Lagos goes cashless on April fool day
By EMMANUEL UDOM
The Central Bank of Nigeria has ordered banks operating in the country to go cashless effective April 1, 2012, beginning from Lagos, the former capital of Nigeria.
In line with the directive of the CBN,cash withdrawals or deposits by individuals should not exceed N500,000, while that of corporate bodies is perked at N3,000,000.
The aim, according to recent posting at the site of the apex bank in Nigeria is aim at reducing, not eliminating the amount of physical cash (coins and notes) circulating in the economy.
The bottom-line is to encourage more electronic-based transactions. That is: payment for goods, services, transfers, among other banking transactions.
Why the cash policy?
- To drive development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. An efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth.
- 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 cash policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy, including:
- High cost of cash: There is a high cost of cash along the value chain - from the CBN & the banks, to corporations and traders; everyone bears the high costs associated with volume cash handling.
- High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents.
- High subsidy: CBN analysis showed that only 10percent of daily banking transactions are above 150k, but the 10percent account for majority of the high value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10 percent incurs in terms of high cash usage.
- Informal Economy: High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth.
- Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.