• Fri. Jun 9th, 2023

    Cashless Economy 3: Between India & Nigeria


    Mar 14, 2023

    By Bassey Ubong

    Has it been all bad news in India following the ‘demonetization’ policy which had a cashless economy as a goal? A verdict of no can be returned for two reasons. First, independent payment platforms, such as PayTM and GooglePay, among several others came on board to make small and bigger transactions easier than what commercial banks offered.

    With high level of reliability, millions of people latched on and the digital or financial technology (fintech) business blossomed to reduce the need for physical cash. 

    The RBI matched the moves by way of the establishment of a Unified Payment Interface (UPI) system. Along with related actions the system witnessed smooth operations and propelled India towards the top of the cashless economy.

    Well, the second reason came by way of a concept in Greek drama theory. The heavens intervened via “deux ex machina” to bring resolution to a cul de sac or closed end. COVID-19 flew in from China without invitation, forced people indoors, and made cash unattractive, because the viruses were feared had the capacity to spread through raw cash. 

    Cashless tools witnessed a spike from 2020 and life no longer remained the same, as folks in religious circles say.

    In Nigeria we are told the CBN tested the cashless policy waters way back in 2012, with Lagos as the guinea pig. 

    Given the success recorded at Lagos, the apex bank went further afield, but pulled back when it met resistance, because of the high level of under banking with the rural sector as the key. 

    But in 2022, the Bank, maybe with a political backdrop, tested a fast flowing stream with two feet. The result has gone into history books, which show Nigeria at the 2016 status of India. CBN had learned nothing from the Indian experience beyond the scramble to control an octopus out of control.

    In every crisis situation, someone or few groups benefit at the peril of many. Fast people with ATM terminals and with links to banks sell Naira like dollars. The last time I made effort, someone offered N600 if I input N1,000 into the terminal.

    Although several bank staff work at risk to their lives, some have smiled all the way to sister banks where they operate personal and business accounts.

    In an attempt to pay for a haircut for a period of two weeks, two barbers at Uyo requested for transfer, but through Opay. 

    I felt intrigued and tried my UBA internet platform. For the first time I observed a long list of payment outlets I had no idea existed. Microfinance Banks top the list, with mortgage banks and commercial bank fintech units as second.

    And, wait for it, I counted 37 strange platforms ready to receive money on behalf of their clients! The platforms issue debit cards, but I have no idea how the accounts are funded beyond transfers from commercial banks. 

    They work via apps available from the Play Store. Some are backed by foreign companies in various sectors, which means they can be relied upon at least till they disappoint themselves.

    A key issue if the private platforms will play a sizable part in the CBN drive for cashless economy will be the cost of android phones as well as ability of the populace to manipulate them as expected.  The phones are at present out of the reach of majority of Nigerians. Can the government get cheaper phones with same capabilities? 

    Nigerians should expect reliability given approval and registration of the platforms by CBN. At this stage, CBN should go on a publicity blitz to give confidence to potential users of the apps. The platforms may take the cashless policy to the expected plateau faster than forced moves such as cash lock up. 

    To leave public education to the operators will fail, because CBN has kept quiet to date about the destructive online loan platforms which circled the country for the past three or more years. The current platforms offer loans, which, for me, generates goose bumps.

    One thing begs the question: does the Central Bank of Nigeria have a Research Department? If it does, did the management of the bank task it with a pre-policy review to prepare for the launch? 

    Or the Department advised, but management played God? We may ask further, does CBN run an interface facility to promote inter-platform transactions? 

    At present, it takes hours to days to execute transfers. Has CBN assisted banks to upgrade their network capabilities? These are the horses which should have been ready and placed before the cart known as cashless policy.

    Currency will continue for decades to be at the centre of commerce worldwide. Coins are no longer used in Nigeria, but in developed countries they have their niche. As quoted in the first part of this post, in Britain an official campaign exists to sustain the existence of cash in the economy. 

    Public policy requires considerable time for preparation with analyses of the several implications and ramifications at the point of commencement.

    In manufacturing, market survey takes time and money and may determine the question of whether to proceed or to avoid.

    When practical, technical, and professional issues are placed in the political domain and worse, regarded as a vindictive tool, negative outcomes must be expected. Change of currency must be seen as an economic activity first and foremost.

    In India research shows that near 100% return of the cash in circulation. It will happen in Nigeria given Governor El-Rufai’s announcement to the people of his state, which the Supreme Court has affirmed.

    Citizens of all persuasions may be unable to reuse the old notes, but they will receive full value for their holdings. What would we have achieved after the loss of lives and businesses?

    For the future, all agencies of government as well as private businesses should make research a critical arm of their operations. Some agencies see staff of the Research Departments as part of archives where stubborn or lazy people are consigned.

    If CBN had listened to its Research Department, Nigerians would have been saved the disaster of the currency change episode.  Developed countries as a routine change currency in terms of denominations and looks, but these take place over periods and in ways which generate near zero dislocations in the system.  

    Nigeria has no reason to suffer for three years like India or wait for deux ex machina which came in 2020 anyway. We just need to learn from the mistake of others the way Japan does in technology development.  

    We hope CBN will escape the brand of being the Central Bank which ran the worst currency change exercise in world history and be recorded as such in the Guinness Book of World Records. 

    In the immediate future, the Bank can catalyse and fast forward the cashless scheme by publicity and actions to strengthen private payment platforms along with injection of some liquid cash into the economy – after March 11th of course.

    Permit a post-script by way of breaking news. Few banks paid upwards of N20,000 to individuals in old N1,000 denominations in some cities, but traders and service outlets rejected the money because CBN has kept mum. 

    This may be as a result of embarrassment, because it signals apparent failure of the principal flank of the offensive – need to disable corrupt and counterfeit currency.

    By December 31, 2023 as directed by the Supreme Court, 101% plus of the old Naira would be back in the banking system! 

    The one way out would be to make enough new notes available, but CBN says the country lacks the capacity to print enough. India fared better with a statistic of 99.3%. So much for demonetization or currency change by two developing countries, one in Asia, one in Africa.


    Dr Ubong, an educational administrator, writer and literary critic, lives in Uyo

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