Since the Central Bank of Nigeria (CBN) made another vain attempt to reintroduce the ill-conceived policy of pegging the withdrawal and deposit limits in the name of promoting cashless economy, I have tried to restrain myself from commenting on it having done so in the past using different platforms. But the more I tried to restrain myself, the more I feel obliged to comment. My position on the matter has always been that the policy of pegging cash transaction limits in the name of cashless economy is mechanistic, crude and restrictive and would further constrict our payment system already encumbered by systemic failures, fraud, poor institutional/regulatory framework, poor technology, poor logistic and others constraints. And that Nigerians prefer cash-and-carry economy despite its attendant drawbacks is because of the absence of a better alternative. And that preference for cash transactions is not the problem of the economy but a manifestation of an ingrained problem. And that an attempt to force-feed the people with it will lead to a much more problem as is always the case when you are focusing on the effect rather the cause of a problem. Cashless economy can only be achieved when credible substitutes are developed and made available. The generality of Nigerians have not bought into the cashless policy for obvious reasons.

The challenges associated with it are enormous for a mismanaged economy like ours with high indices of underdevelopment. There is the problem of network failure, fraud, debit without payment/reversals, the interminable time lag in reconciling unauthorized transactions by banks, non-availability of banking services in some remote locations, illiteracy, lack of financial inclusion and other socio-political challenges. Added to this is the fact that virtually every transaction you do online, you pay either with your money or with your data.
So, given this scenario, it is expected that the CBN authorities would first of all address these issues and prepare the enabling framework and the people would buy in naturally without coercion. We recall that there was a time when traders used to ferry money in Ghana-must-go bags across the country at the risk of armed robbery attack but that stopped naturally when online real time banking was introduced.

I believe that economic management and progress is not achieved by military decrees and executive fiats otherwise African economies would have been the best in the world. Economic progress is achieved by developing right institutions, creating enabling frameworks, engineering sound policies that will promote economic activities and optimal resource utilization.

Clearly, that Nigeria is still talking about cashless economy almost twelve years after Sanusi Lamido Sanusi raised so much dust about it shows that the program failed ab initio and should be consigned to where it belonged—the dust bin of failed policies. It proves that those who had the courage to criticize it then in spite of the Sanusi’s showboating posturing and media fireworks were right. Thus, that the current CBN regime is still harrying the nation with the ill-contrived cashless policy clearly exemplifies sheer absence of conceptual skills and lack of creativity in policy engineering. It goes further to show lack of grasp with the knowledge of the structure and problems of the economy that it is meant to manage.

Generally, one observed trend about central banking in Nigeria is the tendency to relegate development banking and other development issues and to think that central banking is just about supervision of commercial banks. Yes, central banking is majorly about monetary policy which is implemented mainly through the instrumentality of the commercial banks. But we live in an underdeveloped economy with over 60% unbanked and under-banked population according to World Bank report. Therefore, manipulating monetary aggregates in an economy like this without properly integrating this critical segment would be a hellacious task. I think the integration of the unbanked sector would have been the main policy thrust of the CBN. So rather than force-feed us with cashless policy thing, the CBN should be more concerned with establishing development banking structures, financial inclusion, financial literacy, empowerment of the critical rural and sub-urban sectors and bridging the gap between the rural and the urban areas etcetera.
During the era of Pa Joseph Sanusi (1999 – 2004), the CBN leadership seemed to exhibit little clue about managing the economy as the financial system witnessed the supervision of the banks on the pages of newspaper. There was no clear policy direction as the politicians blamed the banks for the woes of the economy. The highpoint of that era was an attempt to introduce the universal banking system.

