By Obinna Chima

Unless the move by the Central Bank of Nigeria (CBN) to reduce the dominance of cash in the system is embraced, the cost of managing cash in the Nigerian economy may increase to N192 billion by 2012.

Deputy Director, Currency Operations, CBN, Mr. Albert Ikmseedun, made this disclosure at a sensitisation programme on the proposed cashless economy policy for the Muslim community in Lagos.

Ikmseedun also said the cost of managing cash by the apex bank and commercial banks in the country stood at N114.5 billion as at 2009.

He insisted that the cost of cash to the country’s financial system was high and increasing
In fact, while he put the total cost spent on cash-in-transit as at 2009 at N27.3 billion, he said the amount for cash processing stood at N69 billion.

The CBN, in conjunction with the Bankers Committee had announced that the cashless policy would, which is expected to take off in some states by June next year, would commence in Lagos this December.

The regulator had disclosed its intention to limit the amount of cash withdrawal and deposit to N150, 000 for individual account and N1 million for corporate entities.

Ikmseedun emphasised that the policy did not mean that cash would no longer be in existence in the country, but that it was aimed at moderating the volume of cash in the system.

According to him, the disadvantages of transacting businesses with cash outweighed its advantages.

“Something drastic needs to be done, otherwise the cost of doing business by banks would continue to rise and it would continue to be passed on to customers.  CBN, in conjunction with the Banker’s committee embarked on a Shared Services program with three key objectives, including a drastic cost reduction of 30 per cent.

“Only 10 per cent of banks’ cash transactions are above N150, 000, but they make up 71 per cent of the value of cash transactions. About 90 per cent of Nigerians carry out transactions below N150, 000,” he added.

He cited robbery, high cost of processing cash, revenue leakages, inefficient treasury management, among others, as some of the reasons there was dominance of cash in the system.

“If there is reduced cash in the system, banks would be able to compete favourably. There are so many alternative payment systems in Nigeria which are even more convenient and safe, but people are not using them. With the improvement in communication in the country, there have been a lot of improvements in the payment system.

“Cashless Lagos does not mean there would not be cash in Lagos again, but it is an industry collaborative effort aimed at executing the payment transformation plan of the state. We are going to significantly increase the amount of Point of Sale (PoS) terminals in the state. We chose to start from Lagos because over 50 per cent of the money supply in the country ends up in this state. If it works here, then it can work in any other part of the country.” he explained.

The CBN official listed internet banking, mobile money system, direct debit system, as some of the other payment systems.

In his response, the Chief Iman of Lagos State, Alhaji Garuba Akinola, commended the banking sector watchdog for the initiative.

Source: This Day