didn’t help matters. Took 3 days to clear a check.

The Nigerian InterBank Settlement System (NIBSS) inaugurated the NIBSS Instant Payment Service (NIP) in 2011. It is the Nigerian financial industry’s preferred funds transfer platform that guarantees instant value to the beneficiary. #CashlessPolicy

It began with two Banks but now includes all commercial banks, micro finance banks & mobile money operators. #CashlessPolicy

Over the years, Nigerian banks have exposed NIP through their various channels i.e. internet banking, bank branches, bank kiosks, mobile apps, USSD, POS, ATM amongst others to their customers. This also includes payment & collection platforms. #CashlessPolicy

The CBN has rolled out initiatives in the run-up to a cashless Nigeria. Stakeholder engagement sessions have been held. Stakeholders include markets, associations & professional bodies. I attended one in Alaba market back in 2012. #CashlessPolicy

Policy reversals have been made in the past involving the legislature. With all the alternative payment channels available, it is not a foolhardy decision by the apex bank. What needs to be done is to create more awareness of these alternative channels. #CashlessPolicy

The rancor and uproar with the reintroduction of the policy is a knee-jerk reaction but necessarily the banking populace does not have a choice. Every operating entity strives to reduce its costs to remain profitable. #CashlessPolicy

The new policy is in a bid to stop subsidizing cash handling charges for individual & corporate account holders. If your banking transactions are cash based, you would take the initiative to reduce same as there are channels to make this possible. #CashlessPolicy

The punitive charges are not draconian in nature as they apply to the excess over the thresholds as approved by CBN. There are alternative channels. This has been 7 years in the making. A lot has been invested #CashlessPolicy

We all complained about fuel subsidy removal in GEJ’s time but fuel subsidy was removed in PMB’s tenure. We couldn’t but help & resigned to fate with petrol pegged at N145/litre. #CashlessPolicy

Although the NNPC continues to subsidize petrol imports whenever oil prices rise against the approved pricing template that pegs it at the retail pump price of N145. Story for another day #CashlessPolicy

I hope I’ve been able to educate you on all the initiatives deployed by CBN in the run-up to this policy announcement. 😁😁😁 #CashlessPolicy

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