The Cashless Policy and Its Practicability in Aba Motropolis

1.0: INTRODUCTION:

1.1. BACKGROUND OF THE STUDY.

Cashless banking is unequivocally the most recurrent phrase in the Nigerian banking and socio-economic lexicon in the past year and even more popular in media attention than the Boko-Harran insurgency. The reasons for its introduction have been articulated by the masterminds as: getting costs reduced by 30% in three years through enforcement of 4-pronged initiatives: reduction in cash management cost, enhancement of electronic payment systems, IT and centralized back-office system; reduce cost to serve by 30%, increase access, convenience and service level across the industry, modernize the industry, enable greater financial inclusion and integration of financial services into the economy, with its attendant positive impact on economic development (Sanusi 2011).

He further averred that only a few customers would be affected since cash transactions represent 99% of customer activity in banks, about 86% of in-branch cash withdrawals are less than N100, 000 in value while less than 10% are more than N100, 000. Other factors that propelled the policy included the increment in currency in circulation (20.36% in 2009 and 16% in 2010(, increased cost of cash management by the banking sector, improvement by the federal government in electronic payments, growing acceptance of ATM, increasing GSM penetration, commitment by the banking community to support seamless electronic payment. He also averred that the policy will reduce cost of accessing banking services, enhance quality of banking services, stem cash related crimes and that those who wanted extraordinary cash services should pay for them. The CBN also promised to carry out awareness and enlightenment campaigns and engage stakeholders in two-way conversations.

After a series of changes –all of which are indicators that CBN did not do its homework properly initially and that it was responsive to public opinions-the policy took off in Lagos on first April, 2012. Some of the modifications included the change in the take off date of January (Lagos) and June (nationwide); excluding Port Harcourt, Aba, FCT and Kano from the pilot phase; changing the cash withdrawal/lodgment thresholds (N500,000 for individuals & N1m to N3m for corporate entities); the punishment for withdrawal or depositing, which the CBN diplomatically termed transaction charge which was reduced from 10% to 3% (for individuals) and 20% to 5% for corporate organizations.

Cash transit services were limited to duly licensed organizations (and penalty for violation was N1m per cash movement against the affected bank) while third party over the counter cheques can not be honoured above N150,000 and excluding ministries, Departments and Agencies (MDAs), embassies and development partners. Non exclusivity policy was also imposed on all cards used in Nigeria.

The questions and challenged envisaged included the state of technology and infrastructure, illiteracy and low level of bank penetration (about 30%) and the cash-centeredness of Nigeria and Nigerians. Eventually, after these changes, awareness building and preparations by banks and other stakeholders, the policy commenced.

The objectives of this study are to undertake a review of the CBN cash-lite policy (Cashless policy), to ascertain it practicability in Aba. The study is divided into five sections: introduction, Literature review, Methodology, Data presentation, Analyses and Discussions and Conclusion.

1.2: STATEMENT OF THE PROBLEM

So much may have been said about the anticipated gains attendant to the adoption of e-payment and cashless economy (or cashless banking); but in concrete terms people have not been convinced that the agenda is for the good of all. While we may point to such economics as the Japanese or U.S, we must be very ready to accept the fact that these are economics with functional institutional basis which cannot also be said about Nigeria with much conviction. Apart from the institutions, one fear that has been expressed is the state of Nigerian infrastructural decay. Have we assessed the impact of infrastructure on the implementation of ‘cashless economy’ or is it an assumption that the infrastructural platform needed for the cashless economy to perform will simply come with the cashless economy?.

1.3: OBJECTIVE OF THE STUDY

The objective of this study therefore is to examine the benefits of the cashless economy, the essential elements of the cashless economy and assess the preparedness for the implementation of the cashless economy by Nigeria. This is anticipated will help bridge the gap between current perceptions about the cashless economy and the actual operations of the system. To achieve this objective this study is divided into five sections. Following this introduction. Section 11, examines existing literature on cashless economy. Section 111. Presents the methodology employed in collecting and analyzing data, section 1v, present an analysis of the collected data and section v, deals with the conclusion and recommendations drawn up from the study.

2.0: REVIEW OF RELATED LITERATURE

2.1: DEFINITION OF TERMS:

2.1.2: CASHLESS SOCIETY: A society where the amount of cashbased transaction is kept to the bearest minimum.
2.1.3: SOCIETY: In this context it refers to any community or certain where bulky financial transactions takes place. E.g Banks, markets, Shops, other business outlets.

2.2: NEED FOR A CASHLESS (CASHLITE) ECONOMY POLICY

Having seen how the system works, we would want to highlight the benefits of the system. So much criticism has been raised about the cashless system. The Zenith of such criticism is that it has been labeled the “FORERUNNER OF THE MARK OF THE BEAST”. However experts and government officials have continued to paint the system in very colourful tones. For instance, the World Bank says that “operating a cashless society in Nigeria was strategy for fast-tracking growth in the nation’s financial sector”. These benefits includes: a. Faster transactions – reducing queues at point of sales b. Improving hygene on site – eliminating the bacterial spread through handling notes and coins c. Increased sales

d. Cash collections made simple – time spent on collecting, counting and
sorting cash are eliminated e. Managing staff entitlement
f. Reduces transfer/procesing fees
g. Increases processing/transaction time
h. Offers simple multiple payment options and gives immediate notifications i. It enhances efficiency for banks and marchants to cover large customer coverage both locally, nationally and internationally j. And

2.3: GENERAL RELATED LITERATURE OVERVIEW

2.3.1: POOR START: The Central Bank’s Cashless Nigeria Initiative, which was flagged off in Lagos on January 1, 2012, seems to be struggling to fly. This has cast a shadow of doubt over the possibility of substantially reducing the quantity of physical cash in transactions. Two months into the “Cashless Lagos” Pilot Scheme, growing cynicism over its workability has led the apex bank to make speedy adjustments to its original plan. Yet, people are as confused about the policy now as they were at its commencement on New Year’s Day. The Economy in parts of Lagos as at press time reveal that contrary to the CBN’s plan, the new payment system, which involves utilizing the Automated Teller Machines (ATMs), internet banking, mobile money and an estimated 40,000 Point of Sales (PoS ) terminals, was yet to become operational in most transactions.

