Analysts Fault Timing, But Agree Cashless Policy is Way to Go


Kunle Aderinokun

The decision by the deposit money banks with the support of the Central Bank of Nigeria (CBN) to increase charges on cash deposits and withdrawals has drawn the ire of market watchers and analysts for coming at an inappropriate time. While the analysts believe the decision was taken with the intention of encouraging cashless transactions, they contended that the new directive was ill-timed and for mooting the idea, the banks were seeking to make excessive gains.

In collaboration with the CBN, deposit money banks under the aegies of the Bankers’ Committee last week reviewed upward charges for cash deposits and withdrawals.
Reeling out the new charges, the Director, Banking and Payment System, CBN, Mr. ‘Dipo Fatokun, noted that the decision was taken at the Bankers’ Committee at its 493rd meeting held on February and also announced that the cashless policy would be extended to the 30 remaining states of the federation.

According to the circular posted on CBN website, charges on deposits and withdrawals were reviewed such that for individuals with less than N500,000 cash deposit and withdrawals would not bear any charge. But, for cash between N500,000 and N1 million, deposit would be 1.5 per cent charge while for withdrawals two per cent of the amount.

Also, as contained in the circular, cash deposit transaction between N1 million and N5 million attracts two per cent of the amount, bank customers making withdrawals of amounts within the range are liable to three per cent charge. For cash above N5 million, deposit attracts three per cent charge while withdrawals is 7.5 per cent.
However, for corporate bodies doing deposit and withdrawals of cash less than N3 million, there would be no charge.

But firms with cash between N3 million and N10 million, depositing such would attract two per cent charge, while withdrawals would attract five cent of the amount when the policy takes off. Also, for cash between N10 million and N40 withdrawn from a corporate account holder, three per cent would be charged for deposit and 7.5 per cent for withdrawals. For cash above N40 million, deposit is five per cent and withdrawals is 10 per cent.

However, the Chief Executive Officer, Global Analytics Consult Ltd, Tope Fasua, argued that, “The idea is ill-timed.”
According to him, “Perhaps the banks are again under pressure to declare profits as alleged in some quarters. Just when the CBN seems to be about to get the FX policy right, we shouldn’t have this. I find it hard to believe that otherwise smart bankers cannot see the optics of things. The timing is wrong and people will complain.”

Saying “The CBN has again offered itself to be lampooned,” Fasua suggested that the apex bank should “stay action if possible for a few months.”
“Again, it’s as if they are coming with a vengeance now. The first time this issue came up, they were more lenient. This time, it’s no holds barred. All at once. I wish them luck, but from a layman’s perspective, I’d say they are underestimating the situation among Nigerians.”

Speaking along the same line, Director, Union Capital Markets Ltd, Egie Akpata, said while the charges introduced were not entirely new, “the timing seems curious and might suggest that the CBN is trying to achieve other aims by discouraging cash transactions.”
“It remains to be seen if these can work in other states where the available technology and operating environment might not be as favourable as what obtains in Lagos or Abuja,” Akpata added.

The Chief Executive Officer of The CFG Advisory, Adetilewa Adebajo, noted that, “These are hard and lean times with mounting pressures of NPLs and the lending to deposit rate spread is shrinking.” As a result, he pointed out, “Banks are looking inward to look at key cost drivers and passing on cost to customers in an effort to encourage the use of electronic banking channels.”
Adebajo believed, “Activity Based Cost Management solutions will help banks get a better understanding and elimination of the high cost drivers and help improve their cost to income ratios.”

“The winner here are the electronic banking platforms and in effect banks are using technology to drive down transaction costs,” he concluded.
In his own analysis, an investment analyst, Adetola Odukoya, acknowledged that, “the development is in line with the CBN’s cash-less policy.”

“I’m of the view that the charges are meant to discourage the usage of cash within the economy thereby reducing the attendant costs of cash handling. This is in addition to the boost it will give to increasing transparency and assist in reducing corrupt practices,” he submitted.

The new charges would take effect from April 1, 2017, in the existing cash-less states (Lagos, Ogun, Kano, Abia, Anambra, Rivers and the FCT).
But the policy shall be implemented with the charges taking effect on May 1, 2017, in Bauchi, Bayelsa, Delta, Enugu, Gombe, Imo, Kaduna, Ondo, Osun and Plateau States according to the CBN.
The policy would be implemented with the charges taking effect on August 1, 2017, in Edo, Katsina, Jigawa, Niger, Oyo, Adamawa, Akwa Ibom, Ebonyi, Taraba and Nasarawa State.

“The policy shall be implemented with the charges taking effect on October 1, 2017, in the following states: Borno, Benue, Ekiti, Cross River, Kebbi, Kogi, Kwara, Yobe, Sokoto and Zamfara. The income generated from the processing fees charged above the allowable cash transaction limits shall be shared between CBN and the banks in the ratio of 40:60.

The CBN, however, clarified that, “Existing exemptions remain sustained for revenue generating accounts of the federal, state and local governments (lodgments only). Embassies, diplomatic missions, multilateral and aid donors in Nigeria are also exempted from all processing fees relating to the cashless policy implementation.”