CBN Cashless Society on the Nigeria Economy
The Central Bank of Nigeria (CBN) reason in the heedless pursuit of a cashless society is the belief that this will stop corruption in Nigeria.
This is a Western notion which we have embraced fully – bringing lots of jobs to the West – the computers, the dispensing machines, the chips, pin, cards, etc. In the process it has changed banking beyond recognition.
The bankers no longer want to see their clients: Their attitude is this: bring your money to the bank, but speak to the ATM. The rationale is fundamentally flawed in a developing economy.
The system – cashless – is presaged by an assumption that all of us have computer related devices – i.e. phones that we are literate, that the ATMs work, that there is electricity and that ATMs are available nation wide.
If you live in the cities, you may be able to do all of this; ( in Europe and US they even have receiving ATMs where the traders can actually deposit end of day sales, thus we have the beginning of making high street Banks irrelevant and unnecessary.) Bottom line is to reduce cost of banking and increase profit for bank owners.
The question we should ask our Western minders is this:- was corruption eradicated or reduced in their countries because their society was cashless? In Nigeria the outcome necessarily is mixed. In my village we have one bank, one ATM, no light therefore most of the time the ATM is not working. The traditional local bank manager is an encyclopedia of local custom, he knows who is coming up in society so that when CBN, for example, intervenes in agriculture the bank manager is able to interpret that intervention to potential clients who stand to benefit.
Such intervention in small scale agriculture may be the saving grace of Nigeria. But our suited CBN bureaucrats obviously have not created the agricultural intervention for the farmers but for a class of fast thinking, fast talking computer literate manipulators, who know how to fill the CBN forms without leaving Lagos, Ibadan, Kaduna, Kano, Maiduguri etc. These city sleek operators are the beneficiaries of nearly all CBN interventions whether for agriculture or transport etc.
No true farmer, fisherman, transporter can understand the jargon in these same form. That the money disappears once voted is due to collaboration between the sleek operators and the bankers. Now the CBN has moved into the Domiciliary Accounts area with predictable heavy handedness which will make its intervention fail. At first the banks announced that they would no longer take foreign exchange cash because their vaults are full, that Nigeria was awash with foreign bank notes which banks cannot take any more into their vaults.
If the vaults are full, then the logical answer is building more vaults. Surely all vaults of all the banks cannot be full at the same time, there would have been ways to continue to receive bank notes. Nations, and Governments, love secrecy but this is no time for the Government to be less than candid to its people, who are not fools and could smell a rat ten kilometers away. No Government which respects its people could tell such barefaced lies. When banks refuse currency it is because such currency is worthless or would very nearly be so, for example, the millions of Duetsmarks in Germany, just before the end of the world war ll.
When doubts were raised, we then began to hear the main reasons for the CBN directive – because the CBN now took the bull by the horn and directed that banks should no longer accept foreign bank notes for domiciliary accounts CBN officers hit the news outlets with the most implausible of nonsense I have heard for a long time: Naira is the legal tender; no nation sits by while its currency is substituted by another, and then finally directed legitimate business transactions could only be done through the old regime of form A, form M etc.
Only fools fail to learn from history. We have been through the regime of forms M, AI, A2 etc. That ordeal led to the cement armada and the 1975 coup etc. Moreover, much of the trade that is done by most people cannot be done under the regime of form M etc. A woman has US $10, 000 – flies off to Dubai to start her small business. A young man has US $10, 000 he flies off to Taiwan, China etc to get some spare parts for cars; others buy electronic goods or parts, still others – fridges, clothes, bras, pants etc, many more get off to Dubai with even less.
The tycoons of Alaba market, Ladipo markets, many Nnewi industrialist, the transporters – Chidi Ebere, Ekenedili Chukwu, The young shall grow etc – this was how they started. Many fashion and boutique houses employing thousands started this way. I remember seeing hundreds of Nigerian, spare parts dealers in Brazil, beginning what are to-day booming businesses. Are these the people carrying millions of dollars, Pounds etc into domiciliary accounts? No.
The banks have a policy of “know your customers” and have an army of marketers who go out canvassing for deposits; so the banks know those who have these massive domiciliary accounts. If they know, the CBN also knows; the present Governor left Zenith a short while ago and Zenith was a big bank. It must have had people with large domiciliary accounts into which more cash was paid. The Nigerian Government and State Governments must be large customers for cash usage and disbursements.
After all US $9.6 million was found in an aeroplane in South Africa on a government mission. Who has access to huge amount of cash? Prima facie that would be the Federal and state Governments and other agencies under them. These are the people CBN could have talked to and stop them from continuing to put our country in jeopardy by putting large sums into vaults; now too small to carry the money. A politician received US $650,000 from a businessman who testified to giving that politician this money in cash? What has happened?
The last election saw an unprecedented flow of foreign currency – who brought it, who used it? Does the CBN not know this? There is little purpose for a man to go to a sea shore and shout in the wind if he really has something to say and he knows who to say it to!! The vaults are not full. The circulation of large amount of foreign currency may affect the value of the Naira but that cannot be stopped merely by banning foreign bank notes. By the way, how much is this foreign bank notes slush?
How much is in the banks? Most of the round tripping done in Nigeria, as the CBN well knows, is not done via bank notes but via transfers from international oil companies, Embassies and other large international conglomerates by the form M the CBN now wishes to impose. Form M cannot stop round tripping. The issue of Naira stabilization is a market problem which the CBN knows how to handle and has been doing so for a long time.
The use of form M, Al etc are strict foreign exchange control mechanism to be imposed only at the most dire of economic problems: inability of the nation to meet it trade obligations. These measures will bring back the old nightmares of confirmed Letters of Credit (LC), then the unconfirmed LCs etc. It took Nigeria more than a decade to get out of this quagmire and ended only when Nigerians could legally operate domiciliary accounts
I think the CBN should ask the banks to talk to those large foreign notes depositors. Opening and operating a domiciliary account in the bank was itself not against the law. If the issue is to know the source of funds then say so but do not make up some nonsense merely, because the US has cracked the whip. The present CBN policy will start putting hundreds of thousands of Nigerians out of work.
Domiciliary accounts should continue to accept cash say up to $10,000 at a time. Larger amount could be accepted e.g. from duty free shops; other exception to the total ban – BTA returnees who did not spend all the money overseas; estacode receiving officers, diplomatic envoys etc.
I suspect that eventually domiciliary accounts will be subject to the interference of the West who assumes that all Nigerians are corrupt. This is a bit rich from the West who themselves over the years have benefited from moneys whose origin have been opaque; whole Governments, and Nations depended on deposits whose origin were unknown if not questionable, such countries as Switzer land, Virgin Islands, Jersey and Guernsey, Luxemburg, the Bahamas etc. China does not accept our ATM charge/ Debit cards. Was the 2008 world banking crash not largely due to corruption?
I cannot believe that CBN finding itself in a wonderful situation of the vaults of Nigeria’s banks being filed with domiciliary account, bank notes does not have the brain power to use this money to help the Nigerian economy, rather than employing the scare monger tactics now being used. If indeed, as it seem, the money came out of the CBN system, then it is unjust to allow the CBN to benefit from its negligence or malfeasance or even its lack of provenance.