Save for a handful of popular shopping malls in the highbrow areas like Ikoyi, Victoria Island, Lekki Peninsula, Ikeja and Surulere where the PoS payment system had already taken off, 95 percent of other businesses were still thriving on cash-based transactions. “We are yet to see any of those machines let alone using it for transactions,” said a cashier of one of the popular fast food outlets located in Egbeda, Lagos, who simply gave her name as Tosin. Last December, Mr Tunde Lemo, CBN Deputy Governor, Operations, had assured the public that modalities for successful launch of the project were already in place. According to him, the apex bank had set for itself “a target of deploying 150,000 PoS by the end December 2012, which will be scaled up to 375,000 PoS by end 2015 when we hope to have attained our benchmark PoS penetration of 2,247 PoS per 100,000 adult population as they have in Brazil”.

“Definitely, there was a delay in acquiring those machines and that is why we have not been able to set up our PoS terminals, but very soon you will begin to see them around town,” says a top staff of Skye Bank. Mr Lemo attributes the delay in deploying the PoS terminals to hitches over import duties on the equipment imported by banks for the cashless initiative. “The delay was partly caused by the Customs Service that refused to collect five per cent duty on PoS machines. They insisted on 20 per cent and we have told the banks to go ahead and pay. But we intend to make a case for them with the Minister of Finance so that subsequently, imports will be based on five percent,” he explains.

For the spokesperson of the Nigeria Customs Service, Mr Chris Osunkwo, the agency was simply doing its job. Indeed, lack of the requisite infrastructure has ensured the road to a cashless economy is bumpy. The banks’ network systems, many are quick to point out, are still far from being rosy. The ATMs and the PoS are yet to attain the desired efficiency necessary to drive a cashless economy. The frequent “service in progress shortly” signs on the ATMs are increasingly causing nervous glances in the direction of the cashless economy initiative. The crippling impact of the epileptic electric power supply, many also note, remains an albatross in the quest towards a cashless economy. The ATMs, PoS machines, computers and mobile phones, all platforms for a cashless economy, require electricity as a source of energy.

With the frequent switch-over from public power supply to generating sets by the banks and other players in the payment business , as is always the case, Lagosians say funds transfer and making payments or conducting other electronic transactions are becoming increasingly difficult. And a majority of Nigerians are losing faith in this initiative thanks also to fear of card fraud. However, the apex bank said it is on top of the situation of combating electronic fraud.

Mr Lemo, during an e-payment forum in Lagos, said the CBN “has set up an industry-wide Nigeria e-Fraud Forum, which will serve as an official body to represent the industry on fraud-related issues, while enabling a forum for payment stakeholders to collaboratively share data on fraud attempts and proactively tackle these issues, with the objective of minimizing fraud attempts and limiting losses”. What is more? Many are questioning the new cash handling charge (service charge) of 10 and 20 percent on daily cash withdrawals or cash deposits that exceed N150, 000 for individuals and N1million for corporate bodies respectively. The new restriction on third party cheques is equally unpopular. The apex bank has had to shift commencement date for the new rules

from January 1, 2012 to March 30 following protests from the banking public that the notification was inadequate. The CBN had in a circular to all banks fixed April 1, 2012 as the take-off date for the implementation of charges relating to the violation of cash-less policy rules, instructing banks to comply with all the rules guiding the implementation of the policy. The apex bank also directed electronic payments to suppliers, payment of all forms of taxes, salaries and pensions by both private and public organisations with more than 50 employees/pensioners in Nigeria. The statement read in part: “The limits apply to the account so far as it involves cash, irrespective of channel (e.g. over-the-counter, ATM, 3rd party cheques encashed over-the-counter, etc) in which cash is withdrawn or deposited (e.g. if an individual withdraws N50,000 over-the-counter, and N150,000 from the ATM on the same day, the total amount withdrawn by the customer is N200,000, and the service charge will apply on N50,000 – the amount above the daily free limit). CBN Governor Sanusi Lamido Sanusi clarified that the limit does not stop customers from withdrawing or depositing beyond the limit set by the apex bank.

However, enquiries by The Economy reveal that while some new banks have started rejecting individual cheques above N150,000 withdrawal limits, others refuse payment of cash above the same amount. As the deadline for the on-going test-run approaches, barring any date shift, efforts by the CBN and the Bankers’ Committee to enlighten the banking public on the cashless economy initiative have been less than successful. The Central Bank’s public awareness strategy has failed to take cognisance of the fact that most unbanked Nigerians are illiterate and are alienated by what many have described as a highly elitist communication strategy. Many analysts point to the need to break the message down to the level of the man on the street. The initiative is aimed at addressing the high rate of financial exclusion in the country, encourage the use of electronic payment channels and cheques for payments, as well as to provide the platform for reaching unbanked Nigerians.

2.3.2: THE ROAD TO CASHLESS ECONOMY: The CBN had in late 2011 announced the decision to introduce the cashless policy in January 2012 for a number of reasons. These include, to drive development and modernization of the country’s payment system in line with its Vision 2020 goal of being among the top 20 economies by the year 2020; to reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach, as well as to improve the effectiveness of monetary policy in managing inflation and driving economic growth. The cashless plan, according to the CBN, is also designed to curb some of the negative consequences associated with the high usage of physical cash in the economy, including the high cost of volume cash handling along the value chain – from the CBN and the banks, to corporations and traders;

the high risk of using cash, especially in the face of the rising robbery incidents and other cash-related crimes in the society. It is also aimed at curbing inefficiency, fraud and corruption in the public and private sectors of the economy, among others. As part of the move to kick-start the process, the apex bank granted operating licences to three cash management companies to manage some of the industry’s non-core services including Cash-In-Transit (CIT) and currency sorting. It also granted licences to 11 mobile money operators in 2011 and struck a deal with telecom companies to offer operational platforms for the commencement of the e-payment regime. The firms already certified to facilitate e-payment solutions in the country include: Fortis Money, UBA/Afripay, GTBank

Mobile Money, Pagatech, eTranzact, Monetise, Eartholeum, Paycom, FET, Ecobank and Kudi. According to the CBN, the Mobile Money Service (MMS) will enable subscribers to use their GSM airtime to pay utility bills, goods and services in shops and on the internet. Mr Lemo said: “The application of mobile technology for financial services will ensure that a large percentage of the population outside the formal banking system would have access to financial services using one of the three models of card-based, account-based and virtual account.”

