Introduction
Let me thank the entire staff and management of the CBN for championing this initiative at improving the efficiency of the payment system in Nigeria. I am confident that with feedbacks from the Lagos pilot, the programme will get improved over time. But as a measure of initial feedback and in order to help the CBN in the improvement agenda of the Nigerian payment system, I have made the decision to send you these few lines to buttress why deposits into bank accounts should not be subject to additional cash-less charges.
The Perspectives
1. Charging the same money twice – double jeopardy
By charging deposits into bank accounts, the CBN is charging the same money twice because it is the same money supply that people withdraw from the banking system that finds its way back into various bank accounts through the trade mechanism. And while people’s withdrawal above certain limit is rightly charged in order to discourage withdrawal of cash, it amounts to double jeopardy to charge the same money again when the money is finding its way into the banking system. I would rather the CBN encourage the almost 70% of un-banked Nigerian population into the formal banking system with incentives (not necessarily monetary) instead of penalising them with charges. The charges on deposit have the negative effects of discouraging the un-banked segment of the Nigerian population while putting more burdens on the already banked segment, which I am sure, is not the intention of the CBN. When people are allowed to deposit cash into their accounts free of additional cash-less charges, it means the cash is now within the banking system and that withdrawal limit charges will influence behaviours of such heavy users to withdraw cash from their bank accounts as they are in the net already. Discouraging cash deposit with penalties will have opposite effects.
2. Who creates heavy cash for the big cash depositors?
I have heard argument of discouraging heavy cash users through the penalties regime but it is pertinent to have a critical look at why and how the heavy cash users get the heavy cash in the first place. Do these heavy users get the heavy cash by printing money by themselves (an exclusive preserve of the CBN) or do they get the heavy cash because their customers pay them in cash? I want to believe the latter is the case. And if that is correct, it is safe to say that punishing them with cash-less deposit charges for the actions of their customers over which they have little or no control at all cannot be fair/right. Probably those heavy cash users are businesses, and how will that affect their businesses and in order not to incur the new cash-less deposit charges, if they decide to force their customers who wants to spend their cash to pay for their goods/services in a particular way? Can those businesses really force their customers to spend in a particular way without losing their customers/patronage? As business persons, won’t we rather serve our customers (whether they bring cash or card) first before encouraging them in subtle ways (not forcing them) to use electronic payment given that it is not a crime to spend cash if they want to?
I know we all have responsibility to help the cash-less policy but won’t it be more business-like for CBN to help those big cash users help CBN in their cash-less policy without any slightest chance of those businesses losing their customers/patronage?
Honestly and as a business man, I will be angry if hundreds of customers are on the queue in my shop to buy my products with their legitimate cash and CBN is telling me I have to be prepared to pay cash-less deposit charges if I must sell to my queuing customers? That would not be right at all! Would it? That’s exactly what CBN is asking of those big cash users.
It matters less whether the percentage of those heavy cash users is 10% or 90% or 1%. What matters is that they are paying cash-less deposit charges for actions of their customers over which they have little or no control but only limited influence. Would that action of the CBN constitute fairness and encourage trade? I am not sure. We should remember customers have the right/discretion to determine whether they spend their money in cash or cheque or electronically. And when small amounts of say N1000 cash is spent by 200 customers, the business is liable to deposit charge already, and no matter how small the charges may be it is still a charge nevertheless. The alternative is to turn customers’ away daily once 150 customers are reached? I am certain again this cannot be the intention of the CBN in the discharge of its statutory responsibility.
3. The need for the philosophy to encourage rather than force, through penalties
The philosophy behind every policy determines other variables like tools, strategies and tactics. And I am of the opinion that the CBN should have a look at the philosophy of using penalties on deposits to ensure compliance. A look at the CSCS indicates a philosophy of encouragement with the complete absence of CSCS fees on share certificate deposit and purchase of shares using CSCS account. It only makes more sense for CSCS to charge fees when shareholders sells their holding instead of when buying because all shares bought and brought into CSCS account will eventually be sold anyway, one way or the other, and fall under the CSCS fee harmer.
4. CSCS Examples
It is pertinent to mention here that CSCS principle and cash-less policy have the same in common; efficiency. The former in share dealings and the latter in payment system. And the charging system for the CSCS will be of help in resolving some of the issues surrounding charging of deposits into bank accounts. It is worthy of note that CSCS Fees of 1% of consideration is only payable when an individual sells shares in his/her CSCS accounts. CSCS fees are not payable when validating/depositing share certificates in CSCS accounts. Neither are the fees payables when buying new set of shares using CSCS account. Charging CSCS fees when depositing share certificate into or buying new shares with CSCS accounts would have affected its embrace and been akin to charging to pay money into bank accounts, which is the impression the charging regime for the cash-less policy suggests. In fact some brokers were charging illegal fees to validate share certificate into CSCS accounts in order to meet the deadlines of 31 December 2008 but the intervention of SEC (the regulator) put paid to that by removing the deadline and warning that brokers should desist from the illegality. But to my surprise the CBN has included deposits in the penalty net and in my humble opinion; this should not be the case.
Conclusion
I am of the view that including deposits within the net of cash-less charges does more harm than good to the bigger picture of the responsibility of the CBN in encouraging trade and making business dealings easier.
I would therefore suggest that the CBN should devise a way of excluding deposits into bank accounts from the new cash-less policy charges in the interest of all stakeholders including the CBN itself
Warm regards
31 Dec 2011, at 07:05
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