By Omoh Gabriel
The Central Bank of Nigeria three weeks ago said that Nigerians will as from June 2012, pay for excess cash withdrawals and deposits. The apex bank pegged the limit of daily cash withdrawal at N150,000 per individual, that is about $1,000 by today’s average exchange rate and N1,000, 000 for corporate individuals. The reason adduced for this is that the apex bank use as much as N34 billion to print the local currency. Under the new policy, individuals that make cash withdrawal or deposit above N150,000 will pay a fine of N100 per extra N1,000 or 10 per cent while corporate organisations that make cash withdrawal or deposit above N1 million will pay a fine of N200 per extra N1,000 or 20 per cent. The policy, which will be enforced in Lagos, Abuja, Port Harcourt, Kano and Aba in the first phase, also banned encashment of third party cheques above N150,000 across the counter.
Yes, it is desirable to transit from a cash-based economy to a cash-less one, but it has to be a gradual process and not at a huge cost to bank customers. In the first instance, what is the level of banking awareness in the country created by the CBN and banks? What is the literacy level in the country for people to shift from what they are used to, to a new thing? Instead of being punished, the CBN should induce Nigerians by whatever incentives it can develop, to use less of cash. The question bugging minds in a country where the culture of mass banking has not taken root is: Who takes the fine? Is it a tax to government or a punishment for breaking an existing law? Which law is this? Law enacted by the CBN or the National Assembly? When individuals deposit cash as savings in the bank, 3 per cent is offered for savings by banks, what interest rate has the CBN advised banks to pay to depositors? In the last ten years, the spread between deposit and lending rates has not fallen below 12 per cent, what has the CBN done to help Nigerians bring down interest rate for small and medium enterprises to access loans?
Is the CBN now a lawmaker to impose a legislation that carry a financial fine without it passing through the National Assembly? The CBN will be violating the Money Laundering Act of the National Assembly which allows individual to hold cash of N500,000 and for corporate bodies N5 million. Even in a well educated, financially developed economy like the US, you can hold up to $5,000. That is an equivalent of N750,000 for the individual. Why the N150,000 limit? What is the basis of the limit set by the CBN or what informed it? If there is an existing legislation that allows the individual to hold cash of N500,000, the CBN will be inviting litigation for the banks for illegal charges. Luckily for it, the time frame is still some one year ahead for it to think and make necessary amendment to the policy.
This same CBN under Professor Chukwuma Soludo decided to insist on Nigerians treating the national currency with some respect, it sent a bill to the National Assembly, Sections 20 and 21 of the CBN Act of 2006. Even when it became law, Nigerians have openly defied the law or pretended as if it does not exist. It was a needless law. But this particular one has neither the backing of the National Assembly nor was a law passed to that effect.
It was just a decision of the CBN to tax Nigerians for it to print more currency. Does the CBN have the power to impose a tax? If it is not a tax, the money realised from the punishment to be inflicted on Nigerians for withdrawing cash from their accounts in banks goes to the bank or who for crying out loud? The CBN archive is full of failed policies that were introduced by trial and error to address the economy. In 1977, the bank introduced the famous rural banking programme, it crashed, it was followed with Federal Government-backed community banking concept, it also collapsed. More recently, the CBN introduced micro finance banking, it has also failed to realise its dreams for the nation. CBN monetary policy failures are not because they are bad policies as such; but because the apex bank has failed to understand the environment and culture it is dealing with.
This time around, the Central Bank in trying to justify the ‘law’ it has imposed on Nigerians said it will license independent firms to roll out Point of Sale (PoS) terminals across the country.
The Nigerian economy is largely informal. Most of the goods and services dispersed are done informally. How many of such PoS terminals will be deployed in Balogun market, Alaba International Electronics market, Mile 12 market where products are sold in millions by numerous traders? What about the nomadic cattle rearer who brings about 50 cows from Kano and Sokoto to Lagos? Each cow costs not less than N200,000. How does the CBN want him to be paid? Most of these traders have no bank accounts, where will the PoS credit the money so deducted? Even when they do, what about the infrastructure to ensure the smooth running of the policy? Is the CBN going to provide generators to power these PoS terminals? There is no guarantee that there will be regular power supply at the PoS terminals or for the servers at the bank to work seamlessly. At the moment, there is a lot of difficulties in transacting business with the automated teller machines (ATMS). More often than not, these machines tell you that your financial institutions are not available.
At that point, what will the man who wants to buy things do? Wait endlessly or leave what he wanted to buy? The banking culture and the confidence that goes with it has not taken root. Up till now, though there is existing law against dud cheques, many sales outlets do not accept cheques for payment. When they do, they insist on it clearing before the buyer can take possession of any product, even with bank drafts. The CBN has done nothing all these years to ensure that cheques are acceptable means of payment by enforcing the law on dud cheques.
The reason given by the CBN for introducing the policy is lame and impotent. Tunde Lemo noted that it was not in the interest of the Nigerian economy to keep incurring such costs. He said that apart from the billions of naira being spent yearly on the printing of currency, the Deposit Money Banks had also been devoting too much time to cash processing at the expense of their major functions. Lemo and the CBN must have completely run out of ideas hence the attempt to sell such a dummy to Nigerians.
As a banker, Lemo knows that no Nigerian wants to carry cash if cheques are honoured and accepted as means of payment, if credit and debit cards are fraud-free and protected by banks. This policy initiative has shown that the CBN has no knowledge of the Nigerian economy and how it works. Is it not shameful that after 50 years of independence, Nigeria continues to import currency? The CBN under Soludo promised Nigerians that “The era of such days are numbered”. What then has happened to the Nigeria Security, Mint and Printing company?
The CBN Governor then had said: “We are developing a business master plan for the mint. Management is going to be tested and Nigerians are going to run it. We have excess idle capacity but we are waiting patiently for the master-plan. In the next three years, the mint will not be the same again. Our goal is that our mint should be in the top 10 in the world in the next three years.” The CBN must first of all tell Nigerians what it has done with the mint then we can continue from there.