For Alhaji Mohammed Ndah, former CBN Director of Currency Operations, the e-payment systems would curb money laundering and corruption and other risks associated with cash-based transactions. According to him, “a cash-heavy economy is bad for the banking industry as it fuels robberies and
burglaries”, and “the huge costs of cash management are often transferred to customers in form of high interests charges”. 2.3.3: PUBLIC OPINION: Expectedly, the failure of the Central Bank to ensure a hitch-free operation of the cashless policy in Lagos has earned it criticisms from the general public. A majority of people whose views were sampled by The Economy attributed the failure of the cash-less pilot scheme to lack of requisite infrastructure and poor implementation which have bedevilled past national development initiatives. Lagos-based lawyer, Barrister Chinedu Akpa, reasons that the exercise failed at its pilot stage because the infrastructure is not adequate to support the policy. He blames the CBN management for failing to provide the modalities for the smooth take-off of the project.

“I expected the Central Bank to go beyond sensitization and support other businesses in building the capacity that will enable them partake in the cashless economy. As it is, beyond conceiving of the idea and carrying out a few road shows, they did not take practical steps that will ensure that the policy will work. I expect them to go as far as funding the deployment of the infrastructure or at least partner with the solution providers — the banks and payment companies in doing this. That way the policy can take off on a stronger footing and achieve easier acceptance,” he argues. According to him, the disappointment trailing the cashless Lagos project may hinder the plans of the apex bank well ahead of the policy extension to other parts of the country in June this year.

“If the cashless project fails in Lagos, it will fair even worse in other cities across the country because in addition to the infrastructure deficit, you also have to contend with the issue of poor attitude of the public to the entire policy,” Akpa adds. Josiah Ehigho, a pharmacist, also cautions that if the operational hitches are not tackled, the objective of the cashless policy will be defeated. “These problems include infrastructure because we lack it and not everybody even the educated ones in the society have good understanding of how it works let alone the market women,” he said. Mr Christian Nnaji, an employee of a Lebanese firm located in Oshodi-Lagos, believes poor awareness campaign is responsible for the setback the cashless project is suffering.

“I can tell you that not up to 40 percent of Lagosians actually know that such project is taking place in the state; and that is because the awareness campaign, if at all there is any, was not effective. Except for the commercial banks that have started advertising various e-payment systems in the newspapers, there is virtually no enlightenment campaign on the programme,” he says. An account clerk with African Petroleum (AP) filling station located in Ijegun-Ikotun area of the metropolis displayed ignorance of the new policy: “When is this Cashless Lagos going to start?,” he asked rather vacuously.

Mr Boniface Okezie, President of the Progressive Shareholders Association of Nigeria (PSAN), has more profound insight. He believes that the CBN should have subjected the policy to public debate and greater awareness campaign before its hasty implementation. “It is disheartening that up till now the CBN has not done enough in creating awareness about the new policy. Instead of imposing electronic banking on the people, the CBN should encourage Nigerians to imbibe good banking habits. We doubt if it matters to the CBN Governor that majority of Nigerians do not bank and this is because of the high rate of bank failures and their shoddy services to customers,” Okezie says.

A few public commentators are less critical. Stakeholders however attribute the initial hiccup in the implementation of the cashless policy to temporary problems, which they believe will disappear as time goes on. According to them, change is usually resisted everywhere, but accepted once the benefits become clear. Although stakeholders are agreed that the policy will require more enlightenment campaign to succeed, they described public apprehension over the viability of the project as ‘unfounded’. “The anxiety is uncalled for. The cashless policy builds on the success of existing electronic banking platforms. It is not fundamentally different from electronic banking people are already familiar with,” said a management staffer of Zenith Bank who pleaded anonymity. Mr Mathew Iheanacho, a management staffer of Diamond Bank, believes that despite the initial set-backs, “the cash-less initiative by the CBN is gaining momentum as channels previously under-exploited are being utilized, though more awareness needs to be created as the illiteracy level in the society is not helping the project”.

Others reckon that the policy should be given time to work even as they debunk critics’ claim of insufficient infrastructure, saying that high illiteracy and erratic power supply cannot scuttle the initiative, given that lesser literate and developed societies have implemented the project. “We don’t have to wait until every Nigerian is educated before we implement the cashless policy. Nigerians didn’t wait to be educated before they embraced GSM,” Mr Joseph Akintunde, an ICT consultant said. On the brighter side, some commercial banks, in conjunction with telecommunication firms, have rolled out electronic payment services, such as ‘U-Mo’- the mobile money product of the United Bank for Africa (UBA) and its associate company, Afripay Limited. GT Bank and Fortis Mobile Money have also commenced operations in partnership with MTN. Another product, ‘PocketMoni’ has equally been launched by eTransact International.

2.3.4: FROM CASH-LESS TO CASH-LITE: Meanwhile, electronic payment service providers have moved to clear the air on the public misconception of the term “Cashless”. They now carry out all promotions of the project with the term Cash-lite to correct the impression among some sections of the public about the policy. The cash-lite policy, an initiative of the Bankers’ Committee, comprising the CBN, Nigeria Deposit Insurance Corporation (NDIC), discount houses and the 24 deposit money banks, is aimed at encouraging more electronic-based transactions and reducing the amount of physical cash in the economy. This follows a growing misconception in some quarters that implementation of the cashless policy portends the elimination of physical cash as a means of transaction in favour of electronic systems, a development that did not go down well with most of the uneducated.

