I was taken aback by the turbulent reactions that followed
the recent cashless directive by the CBN. My surprise stems from the fact that
the cashless agenda, including penalizing people for deposits, is not new. So,
this is not one of those things done by ‘this Buhari Government’. Eight years ago and specifically on 30/8/11
and 6/9/11, I reflected on this matter, when it was still on its infancy. A
year later, I also analysed developments on the subject matter. I had also done
two academic papers on the matter(2012 and 2018). I will therefore start with the common-sense
cash-back strategy, which I recommended to the CBN in 2011 and here it goes…
Before delving into the main issue, there are some
preliminary observations and clarifications. The first is that I must admit
that common sense is no longer common; indeed, it is the scarcest commodity in
Nigeria today. This is caused by our attempt to live foreign lives when we have
not mastered our traditional values so that we are neither local nor foreign.
We have thrown away everything we have in a bid to emulate what we don’t have
and now, we are between and betwixt; we are in a cultural limbo! That is why
common sense is very scarce. Secondly, cash-back is a marketing strategy when
the strategist is so sure of his offer that he guarantees to refund the
customer’s money if/when he/she is not satisfied. Thus, I am sure that the
strategy I am about to recommend will work; it is a sure-banker as they would
say. But since Governor Sanusi is not paying me for this unsolicited
consultancy, and I am not even sure he will heed my advice, there can be no
cash-back. Thirdly, the concept of cashlessness requires some serious
rethinking. We are using the concept in its Nigerian and everyday meaning
because its monetary and macroeconomic interpretations and implications are
something else. Even then, many
Nigerians are already cashless; not because they don’t want to hold cash or for
fear of Sanusi’: they don’t have the cash to hold. Some will suffer bouts of
cashlessness, but others are permanently cashless- due to acute poverty. Furthermore,
it is theoretically and practically impossible to have a cashless society. Mike
Lee, the CEO, World ATM Association, who is an interested party in this
cashless debate has said it all:
‘the cashless society is about as
a real possibility as a paperless office’. We should in effect be talking about
less-cash society.
Fourthly, banks and bankers are already punishing their
customers for doing business with them. My bank charges a penalty for any cash
withdrawal of less than N40000 and one very old generation bank had once
refused to give me my balance over the counter, insisting that I must use my
ATM for that purpose. Of course, I applied my Nigerian sense on them. For my
bank, I ensure that I don’t withdraw N40000; rather than leave some amount for
them and be punished, I withdraw everything. So when I need N50000 and my
balance is N80000, I ‘clean-up’ the
account. For the second bank, I quoted the laws and practices of banking from
the days of goldsmiths to the Sanusi era(I am a Fellow of the Chartered
Institute of Bankers!) and they hurriedly obliged! Anyway, what the CBN has
done is to endorse the oppressive KITA strategy (Kick in the arse) which the
banks have always deployed against their hapless customers. It is also important to stress that people
have used money for centuries and it will not be easy to just wish money away
and this is not just a Nigerian sentiment. Writing on ‘The New Cashless
Economy’ [E-Commerce Times, 24/3/97] Keith Regan listed ‘human habits and
traditional attachments to the idea of money’ as some of the impediments to cashless economy
Finally, I want to
state upfront that the CBN is engaging in a war that may be worthwhile but
which it cannot win. In an economy where the black market accounts for 70% of
activities, pushing for cashlessness is an effort in futility. We have black market forex; black market oil
exploration, refining and importing; black market(illegal) universities and
black market (Oluwole-minted) degrees , black market court injunctions and judgments, black market
subsidies (diverted to the rich) and black market governance all of which make
up black market(informal) economy! The simple fact is that cashlessness does
not jell with a black market (or informal) economy!..
While it is generally
believed that the objectives are worthwhile, there have been doubts as to the
efficacy of the policy as designed and fears that it may do more harm than
good. Indeed, an informed commentator has warned that we may end up with a
bank-less economy rather than a cashless economy! Only about 20% of Nigerians have access to
bank accounts; there is no trust in the environment and even those who do
genuine business rely on cash and given the average level of prices, N150000
appears grossly inadequate-even for petty traders. Some organizations spend
more than N1m daily on cash and carry labourers and there are those who make
unholy transactions who must pay cash. The punishment is also damn draconian;
it is twenty times the maximum COT charges in the Nigerian banking industry and
one begins to wonder why a customer should be severely punished for withdrawing
his own money!
Some Nigerians may comply but those who need the cash for
genuine or dirty purposes will adopt several options: split the cheque,
under-the-mattress-banking, multiple accounts and multiple banks ( after all, a
fraudulent fellow recently opened 30 accounts (yes, THIRTY!) despite the KYC),
compromise the process, or hold foreign currencies…
Before discussing other matters arising from that policy, let
me present my cash-back, common sense strategy. This strategy is based on
making it difficult-if not impossible- for people to carry cash around. To do
this, the CBN should simply withdraw the higher denominations of the Naira and
leave us to battle with the dirty smelly low-value denominations. The strategy should be gradually and quietly
implemented in this manner. In September 2011, the N1000 notes will quietly
disappear. In October, the N500 notes will follow suite; in November, N200
notes will disappear from the vaults and if recalcitrant Nigerians do not ‘behave’,
the N100 notes will also disappear in December, leaving only N50 notes. By
January 2012, the CBN should release the statistics and let us see how it goes.
When Nigerians need a container to carry N1m, then nobody will tell them to
look for alternatives to cash! Of course, I trust that Sanusi will not succumb
to pressure from the usual Big Men who would complain and protest. If this
strategy does not work, I will refund any amount that the CBN has paid for this
consultancy! ( Please there is no ‘Other matters’ this week; my apologies)
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