Tunji Andrews, Lead Economist at Time, Trade and Commodities (TTAC)
THE year 2012 was very significant for ecommerce in Nigeria for at least two reasons. Firstly, the government, through the CBN, had set up a policy it hoped would curb excesses in the handling of cash in Nigeria.
The second thing that happened was that, just a few weeks to the roll out of cashless Lagos, the CBN made two key tweaks to the policy that at the time seemed bold but in retrospect, now seem not well thought out decisions.
The first tweak was the Over-The-Counter limits, having prescribed cash handling charges on daily withdrawals above five hundred thousand Naira (N500,000.00) as against the initial One hundred and fifty thousand naira (N150,00) for individuals and three million Naira for corporate bodies (N3, 000,000.00) as against the initial two million Naira (N2, 000,000.00) for corporate bodies.
While a few of us pointed out how this might make the policy redundant to curbing cash use, especially since the number of people who actually go take N500,000 and above over the counter, were really not that much, compared to those who fall between the N50,000 – N250,000 bracket (CBN’s own analysis showed that only 10% of daily banking transactions are above 150k); The CBN decided to engage in a needless campaign, trying to explain that the CASHLESS in the policy actually meant LESS CASH; they spent an awful amount of time on PR campaigns, with little time evaluating the efficiency of the policy.
The other tweak was in insisting that the mobile money operations be bank-led (which wasn’t a problem), but to emphasize this, no telco was given a mobile money license. I asked the crucial “WHY” question at the time and the usual answer was “How it could be a threat to retail banking”, as it has been seen in other parts of Africa. It even echoed around West Africa, that in 2016, Kumangkem Kennedy Kubuga, wrote a rebuttal paper titled “Mobile Money – A Potential Threat to Banks?” The long story short is that, Central banks across Africa chose to see the success of MPesa in Kenya as a loss for retail banking, rather than a win for financial inclusion.
To be honest though, I wasn’t too worried at the time, as looking at the list of 21 Mobile money licenses issued, I believed we had enough within them to drive financial inclusion into the rural areas and strengthen E-commerce in the urban areas.
What has however happened, is that banks have basically made it an add-on service to already existing customers, while the real heavy lifting of using it as a tool of financial inclusion has been left to the likes of PagaTech (Paga), who now have over 5 million subscribers but are now faced with new regulation, with CBN rules, effective from the end of December 2017, stating that operators must have NGN1 billion ($2.8 million) in their reserves to operate; a sum which is expected to rise to NGN2 billion on 1 July, 2018.
Surely now, we must return to this table to re-evaluate the successes and the failures of the cashless policy and its offspring. While we stand afraid of what happened in Kenya, let us remember that, Kenya leads the world in developing mobile money payment systems and in widespread usage, despite Kenya’s extreme poverty, ranking 187 in per-capita GDP.
Of the country’s 47 million people, seven in 10 adults (69%) have financial accounts (as against 41.1% in Nigeria). In addition to mobile money, financial services are available through a diverse group of providers, including banks, non-bank financial institutions and informal financial groups. Nearly two-thirds of the country is rural, and three-quarters of adults earn at least part of their incomes from agriculture.
Nigeria, really, should be taking huge strides in financial inclusion using mobile money but we are still handling teething issues where talk has begun to emerge that the CBN may revoke the licenses of at least 15 struggling mobile money operators under new minimum finance rules.
To drive the nation’s (CBN’s) vision of 80% financial inclusion as stipulated in its National Financial Inclusion Strategy, we must push through with CBN Governor, Godwin Emefiele’s remarks on eventually giving licenses to telecommunication companies (Telcos) to provide mobile money services. As I believe they are better suited to offer products that would see a massive rolling out of agent networks and creating awareness to increase adoption, and adoption of digital financial services as simple, flexible and easy alternative channels for reaching remote areas and rural hinterlands.