Felix Mumba, an e-payment expert, observes that the word ‘cashless’ is a bit scary to Nigerians as it portrays absence of cash. “What scares us the most is the use of the word

‘cashless’ and somehow our understanding is that the idea is to push cash completely out of the system. So, we all begin to imagine that we will be dealing purely in virtual terms but that is not the reality and it is not going to happen in a very long time,” he says. Onajite Regha, the Chief Executive Officer of E-Payment Providers Association of Nigeria (E-PPAN), argues that the name ‘Cashless’ has been a major challenge in the awareness creation. “I think the major problem is misunderstanding of that term ‘cashless’. When we started going out to the markets, what we did was to break the English down and make them understand what this cash-less society means.

It doesn’t mean that there wouldn’t be any cash at all but just to turn it around we can say ‘less cash’, for people to have faith in the system and pass all their payment through the system,” Regha notes. Reacting to the mix-up, Mrs Eyitope Mathew-Daniel, CBN Director in charge of Cashless Lagos and Head, Shared Services Department at the apex bank, says there is no economy in the world that operates with zero cash, rather each strives to rely less on cash. “When we talk about cashless, we are not talking about zero cash; we are talking about less cash and this varies from country to country, in terms of best practices, in terms of being cash less. There are about 47 per cent in terms of the ratio of cash to non-cash transactions. So, there is no economy that has zero per cent cash ratio. It is important to clarify that misconception,” she explains.

According to her, the primary purpose of the policy is to reduce the spiraling cash management cost, which include bank charges and lending rates as a result of the country’s cash dominant economy, cost of banking operations and enhance quick payment system. All said, the CBN and the deposit money banks need to tackle the fundamental issues that are making Nigerians lose faith in the cash-less/cash-lite economy initiative. 2.4: BANKS’ CUSTOMERS PICK HOLES IN CASH-LESS POLICY: The Central Bank of Nigeria’s (CBN’s) cash-less policy designed to reduce cash-based transactions is having difficulties in meeting customers’ expectations, The Nation investigation has revealed. Many banks’customers have raised issues with the services rendered by their banks in the course of the one year the policy has been in operation in Lagos State. They said the policy is “anything, but efficient at the moment.”

One of the customers said he was compelled to wait for five days before he could get access to money that was “supposedly wired to his account in his presence.” He said: “I went to the bank (name withheld) with a friend who had just sold his car to a buyer for N4million. He insisted that the money be transferred to his account on-line.

This was done, and we all witnessed it. The buyer’s account was debited immediately,” he added. “On the assumption that his account has similarly been credited (although he had not been alerted), he travelled out of the country. Four days later, the money had not hit his account,” he said. He said it was not until the fifth day that he was eventually credited with the proceeds. It was gathered that this has been the experience of many customers who have to wait for days, before they could access the money sent to them through the e-payment platform. Several other customers complained that remittances to their parents for the Christmas and New Year period were never delivered until several days later.

When confronted, a spokesman for one of the banks, who pleaded that his identity be veiled, blamed the incident, which he admitted is a common occurrence, on equipment, Asked to explain why a system that can debit one’s account would be unable to credit another’s, he insisted: “It was a systemic challenge that the industry is grappling with and strenuously striving to resolve. It is not peculiar to this bank alone. It’s an industry issue,” he added. The Central Bank of Nigeria’s (CBN’s) spokesman, Ugochukwu Okoroafor, told The Nation there have been teething problems, but they are being overcome. He said the cash-less banking initiative did not exist before and, therefore, there is always time to learn. He said there is no system that is free of problems, “but the most important thing is that e-payment has made banking easier for bank customers,” . He assured that the banks have structures in place that make it possible for them to rectify any problems encountered by their customers.

A customer of one of the first generation banks, Martins Obi, said banks have to ensure that they offer the best of services because such would enhance financial inclusion. He said many of the banks were yet to be acquainted with demands of the policy, urging that they make upgrade of their facilities a priority. 2.4.1: CASHLESS ECONOMY: ASSESSING THE HURDLES AHEAD OF IMPLEMENTATION: The convergence of communications and information systems is enabling a rapid move to electronic commerce and the empowerment of the individual to have an unprecedented level of control over his or her own finances. Globally, this move has been bolstered, majorly by proper regulations, infrastructure upgrade and security networks, especially in advanced nations. Besides, combined market for all types of mobile payments is expected to reach more than $600 billion globally by 2013, which will double the current figure. In Nigeria, the Central Bank is championing this course and has set January 1, 2012 as kick off date for the pilot scheme, billed to start in Lagos.

The CBN had stressed among other things that the need to provide financial inclusion for the over 80 million Nigerians who have never owned bank accounts before and to reduce huge heavy cash handling by making e-payment channels available were the major thrust of the initiative. According to the CBN, the new policy would also aimed at reducing high usage of cash, moderate its cost management and encourage the use of electronic channel. It added that the policy became a sine qua non, due to the increasing dominance of cash in the economy with its implication for cost of cash management to the banking industry, security and money laundering.

Besides, the Apex bank argued that, 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 one that allows for 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 Automated Teller Machines, internet banking and a significant increase in point of sale (POS) penetration and usage.

Simply put, it refers to the widespread application of computer technology in our financial system. Accordingly, the Sanusi Lamido Sanusi led CBN had 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, and emphasised that the policy is expected to moderate the volume of cash flow in the system. Furthermore, the CBN noted that the importance of an efficient, secure and sound payments system in nation building is well acknowledged in economic development literature, adding that sustainable economic growth requires a well-functioning, efficient and reliable clearing and payments system to lubricate local and international business transactions by providing liquidity in the financial system, adding that, 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.

