PRINCEWILL EKWUJURU with agency report
Mastercard, a US-based financial payment solutions firm has revealed that Nigeria spends an estimated $5.1 billion, about N816 billion yearly on printing and handling cash, an amount which is one per cent of the country’s Gross Domestic Product, GDP figure.
The financial payment firm explained that countries across the globe spend an average of 1 percent of their GDP yearly to fund minting of currency notes and logistics involving handling, processing and shipment.
According to Mrs. Omokehinde Ojomuyide, Vice President, West Africa, MasterCard said: “MasterCard advisers have done studies in many countries and found out that the cost of cash to an economy is about one per cent of the country’s GDP, she was quoted by Nigerian Financial Technology.
Continuing she stated: “The studies show that countries spend between 0.5 to 1.5 per cent of their GDP.”
This implies that Africa’s largest economy, following the recently devised GDP figures of $510 billion, spends an average of $5.1 billion annually of cash logistics, as $5.1 billion represents 1 percent of GDP.
The revelation underscores the need to devise strategies of reducing cost of cash, an area where recently implemented cashless policy becomes even more critical.
The Central Bank of Nigeria (CBN), in January 2012, launched the innovative cashless policy, with Lagos – the country’s commercial hub – its kick off base. The policy sought to limit the amount of daily cash handling in circulation by increasing charges on daily withdrawals and deposits that exceeded N500,000 ($3,000) for individuals and N3 million ($18,600) for corporate bodies, encouraging individuals to rather patronize electronic forms of payment.
While several socio-economic reasons were listed for the need to reduce cash in circulation including insecurity and the high risk of moving hard currency and maintaining economic stability by controlling inflation, the most critical point of was reducing the cost of minting and circulating adequate cash across the country.
“I believe that is the discussion the CBN had some years ago and started pushing the cashless policy. There is a reason to the cashless initiative,” added Ojomuyide. “And the reason is simple. It is because the government has done the numbers and realised that there is a cost to cash, and it is only when you realise that there is a cost to cash that this conversation that we call cashless can start.
“That is what is motivating their policies. You see them bringing out policies to reduce cash, make PoS work, and if you deposit above X amount, you will get charged.”
Nigeria is set to deepen the cashless initiative’s reach mid-2014, with plans to expand offerings nationwide from July.
Early this year, the suspended Central Bank Governor, Mallam Lamido Sanusi, had noted that cost of cash on the apex bank’s balance sheet had dropped from N46 billion ($285 million) in 2009 to N35 billion ($2.16.8 million) as at 2013; sandwiched in-between was the launch of the policy in 2012.
“We have got more money now being transferred through electronic channels,” he said.
Bouyed by the encouraging figures and the significant impact it had on cost of printing and handling, he vowed to further drive down cost below N30 billion ($185.9 million) before his tenure elapsed this year.