By Rotimi Fasan
TALKING Point this week features a piece which, I hope, would present a welcome diversion from the often-depressing focus on Boko Haram and other aggravating excesses of our politicians. It is from one of the more devoted followers of the column and it throws light on an important aspect of the financial sector.

TWO troubling thoughts readily come to mind as one ruminates over the recent CBN policy to actualize a ‘cashless’ Nigeria, with Lagos serving as the guinea pig with effect from the 1st of January, 2012.

The first of these is the efficacy of the N1million as cash limit per bank account per day set for business entities while the second issue is the frenzy of PoS deployment being encouraged by the CBN as the one-stop solution to achieving the desired goal by the turn of the year.

The CBN has stipulated that with effect from January 1, 2012, any payments through Lagos bank accounts in excess of the N1million mark shall be subject to a charge of 20% of the excess amount. In other words, if ‘Emeka and Sons Ltd’ bank account is credited with N100,000 above the N1million limit, the business will be charged N20,000 as Cash Limit Fee, excluding other bank’s charges. If the account is credited with an extra N1million per day, that translates to a cash limit charge of N200, 000 for cash deposit alone.

Whilst the economic benefits of a ‘cash lite’ society is transparently apparent to every discerning mind, one cannot but wonder what metrics or indices informed the CBNs choice of N1million as the daily cash limit for businesses. Was this figure arrived at through some scientific research, or was it simply haphazardly fixed based on the whims of an individual or a committee?

The guess is that there is no analytical framework to support the figure. This is backed by the reality that there are businesses that simply cannot avoid having cash deposits above N1million per day. A business organisation, for instance, with massive malls in strategic locations cannot but have over N1million in cash sales per day. Same applies to the likes of ‘one-stop’ shops with high customer base.

If the policy is to be strictly implemented to the letter, these retailers will be out of business within a month. So what will such businesses do with their excess cash? The postulation is that to beat the charges, such businesses will keep their excess cash in their vaults; pay their suppliers in cash; and convert the excess Naira into foreign currencies which is not covered by the CBN regulation.

The unfortunate implication of this is that rather than have a cashless Lagos as planned, we could end up with excess cash in circulation outside the banking system and an increased demand for foreign exchange, coupled with its attendant pressure on the value of the Naira. Definitely not what the CBN wants now. And this brings us to the second pertinent issue – the PoS slogan.

The CBN has gone to town about plans to flood the market with thousands of PoS machines and sponsored adverts in newspapers on the need for businesses to have PoS machines in order not to fall foul of the policy.

They have even gone ahead to license Payment Terminals Service Providers, PTSPs, to deploy and manage PoS terminals in the country. Unfortunately, the truth is that flooding the markets with PoS terminals will not in itself fundamentally change the payment landscape in the country. More than 95% of transactions will still be in cash. As for the companies that have invested in the terminals, one only hopes that they survive long enough to reap the dividends of their investment. But that is a discourse for another day.

Though there are businesses that need the PoS terminals in order not to fall short of the CBN rule, the fact is that the vast majority of businesses in Nigeria do not come close to having a problem with the CBN cash limit of N1million. They do not make cash sales of N1million per day and therefore do not need to change their business model at all. Even if they are given a PoS, they are unlikely to see much activity on it.

As old habits die hard, putting thousands of PoS machines in small retailers will not change consumers’ habits. Customers will always prefer cash payments. Shop owners will always prefer cash. The vast majority will still pay by cash, and there is no compulsion on the shop owner to encourage card usage.

So rather than make a sing-song of the PoS as the magic wand for cashless Lagos, the CBN is better advised to revisit the N1million daily cash limit while also exerting more resources in highlighting other channels of transactions such as NEFT, Instant Payments, Internet banking, mobile payments, etc.

These are channels through which vast sums could be transferred and they are most suited to companies that are more prone to fall short of the policy. It is also important to underscore the fact that cash will always be king and can never be totally eliminated as is ignorantly believed in some circles.

At the end of day, if we reduce cash from 98% to 90% over the medium term, that would be a huge success for the CBN in particular, and the economy in general.

Joachim Iloemezue wrote from Lagos.

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