Speaking at a seminar organised by Committee of e-Banking Industry Head (ceBIH), CBN deputy governor in charge of Operations, Tunde Lemo said the high dependence on cash for settlements has resulted in the inefficient allocation of resources and a low depth of financial intermediation with downside effects on monetary operations and monetary policy management. Continuing, Lemo said strengthening currently available modes of electronic payments; further deployment of ATMs is being encouraged, although to drive more cashless transactions as opposed to its traditional cash dispensing functions. He said ATMs are now equipped to facilitate electronic payments of bills and account-to-account transfers; banks are therefore poised to deploy additional 75,000 ATMs by December 2015.

But he pointed out that the tariff structure imposed by the Nigerian Customs Service on the importation of PoS is on the high side. Ahead of the kick off of the scheme, the CBN deputy governor informed that in a bid to meet the objective of deploying 40,000 PoS in preparation for the January 1st take-off date for the pilot scheme of the cashless policy in Lagos, the 23 banks, acting under a CBN negotiated deal with PoS manufacturers, had ordered mass importation of the terminals. According to him, the importation is, however, being frustrated by a 20 per cent import tariff imposed on the terminals by the Customs. “We have a hiccup, many of them have arrived and are actually at the ports but the Customs said we should pay 20 per cent, instead of five per cent as tariff.

“We are petitioning them, though we have been advised to pay and clear the PoS so that they don’t frustrate the programme. But we would ensure that we get the money back. We are doing a letter to the Minister of Finance to report the Custom’s people, because I took a letter to the Head of Customs and the response was not good at all”. Besides, one of the PoS operators confirmed to The Guardian that operators would require about $90 billion to be able to deploy their services effectively across the country in the coming year and subsequently. On the policy of cash limit, Lemo said the policy which has been slated to start by June, noted that: “We have a target of deploying 150,000 PoS by December 2012 which will be scaled up to 375,000 PoS by end 2015 when we hope to have attained our benchmark PoS penetration of 2,247 PoS per 100,000 adult population as obtainable currently in Brazil. “Similarly, we are strengthening currently available modes of electronic payments.

Further deployment of ATMs is being encouraged, although to drive more cashless transactions as opposed to its traditional cash dispensing functions. ATMs are now equipped to facilitate electronic payments of bills and account to account transfers”. “Banks are, therefore, poised to deploy additional 75,000 ATMs by December 2015.” On the growing infrastructure challenges in the country, the CBN deputy governor said: “Whilst striving to grow and develop the available channels for retail payments, the CBN is also mindful of the infrastructure and the security challenges posed by this ambitious programme. We have therefore progressed in forging effective partnership with telecommunication companies with the cooperation of the NCC while ensuring that structural impediments such as un-interoperability of payments networks of stakeholders are removed.” Chairman, CeBIH, Mr. Chuma Ezirim, said: “Recent academic findings based on empirical data, revealed that shifting from paper-based payments to electronic ones could entail yearly savings to a country’s economy of about one per cent of its GDP.

According to the General Manager Operations, Nigeria Inter-bank Settlement System (NIBSS) Plc, Niyi Ajao, an efficient payment system will lead to higher velocity of money, which in turn promotes economic growth. He stressed that such system will depend less on cash and has great potential to grow the national economy by reducing corruption, providing banks with more liquidity for lending to the needy sectors of the economy, at attractive interest rate among others. Meanwhile, at a recently held Electronic Payment Providers Association of Nigeria (E-PPAN) conference, the CBN 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 harped 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. As such, he said the Apex bank 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. In addition, the President of the of the Institute of Software Practitioners of Nigeria (ISPON) Mr. Chris Uwaje, opined that the apex bank should not be in a great hurry to introduce policy’s without taking into cognisance the peculiarities of the country.

According to him, 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.” 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. Uwaje explained that the technology prerequisite for the scheme is Public Key Infrastructure (PKI); Centralized National Database and e-Legislative Framework, stressing that all the above are still grossly missing.

Moreover, he said, we need to build massive skill capacity and Security interfaces, which amounts to an intellectual laziness for a nation to embark on such a magnified venture without a constructive e-Transaction Policy and legislative Framework. “The best we can do now is a Pilot. 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. Speaking to The Guardian on the condition of anonymity, a senior official in one of the leading telecommunications firm at the weekend said much effort are required by stakeholders, especially in the areas of awareness and security to be able to achieve the maximum result. According to him, the regulator in charge, though on the right path, must ensure that operators get the module operandi right, to avoid any unforeseen circumstances. 3.0: RESEARCH METHODOLOGY

3.1: POPULATION OF THE STUDY/SAMPLE SIZE AND TECHNIQUES:

The targeted population for this study includes some top executives of hotels in Aba, selected traders from Umungasi market, Ariaria international market, Ekeoha shopping Plaza all in Aba, some bank managers and heads of operations in Aba metropolis. The assessable population were set at 20 respondents and used as the sample size. Due to the difficulties in covering the entire Aba Metropolis in our sample frame. The sample method used in this study is random sampling techniques. It was considered suitable because it is easier to use a few members to study the entire group or population.

3.2: METHOD OF DATA COLLECTION:

The only instrument used for the data collections is questionnaire, this was squeal to tight schedules of the respondents who preferred to attend to the questions at their convenient, usually during breaks, etc . A QUESTIONNAIRE being a series of well planned questions usually typed and administered to group of people called “respondents”, who are expected to give responses to the questions. In this study 20 questionnaires were distributed and only 18 were duly returned.

3.3: METHOD OF DATA ANALYSIS:

The data collected through questionnaire were analyzed using table percentages.

4.0: PRESENTATION, ANALYSIS AND INTERPRETATION OF DATA

4.1: DATA ANALYSIS ON THE PERSONAL DATA AND RESPONSE RATE OF RESPONDENTS:- 18 questionnaires were dully filled and retrieved [90%] and the personal details of respondents as seen in the table below

On gender the table above shows that fifty five point five (55.5%) of the respondents were males, while forty four point five (44.5%) were females. On area/business segment – Ariaria market were 16.7%, Ekeoha Shopping Plaza were 22.2%, Retail Shops/Pharmacists’ were 27.8%, Banks were 11.1% and Hotels/eateries were 22.2%. The majority of the respondents had ND/OND/NCE (38.8%), Hence, greater percentage of the respondents were educated.

