..::Christ Embassy Online News::.. Will cash-light deliver better value to banking customers?

Will cash-light deliver better value to banking customers?

Deposit Money Banks in the country are again embroiled in neck-break contest to meet up with the demands of a recent key policy of the Central Bank of Nigeria (CBN); in this report however, CAMI EZENWA reiterates the question in the minds of many: will Cashlight translate to better service delivery to the hapless Nigerian banking public?

IF he has his way, Mr. Christian Ezeji, senior staff of a leading consultancy firm in Lagos would still prefer to walk up to bank counters any day to make any cash transactions.

At the risk of being tagged conservative, Ezeji who holds a 1995 Higher National Diploma (HND) certificate in Business Administration, said he is much at home with conventional banking and has subtlety resisted attempts by banks to make him go electronic.

“I just have not made up my mind to change”, he told our reporter in an interview. “I have had issues with my bank over transaction delays and other complaints over the counter, but honestly, I am yet to come to terms with ATMs and all that”,

For Mrs Comfort Uche, an administrative staff with a polytechnic, electronic banking is it all the way. In fact, she was one of those who immediately obtained an Automatic Teller Machine (ATM) card, immediately her bank introduced the initiative, but she still has her scars with electronic banking. It has made her also wonder if all the banks would be able to respond adequately to the challenges of Cashlight.

“I am saying this because I have heard stories of frustrations by ATM holders in their attempt to withdraw money”, the mother of one told our reporter.

She said in her case, she was a little careless about her ATM card only for an office colleague to pick it. Before she knew it, the fellow had gone to the bank and made withdrawals and she still finds difficult to know how she was able to get her pin.

“I was so agitated because she had withdrawn almost to the last naira in the account, but I thank God, because the bank staff tried their best and eventually got the person who used the card”.

Off course, people’s experience with the electronic banking differs and in spite of its many advantages, many people are still to embrace it.

But the CBN is resolved that Cashlight, now the acronym for the cashless programme, which it announced last May, is the way to go for Nigeria. In fact, with the commencement of the programme at the beginning of the year, Nigeria’s Money Market Sector entered a new era of its growth.

The policy seeks amongst others, to reduce physical movement of cash circulating in the economy; encourage more electronic-based transactions both in the payment for goods and services and also for funds transfers, and ultimately, to bolster the monetary policies measures of the regulatory authorities.

The policy has since kicked off in Lagos, Nigeria’s commercial capital on January 1, with Abuja, the political capital; Kano and Port Harcourt set to follow suit mid year.

The cashless economy policy is being justified for a number of reasons; one is the high cost of managing cash said to be in the region of N150 billion yearly. There is also the issue of so much money circulating outside the banking sector, against the need to enhance financial inclusion of the generality of Nigerian and triggering both a savings and entrepreneurship culture. These are in line with the monetary policy measures of the government.

A recent Bankers Committee meeting, in considering all these factors, endorsed the CBN’s proposal to reduce the lending rates through cost-cutting measures, and in fact, its target is to cut banks’ operating expenses by as much as 30 per cent.

It is thus in the bid to ensure reduction in physical cash movement that it is slamming a cash handling charge on daily withdrawals exceeding N150, 000 for individuals and N1million for corporate organisations. While individuals would pay a service charge of N100 per every N1, 000 they withdraw; corporate entities would pay a service charge of N1000 for cash transactions above the stipulated value.

Alhaji Sanusi Lamido Sanusi, the CBN Governor has repeatedly said high cash usage results in a lot of money circulating outside the formal system thus limiting the effectiveness of monetary policies of the CBN. He said this also affects efforts at managing inflation and economic growth, while it leads to leakages and money laundering.

There is also the social concern of abuse of the naira, like is experienced when Nigerians attend social parties. Because of readily available cash, they usually indulge in spraying the naira with all its attendant drawbacks.

Aside the quick rupture in currency value, the practice is believed to induce criminal tendencies.

Beyond these, indications are that banks are likely to pay as much as N92 billion in cash management costs this year, with very strong bearings on interest rates escalation. This is because banks would naturally consider how they pay on deposits, their operating expenses against their projected profit margins to decide how much they charge as lending rates. And in a situation where credits to the real sector is either shrinking or has remained largely unimpressive, has come as another important reason why the cashless policy is flying without let. For one, it would ensure stability in the interest rate.

And when banks pay less as cash management costs, the tendency to reduce cost charges on other service deliveries to the public is almost assured.

Mr Niyi Ajao, who is the General Manager, Operations of the Nigeria Inter-bank Settlement System (NISS), is of the opinion that the era of Cashlight would witness more liquidity for the banking sector for on-lending to the needy sectors.

He told participants at a forum under the auspices of CBN in association with the Deposit Money Banks that Cashlight would increase the velocity of money in the system and thus checkmate corruption to a certain degree.

Beyond this, he established a relationship between the efficiency of the national payment system and increase in the Gross Domestic Product (GDP), affirming that most countries which are desirous of having stronger economies are putting in place, improved national payment systems.

“Efficient payment system is a pre-requisite for the development of the national economy. An efficient payment system will lead to higher velocity of money, which in turn promotes economic growth. The payment system is a significant national infrastructure and is critical to the growth of the national economy just like telecommunications, electrical p0ower and transportation infrastructure”, he said.

Bank customers who respond to enquiries on the matter are of the opinion that all said and done, what is important is that the policy improves the overall service delivery of the banks. Only then would the policy be worth all the attention and expense it has attracted.

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