CBN Governor, Sanusi Lamido Sanusi

With banks bracing up to meet the target date ahead of the implementation of the Central Bank of Nigeria (CBN) cashless policy come January 2012, stakeholders have continued to express mixed feeling on the workability of the policy amidst the possible challenges inherent in the Nigerian e-payment environment, Amaka Eze writes

As Nigeria gears towards a cashless economy in January, 2012, stakeholders in the Nigerian IT industry, payments system service providers, banks, the Central Bank of Nigeria and other relevant government agencies have continued to express mixed feeling on the workability of the policy amidst the possible challenges inherent in the Nigerian e-payment environment.

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 defined as a situation where there is 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 ATMs, internet banking and a significant increase in point of sale (POS) penetration and usage. It other words, it simply refers to the widespread application of computer technology in our financial system.

The CBN regulator, which hitherto 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, have emphasised that the policy is expected to moderate the volume of cash flow in the system.

Stakeholders have however raised worries on some of the issues that needed to be resolved in other to ensure a hitch-free transition and full acceptance of the policy as against the supposed disadvantages of transacting businesses with cash, which the adaption of the cashless policy is expected to curb.

Arm robbery and cash-related crime, high cost of processing cash from CBN, to banks, to the operating entities as well as revenue leakages arising from significant handling of cash, and inefficient treasury management due to the nature of cash processing, amongst others, are some of the problems that are associated with a cash-based society. But within a cashless society, some of the new worries are infrastructure; power, security; fraud, consumer protection, consumer awareness; grass root sensitisation, job loss; job creation, amongst others.

Benefits of Cashless Economy

Choosing to start from Lagos because over 50 per cent of the money supply in the country ends up in this state, stakeholders believe that if the cash less economy is able to work in Lagos, it will defiantly work in any other part of the country.

The benefits of a cashless society are said to be enormous to the customers as it will offer an endless convenience of transaction possibilities, and at the same time reduce transfer/processing fees, increases processing/transaction time, offers multiple payment option and gives immediate notification of all transaction on customer’s account.

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.

CBN Standpoint

At a recently-concluded conference, organised by the Electronic Payment Providers Association of Nigeria (E-PPAN), the Central Bank of Nigeria 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 Lamido Sanusi, harping 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.

The CBN 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.

Expert Opinion

According to the President of  the of the Institute of Software  Practitioners of Nigeria (ISPON)  Mr. Chris Uwaje, the apex bank should not be in a great hurry to introduce policy’s without taking into cognisance the peculiarities of the country.

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.”

Uwaje added that commencing on e-pay and mobile payment without the e-transaction Framework Policy, Bill and enactment of an enabling ACT will amount to intellectual laziness by the promoters who seems rather in a hurry. He therefore called on the above mentioned to be fully harnessed before the policy can fully kick off.

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.

“When it crashes someday, and it will, given the existing conditions of poor power and other infrastructures, there will be no fall back system for business continuity and government survivability. Nigeria must get it right. There is need to return to the drawing board to avoid been hunt in the nearest future.

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.

The General Manager, 3Line Card Management. Ltd, Mrs Funke Ade-Ojo, in her opinion, believed that the  CBN was on the right path but craved for more time to create the much-needed awareness.

Ade-Ojo who is very optimistic that the policy would further help to build up the e-payment culture obtained in the developed countries, stressed that the emphasis should be targeted at enforcing the relevant laws guiding the cashless economy.

“The Cashless Lagos initiative is one the most comprehensive regulatory-provoked schemes embarked upon by an emerging economy with a global quest to eliminate cash-dependence and all the inefficiencies that comes with. More than anything else, I am inclined to say that the initiative will bring out the best of innovations from all the stakeholders that are involved in the implementation.

“This initiative should be encouraged. Two major policy changes will be introduced around the same time; it would be interesting to watch how the planned removal of the fuel subsidy coinciding with this cashless initiative will play off on each other. She added.

Security/Fraud and Consumer Protection

The President, Certified Information Systems Security Professionals, (CISSP) Mr David Isiavwe, in his paper presentation at the E-PPAN conference, called on the National Assembly to consider passing the e-payment legislation bill for an Act to protect Nigerian cyberspace and provide for the prevention, detection, response and prosecution of cybercrimes and for related matters.

He stated that the general objective of this Act would be to cover the provision of effective, unified and comprehensive legal framework for the prohibition, prevention, detection, prosecution and punishment of cybercrimes in  the country.

It would also include the enhancement of cyber security and the protection of computer systems and networks, electronic communications; data and computer programs, Intellectual property and privacy rights.