4.2 Feedback on the awareness and understanding of Cashless policy, I tried to ascertain to what extent were Aba people aware of this policy and it was revealed that 83.3% of the respondents were aware of the policy but unfortunately, only 38.9% fully understood what the policy was all about. (See table 2).

4.3 Attitude, Accessibility and Usage of Cashlite channels  The study further sought to establish the attitude of the respondents towards the cashless channels, their accessibility to these channels (Availability)
and the ones they usually use.

16.7% of the respondents had a highly positive attitude towards these channels; 38.9% were just positive, 38.9% were neutral and negative. Most of the respondents (55.6%) had access to and actually do use ATMs with high regularity of 11.1% regular usage of 33.3% and occasional /rare usage of 33.3% and about 22.2% who do not even use it all (see table 2). 33.3% of the respondents also averred that they had increased their usage of ATMs since the cashless awareness building began in January, 2011. Of course this stands to reason, not because the respondents and indeed Nigerians love the ATMs: the banks had forced their customers to use ATMs by raising the minimum amount they could pay over the counter (In most places, N100000 and above) or imposing charges for direct cash withdrawals. December 2011 (CBN 2012)

Those who patronize cashless-channels and who should be change champions and advocates for the policy were asked to state the reasons for patronizing these channels (Table 3). Top on their response was convenience – 39.4% (Convenient and fast transaction, 24/7 availability and removing the burden of carrying cash) followed by security – 32.6% (robbery and security)

Those who avoid these cashlite channels also gave their own reasons top of which was frau-26.3% (Fraudulent operations and account safety), operational issues – 60.5% (Rigidity, compatibility, denomination of cash dispensed, low coverage) and network problems (13.3%); See table 4

4.4 INTERIM VERDICT ON THE CASHLESS POLICY: Based on the awareness building, implementation so far and their understanding of the policy, respondents were asked to pass a verdict on the policy and this is shown in table 5: 67% of the them believer that the cashless policy is necessary but only 56% believes that the CBN approach to its implementation (coercion based and legislated change) is the best 33% is not so sure while 11% is certain that the CBN is adopting the wrong approach. This is in tandem with the general flow of public opinion on the debate; most people believe that the policy is right but very few believe that levying draconian charges on people to withdraw their own money in an environment like ours and without any inducements to go cashless will work. To conclude the verdict, only 44% believed that the policy would work.

To mine the views of those who were convinced that the policy would fail and to assist policy modifications, they were asked to justify their predictions. They based their pessimism on epileptic power supply (15%), poor implementation (11%), illiteracy (14%), lack of those channels in rural areas (14.6%) among others. Although CBN has also argued that nobody has been expressively or impliedly deprived of the right to own or use money deposited in any bank. It was equally held that they were not bound to patronized any bank but once they chose to do so, they must abide by extant rules and that the policy does not contravene the fundamental rights of the applicants under section 44(1) of the Nigerian constitution (Chiejina, 20131:12)

5.0: FINDINGS AND DISCUSSION OF THE RESEARCH TOPIC/PROJECT WORK

5.1: FINDINGS OF THE STUDY:

i. Findings by The Economy in parts of Lagos as at press time reveal that contrary to the CBN’s plan, the new payment system, which involves utilizing the Automated Teller Machines (ATMs), internet banking, mobile money and an estimated 40,000 Point of Sales (POS ) terminals, was yet to become operational in most transactions. ii. Save for a handful of popular shopping malls in the highbrow areas like Ikoyi, Victoria Island, Lekki Peninsula, Ikeja and Surulere where the POS payment system had already taken off, 95 percent of other businesses were still thriving on cash-based transactions. iii. “We are yet to see any of those machines let alone using it for transactions,” said a cashier of one of the popular fast food outlets located in Egbeda, Lagos, who simply gave her name as Tosin.

iv. Last December, Mr Tunde Lemo, CBN Deputy Governor, Operations, had assured the public that modalities for successful launch of the project were already in place. According to him, the apex bank had set for itself “a target of deploying 150,000 POS by the end December 2012, which will be scaled up to 375,000 POS by end 2015 when we hope to have attained our benchmark POS penetration of 2,247 POS per 100,000 adult populations as they have in Brazil”. v. “Definitely, there was a delay in acquiring those machines and that is why we have not been able to set up our POS terminals, but very soon you will begin to see them around town,” says a top staff of Skye Bank. Mr Lemo attributes the delay in deploying the POS terminals to hitches over import duties on the equipment imported by banks for the cashless initiative.

vi. “The delay was partly caused by the Customs Service that refused to collect five per cent duty on POS machines. They insisted on 20 per cent and we have told the banks to go ahead and pay. But we intend to make a case for them with the Minister of Finance so that subsequently, imports will be based on five percent,” he explains. vii. For the spokesperson of the Nigeria Customs Service, Mr. Chris Osunkwo, the agency was simply doing its job. viii. Indeed, lack of the requisite infrastructure has ensured the road to a cashless economy is bumpy. The banks’ network systems, many are quick to point out, are still far from being rosy. The ATMs and the POS are yet to attain the desired efficiency necessary to drive a cashless economy. The frequent “service in progress shortly” signs on the ATMs are increasingly causing nervous glances in the direction of the cashless economy initiative.

ix. The crippling impact of the epileptic electric power supply, many also note, remains an albatross in the quest towards a cashless economy. The ATMs, POS machines, computers and mobile phones, all platforms for a cashless economy, require electricity as a source of energy. With the frequent switch-over from public power supply to generating sets by the banks and other players in the payment business , as is always the case, Lagosians say funds transfer and making payments or conducting other electronic transactions are becoming increasingly difficult. x. And a majority of Nigerians are losing faith in this initiative thanks also to fear of card fraud. However, the apex bank said it is on top of the situation of combating electronic fraud.