When Prof. Chukwuma Soludo came, there was positive development as he aptly identified the challenges of the banking sector and introduced the Banking Consolidation Program to address the problem of inadequate capital. The increase in minimum capital requirement brought in recapitalization and mergers and acquisition that strengthen the banks. The Nigerian stock market driven by the banking stocks grew significantly. Banking services expanded and extended offshore to other countries. The banking sector became the highest employer of labor in the country. And with that came competition among the banks and with their universal banking license many of the banks veered into areas outside their core competencies…

And then came Sanusi Lamido Sanusi who came to implement what was seen as premeditated agenda of reversing the gains of the banking consolidation. During the Sanusi era Nigerians were assailed with the noise of phantom reforms that put the financial and banking sector in a state of topsy-turvy that regressed the economy. Sanusi era which is the worst in the history of central banking in Nigeria was characterized by contradictions, inconsistencies, policy mismatches and reversals and showmanship. Sanusi muddied the financial sector, vandalized the national economy with his ill-thought-out revanchist policies, scurrilous utterances and his hubristic cavalier attitude. Sanusi made so much noise about corporate governance and yet governed the CBN like a dictator. He doled out un-appropriated public funds without following due process. He sacked some bank MDs and EDs without recourse to the various boards and unilaterally appointed his cronies to superintend over the affairs of the banks and forced loan on them and finally liquidated them. He made so much noise about risk management but gave the banks the worst form of enterprise risk (reputational risk) by his unguarded utterances. Under Sanusi there was massive retrenchment of bank workers and “casualization” as employment policy was institutionalized and fraud increased in the sector by the employment of temps and today over 60% of bank employees are casuals. What Sanusi called reforms was the forced introduction of the Nigerian Uniform Bank Account Number (NUBAN), the implementation of the non-interest banking and the failed cashless policy.

Thus, it is not out of place to say that Emefiele, Sanusi’s successor inherited a banking sector imperiled by rash policies that it is yet to recover from. But with the coming of Emefiele, Nigerians expected something different given his pedigree but regrettably, apart from the growth of the agency banking that has created jobs and somewhat taken banking services closer to the people, there has not been any demonstrable evidence to show that the Emefiele’s regime is willing to do anything different. And that is why most Nigerians are flummoxed about the renewed hoof beats of the cashless economy humdrum. However, it is generally believed that the current CBN regime is constrained by the obnoxious policies of the present government. The first blunder it committed under the current regime was in 2015 when it temporarily banned people from making lodgments into their domiciliary accounts. The result was dollarization, capital flight and the decreased value of the Naira that it is yet to recover from. And again is the issue of unbridled creating of money by ways and means.

But, let us pause a little and ask: what is the renewed cashless policy meant to achieve? The CBN authorities told us that it will control inflation. But they know as much as many people know that the Nigeria inflationary pressure at present is not demand-pull or too much money chasing too few goods but supply-pushed even though there is a thin line between the two. The economy is contracting because of low productivity domestically occasioned by insecurity and mismanagement of state resources. Inflation is exacerbated by excessive borrowing by ways and means in the current regime. So the focus of the CBN should have been on how to boost local productivity by incentivizing the relevant critical sectors.

Also, it is said that the so-called cashless policy would control money laundry and that again is fallacious. While I do not dismiss the possibility of laundering money through cash transactions, I know that the volume of cash transaction is a trifle compared to what is done electronically. Granted, money transferred electronically can be traced but how come we still have high incidences of money laundry by our political elites?

Without doubt, the renewed CBN cashless policy would have tortured the poor more and not the rich that have multiple channels of carrying out financial transactions. The petty traders as well as key distributors of fast moving consumer products would have suffered more. And perhaps, the first victims of the Emefiele’s cashless economy would have been the POS operators, his greatest achievement as the CBN governor, who would have been swept out of business and the poor illiterate rural dwellers who are on the other side of the digital divide and not the elite as some erroneously believe.

Indeed, asking the people to pay 5% fee on deposit and withdrawal above a certain limit is akin to promoting fraud in an economy where business men and entrepreneurs are already complaining about indiscriminate charges from banks. CBN should develop policies that will make banks more able to play their role of financial intermediation rather than make phantom gains by ripping off depositors.

Gozie Irogboli
An economist, a novelist and a public policy analyst

Banking and finance