“Cybercrime is on the increase, hence there is need for the necessary legislation to check and punish cyber criminals. Given the fact that the existing cyber legislations have jurisdictions outside Nigeria, it has become necessary to have our own home made legislation that suites our cyber peculiarity, hence the current legislation that seeks to pass this bill is quite laudable.

He however stated that while the bill was a step in the right direction, efforts should also be made to continually revise it, to make it more encompassing, so that all aspects of information security are extensively dealt with. Gathering,   preservation and presentation of electronic evidence should be covered. Also privacy laws and unsolicited mail issues should also be adequately covered. The lawmakers should take care not to create lacunas that may create enforcement problems.

Consumer Awareness/ Sensitisation

The General Manager of Nigeria Inter-Bank Settlement Systems (NIBSS), Niyi Ajao, in her presentation at the conference, also called on the government as the major enabler of the cashless policy.

According to her, the government had the most important role of creating the enabling environment for the payments system to thrive.

“Government is the biggest spender in most African countries. If the government is bold enough to set the pace with e-Government initiatives, awareness will definitely grow and other economic agents will embrace electronic payments readily; the Government however needs to legislate and release guidelines as necessary, and enforce compliance while punishing infractions.”

Ajao added that if the government as the custodian of the people failed to embrace the policy as quickly and as effective as possible, it would then be difficult for the ordinary consumers to do same.

“The good news is that most governments have realised that developing a national payment system is an on-going process. In all countries, there is always some element of the system in the process of reform or modification. In recent years, there has been a rapid acceleration in fundamental reforms in national payment systems worldwide,” she said.

THISDAY also gathered that the Bankers Committee have made it clear that it was committed to deploying over 40,000 PoS terminals in Lagos by the end of December. This deployment they said  was expected to create an enabling environment for the take-off of the new cash policy in Lagos State in January 2012.

In the same vein, the bankers committee, as well as relevant stakeholders in the IT industry, are also committed to sensitising the general public on the enormous advantages of the adapting the cashless economy.

But customers have continued to show concern on the little small number of people that are aware of the planned cashless economy, and what it actually entails.

THISDAY, while relating with different groups of people observed that only a handful of people were really comfortable with using the ATM machines, and were clearly lost when the issue of cashless economy was mentioned to them.

According to Mr. Bimbo Falade, a  business personnel, “our banks should first of all work on the inefficiencies of the automated teller machines (ATMs), so that a majority of the people will understand what it entails before telling us of internet banking and mobile money transfer.”

He added that in a country where most people were not computer literate, a forced and quick movement to e-payment system might fail, because it would be difficult to transform the nation’s economy overnight from cash to a cashless society since most Nigerians were only retailers.

Also, THISDAY recently reported that the Director of  Publicity, Auto Spare Parts and Machine Dealers Association (ASPAMDA), Lagos, Mr. Ozobugha Udoka Bonaventure, said: “The issue of POS terminals is a time bomb waiting to explode because this economy is a cash-driven economy and we want to migrate it to a cashless economy overnight.”

He said there is no supporting infrastructure to drive the policy.
“At present, we are battling with persistent system failures in the banking system and we are adding yet another headache to it.
“Have you checked the literacy level in the country? How many people can read and write in our country?

“As we speak, no operator has deemed it fit to invite us for a roundtable discussion on it. We are the main target of the policy, yet there is no communication to say this is what we are doing, and how will it affect your businesses.

“Our people carry cash not because they do not know the implications but because the stress of going through the bank is too much. That is why some of our of people resort to carrying the cash themselves.

“They must create awareness at the grassroots and organise symposiums and seminars for the traders. We have members and we can use our associations as channels or platforms. The campaign should be intensive but we are yet to see that,” he charged.

Speaking in the same vein, Vice President, Balogun Business Association, Pascal Udeh, said: “They have not reached us in any way. We are waiting for the implementation of the policy to see its efficacy.

“As an individual, I will say that I do not think the country is ripe for such a far reaching policy.
“I also do not think we have the necessary tools to drive the policy. They said the first phase will start in Lagos since April it was mentioned, we are in October and we cannot feel anything.”

Also, Public Relations Officer, Alaba International Market Association, Zimako Anayo, indicated that traders were still waiting for the implementation of the cashless scheme. He said some of the traders don't have confidence in banks because of their multiple charges.

It has therefore become imperative for the stake holders to actually put heads together, in other to reach the target audience who the cashless policy is meant for, Falade said. "This is a cash-driven economy, if we the business people who our businesses revolve around cash don't really understand or well sensitised on the policy, what then happens to the man and women in the grass root areas?" he queried.