Mr. Lemo, during an e-payment forum in Lagos, said the CBN “has set up an industry-wide Nigeria e-Fraud Forum, which will serve as an official body to represent the industry on fraud-related issues, while enabling a forum for payment stakeholders to collaboratively share data on fraud attempts and proactively tackle these issues, with the objective of minimizing fraud attempts and limiting losses”. xi. What is more? Many are questioning the new cash handling charge (service charge) of 10 and 20 percent on daily cash withdrawals or cash deposits that exceed N150, 000 for individuals and N1million for corporate bodies respectively. The new restriction on third party cheques is equally unpopular. The apex bank has had to shift commencement date for the new rules from January 1, 2012 to March 30 following protests from the banking public that the notification was inadequate. xii.

The CBN had in a circular to all banks fixed April 1, 2012 as the take-off date for the implementation of charges relating to the violation of cash-less policy rules, instructing banks to comply with all the rules guiding the implementation of the policy. The apex bank also directed electronic payments to suppliers, payment of all forms of taxes, salaries and pensions by both private and public organizations with more than 50 employees/pensioners in Nigeria. xiii. The statement read in part: “The limits apply to the account so far as it involves cash, irrespective of channel (e.g. over-the-counter, ATM, 3rd party cheques encashed over-the-counter, etc) in which cash is withdrawn or deposited (e.g. if an individual withdraws N50,000 over-the-counter, and N150,000 from the ATM on the same day, the total amount withdrawn by the customer is N200,000, and the service charge will apply on N50,000 – the amount above the daily free limit).

xiv. CBN Governor Sanusi Lamido Sanusi clarified that the limit does not stop customers from withdrawing or depositing beyond the limit set by the apex bank. However, enquiries by The Economy reveal that while some new banks have started rejecting individual cheques above N150,000 withdrawal limits, others refuse payment of cash above the same amount. xv. As the deadline for the on-going test-run approaches, barring any date shift, efforts by the CBN and the Bankers’ Committee to enlighten the banking public on the cashless economy initiative have been less than successful. The Central Bank’s public awareness strategy has failed to take cognizance of the fact that most unbanked Nigerians are illiterate and are alienated by what many have described as a highly elitist communication strategy. Many analysts point to the need to break the message down to the level of the man on the street. xvi. The initiative is aimed at addressing the high rate of financial exclusion in the country, encourage the use of electronic payment channels and cheques for payments, as well as to provide the platform for reaching unbanked Nigerians.

5.2: DISCUSSION OF THE STUDY:

The new cash policy was introduced for a number of reasons, including: • To drive development and modernisation of Nigeria’s payment system in line with Vision 2020 goal of being amongst the top 20 economies by 2020. • To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach. • To improve the effectiveness of monetary policy in managing inflation and driving economic growth.

In addition, the policy aims to curb some of the negative consequences of high usage of cash, including high cost of handling (estimated to be about N192 billion this year), high risk of usage and high subsidy. However, as full implementation of penalty charges on deposit and withdrawal limits draws near, the various e-channels and applications like Automated Teller Machines (ATM), Point-of-Sale (PoS) terminals and mobile banking platforms that are supposed to facilitate electronic transactions have remained largely deficient. There are still fears that ATMs and PoSs are yet to attain the desired efficiency to drive a cashless economy, maintain a working network and constant connectivity. There have been complaints that sufficient facilities have not been provided to make the system smooth.

The e-payment system is said by many who have tried to use it to be filled with hitches. Sometimes, one is charged for service not successfully rendered. There are, therefore, fears of possible loss of money through fraud. Then the poser: How would the market women and other small business owners who are long-accustomed to cash transactions, smoothly transit to the new policy by June? Meanwhile, information security experts have said the infrastructure supporting the cash-less system may be 60 per cent vulnerable to fraud. This, according to them, is because the system is only 40 per cent protected as only one per cent of the operators involved has attained the Payment Card Industry Data Security Standard certification (PCI DSS).

PCI DSS is an information security standard for organisations that handle card holders’ information for major debit, credit, prepaid, e-purse, ATM and PoS cards. Digital Encode Director Mr Adewale Obadare said: “From the information security readiness perspective, I will say that the cash-less scheme is only about 40 per cent secured against rising cyber fraud on other channels beyond the cards. “That is why operators need to do the PCI DSS certification because, in doing it, they will be giving the public the assurance that transactions via their networks are safe.”

aAn official of Control Case, a United States based Qualified Security Assessor for PCI DSS, Mr Afy Merchant, agreed that 60 per cent of the cash-less system might be vulnerable. He, however, said it was better to stand by a 50:50 ratio because the cash-less initiative was new in Nigeria. While modern day business is all about electronic transactions, experts are of the view that cyber laws, as well as those governing e-payment, which will protect users of the technology in the cash-less policy, are needed. They said there is the need for controls and firmness of the laws on the industry and the electronic deals.

Director, Middle East and Africa, Fico (an IT fraud solutions firm), Mr Robin Findlay, said Nigeria must pass cyber laws to maintain cyberspace integrity and protect consumers in the cash-less system. “Each country has its cyber laws to protect online transactions, which also include online financial transactions. But as countries continue to come up with regulatory laws, the better it is for our economies. “To maintain Nigeria’s integrity in the cyberspace, there is the need for the country to put cyber-crime laws in place. “Banks should have a fraud detective department and should invest heavily in it,” he added. CBN Governor Sanusi Lamido Sanusi recently gave an indication that the CBN intends to push for the enactment of four bills by the National Assembly to tighten financial sector regulations. They are the Electronic Transaction Bill, the Financial Ombudsman Bill, the Nigerian International Financial Centre (NIFC) Bill, and the Alternative Dispute Resolution (ADR) Regulatory Commission Bill. Sanusi said the Electronic Transaction Bill, if passed into law, would give effect to the admission in evidence of all electronically- generated statements of account which the Evidence Act currently forbids.

The Financial Ombudsman Bill, he said, aims to facilitate faster resolution of financial disputes, while the Alternative Dispute Resolution (ADR) Regulatory Commission Bill is proposed to create an ADR Commission to promote and regulate the practice and use of ADR in Nigeria. Sanusi said through what he called the Shared Services Initiatives, the number of ATMs is expected to increase, which should reduce the cost of operations and promote a cash-less society. Lawyers are also of the view that the legal framework needs to be strengthened. A Senior Advocate of Nigeria (SAN), Dr Joseph Nwobike, said: “The current legal regime is clearly inadequate to regulate e-commerce transactions in Nigeria. “It is also understandable that the cash-less policy can be implemented without the need for a specific penal legislation for the purpose. “However, I believe that there a number of legislation that can be applied to punish offenders.

“What the Central Bank should put in place is the mechanism which would assist law enforcement agencies to track and secure the conviction of those who commit offences using the platform. A lawyer, Mr Nojim Tairu, said existing laws are inadequate to protect consumers. “As with most innovations in the world, we are barely tagging along in all respects on the e-payment system. There are presently no direct legal instruments to meet all aspects of the situations that are bound to arise from the cash-less policy. “Existing law of contracts, torts and criminal law would simply be inadequate in the circumstance even if they are stretched to apply to the novel context that the cashless policy has introduced. “Nigeria will have to fashion out a fresh set of legislations based on the practical legal experiences, precedents in other climes and jurisdictions. But the moral is the need to be proactive rather than reactive as a nation.”

For another lawyer, Richard Nduka Chukwuocha, the penal law is not enough to protect customers in the cash-less regime His words: “Imagine Nigeria without cash; a nation where almost every financial business transaction is done without cash. Such ways may include online banking, direct deposits, automated teller machines, debit cards, smart cards, etc. “There is a high tendency for a cash-less economy to rely on information technology. Turning Nigeria into a cash-less economy has its advantages and disadvantages for the economy.” He went on: “In relation to theft, it will, to a large extent, act as security in protecting people’s money. However, many Nigerians are still afraid to use, for instance, the ATM because the security features are not enough, as yet, to prevent theft.

“The Penal Law in Nigeria is not adequate to protect customers in the cash-less regime. The reason is not farfetched. “With the advent of computer age, legislatures are struggling to redefine penal laws to cope with the menace of cyber-crimes and Nigeria is not an exception. “Nigeria needs to enact laws targeting cyber-crimes, as the traditional penal laws such as the Criminal Code and the Penal Code are not adequate to tackle the ever- evolving crimes associated with the computer.” Chukwuocha added:”Amend-ments to our criminal statutes are unavoidable if the cash-less economy is to record resounding success. But as the penal law stands today, it is my opinion that Nigeria does not have an enabling legal framework for a successful cash-less economy.”

Executive Director, Social and Economic Rights Action (SERAC), Dr Felix Morka, a lawyer, questioned CBN’s powers to set withdrawal limits. He argued that deep thinking did not go into making the policy. He said: “I don’t think the CBN has invested time and energy in researching and analysing the consequences of the policy. “As far as legal position is concerned, I think it is very arguable that the CBN is going beyond its regulatory powers given to it by law to dictate how much money an individual has access to, and how much he/she can place in the bank.

“When I have an account with a bank, I have a contract with it. I should be able to retrieve my money on demand. “I think that, overall, the CBN needs to think more critically about staying within the confines of its authority and its role as the apex bank without limiting my own rights and liberties as a citizen. “The policy was announced without a lot of thinking and planning. That is why there have been controversies over it even before it’s implemented. They are beginning to realise they didn’t think it through. “I think that policy is very consistent with the way we do government business in this country, we act first before thinking.”

6.0: CONCLUSIONS AND RECOMMENDATIONS

6.1: CONCLUSIONS OF THE STUDY: As the Central Bank of Nigeria (CBN) has affirmed that the second phase of the cashless initiative will begin July 1, 2013. Deputy Governor, Operations, CBN, Mr. Tunde Lemo, confirmed this weekend (10th May 2013), saying that the planned extension of the cashless policy to five states, as well as the Federal Capital Territory (FCT) from July 1 still holds. The states to implement the cashless initiative include Rivers, Kano, Anambra, Ogun and Abia as well as the FCT. According to Lemo, the states and the FCT were chosen because of the large volume of cash transactions in some of their major cities. He explained that in order to achieve the target, the apex bank and lenders had already drawn a road map, which is being followed meticulously. “We are ready to roll out to the six other states and there would be no change in date. We are not shifting the goal post. We have a road map, which is being followed and we are fully prepared,” he said. It will be recalled that the cashless policy, whose implementation began in Lagos in January, last year, is aimed at reducing the dominance of cash in the system. The policy specifies penal charges for individuals and corporate organisations that want to withdraw or lodge cash above prescribed limits.

6.2: RECOMMENDATIONS OF THE STUDY: To make the implementation of the cashless policy work smootly in Aba, Abia State, the following measures are recommended: a. There is need to intensify the publici enlightenment programmes since it will affect everybody in Aba, Abia State; b. Since there is high level of illiteracy generally and all people must be broughtr into the system, government should design special enlightenment programmes especially for the non-illiterate, using probably signs and symbols to educate these segment of the populace;

c. Nigeria should design a concreate internet security to check online fraud ans assure the public of protection against cyber attack and fraud; d. There should be a careful studyof the system tp determine the number od point of sales terminals in order to avoid frictions in the sytstem; e. There shoulsd be adequate legislation on all aspect of the cashless policy implementation so that both operators and the public can be adequately protected; f. It is also important to establish the shortcuts which people use to avoid the sledgehammer inherent in the cashless policy, especially, the charges and the cash thresholds.

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