Further Clarifications on Cash-less Lagos Project

Cashless Policy

The Central Bank of Nigeria (CBN) has introduced a new policy on cash-based transactions which stipulates a ‘cash handling charge’ on daily cash withdrawals or cash deposits that exceed N500,000 for Individuals and N3,000,000 for Corporate bodies. The new policy on cash-based transactions (withdrawals & deposits) in banks, aims at reducing (NOT ELIMINATING) the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.)

Why the Cash Policy?

The new cash policy was introduced for a number of key reasons, including:

1. To drive development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. An efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth.
2. To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.
3. To improve the effectiveness of monetary policy in managing inflation and driving economic growth.

In addition, the cash policy aims to curb some of the negative consequences associated with the high usage of physical cash in the economy, including:

• High cost of cash: There is a high cost of cash along the value chain - from the CBN & the banks, to corporations and traders; everyone bears the high costs associated with volume cash handling.
• High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents.
• High subsidy: CBN analysis showed that only 10percent of daily banking transactions are above 150k, but the 10percent account for majority of the high value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10percent incur in terms of high cash usage.
• Informal Economy: High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth.
• Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.

Content of the Cash policy

The following aspects of the policy shall apply from January 1st 2012 in Lagos State (“tagged Cash-less Lagos”):

• Only CIT licensed companies shall be allowed to provide cash pick-up services. Banks will cease cash in transit lodgment services rendered to merchant-customers in Lagos State from December 31st 2011. Any Bank that continues to offer cash in transit lodgment services to merchants shall be sanctioned.
• 3rd party cheques above N150, 000 shall not be eligible for encashment over the counter. Value for such cheques shall be received through the clearing house.

The service charges/fees will not apply until March 30th, 2012, in order to give people time to migrate to electronic channels and experience the infrastructure that has been put in place. Therefore, banks should continue to encourage their customers to migrate to available electronic channels, and where possible demonstrate the costs that will accrue to those that continue to transact high volumes of cash from March 30th, 2012 in Lagos State.
In addition, below are some detailed context and pertinent clarifications on the policy:

• Location
  • The pilot shall be run in Lagos State.
• Account Application
  • The cash-policy applies to all accounts, including COLLECTION accounts. Banks should therefore work with their corporate customers to arrange for suitable e-collection options.
• Limits
  • The limits are cumulative daily limits each for withdrawal, and for deposits (e.g. for Individuals, the daily free withdrawal limit is N500,000; while the daily free deposit limit is N500,000)
  • The limits apply to the account so far as it involves cash, irrespective of channel (e.g. over the counter, ATM, 3rd party cheques encashed over the counter, etc) in which cash is withdrawn or deposited (e.g. if an individual withdraws N450,000 over the counter, and N150,000 from the ATM on the same day, the total amount withdrawn by the customer is N600,000, and the service charge will apply on N100,000 - the amount above the daily free limit). The limit also applies to cash brought through CIT companies, as the CIT company only serves as a means of transportation.
• Charges
  • The charges shall apply from March 30th 2012 in Lagos.
  • The service charge for daily cumulative deposits above the limit into an account shall be borne by the account holder. However, during the pilot in Lagos, individuals paying money from Lagos, into an account outside Lagos, shall bear the charges for any single transaction above the daily limit.
  • The service charge for daily withdrawals above the limit into an account shall be borne by the account holder.
• Interstate Transactions
  • Charges/fees shall apply for all transactions in Lagos, and on Lagos State based accounts.
  • Transactions initiated out of Lagos State, and affecting a Lagos based account shall not attract charges/fees, and shall not be counted as part of the daily cumulative amount on that account since the policy has not been activated outside Lagos. (E.g. A deposit above the limit made from Onitsha into a Lagos state account shall not attract charges/fees).
  • Transactions initiated from Lagos State, and affecting an account outside Lagos, shall attract charges/fees (when the specific transaction is above the limit), since the policy has been activated in Lagos. (E.g. A deposit made from Lagos State above the limit, into an account in Abuja, shall result in the initiator paying the relevant charges/fees, while the account into which it is paid outside Lagos shall not be impacted).

The policy will eventually be rolled out to other regions across the country from January 1st 2013. Please note that the policy does not prohibit withdrawals or deposits above the stipulated amounts, but that such transactions will be subject to cash handling charge.

Expected Benefits of the New Cash Policy

A variety of benefits are expected to be derived by various stakeholders from an increased utilization of e-payment systems. These include:

• For Consumers: Increased convenience; more service options; reduced risk of cash-related crimes; cheaper access to (out-of-branch) banking services and access to credit.
• For Corporations: Faster access to capital; reduced revenue leakage; and reduced cash handling costs.
• For Government:Increased tax collections; greater financial inclusion; increased economic development. Increased tax collections; greater financial inclusion; increased economic development.

Current Awareness/Engagement Status

The CBN has been running a set of targeted stakeholder engagement sessions as a first stage of its planned communication campaign. These have targeted key groups that will be most impacted by the cash policy, with the objective of creating awareness and providing an opportunity for them to raise issues and concerns. The stakeholders so far have included markets, associations, professional bodies, etc. These stakeholder sessions were concluded in November 2011. We are now implementing the phase 2 of the communication strategy, which is the Mass communication campaign, leveraging the inputs derived during the stakeholder sessions.

Sanusi to Jonathan: You can’t suspend the truth

Suspended CBN Governor, Lamido Sanusi

I have no  regrets;  I   have no ill-feelings  and with no sadness.  I’m happy; I’m proud of what I have done.”

These were the words of  Lamido Sanusi  as he reacted to his suspension  as the Central Bank of Nigeria governor by President Goodluck Jonathan on Thursday.

Although it was learnt that  he might  challenge his suspension in court, Sanusi  reminded the Jonathan administration: “You can suspend an individual but you can’t suspend the truth.”

Sanusi, who added that   his suspension did not bother him, said his  “biggest concern is for the system .”

He was  attending a meeting of the West African Central Bank Governors in  Niamey, Niger Republic when the Special Adviser to the President on Media and Publicity, Dr. Reuben Abati, announced his suspension.

Abati,  in a statement in Abuja,  said Jonathan  took the decision because  Sanusi’s tenure  had been  characterised by acts of financial recklessness and misconduct.

The presidential aide ,who claimed that such  acts  were  inconsistent with  the vision of the  Jonathan  administration, said the most senior  CBN deputy governor,   Dr. Sarah Alade,  would   act as the  governor  of the bank.

But  the President later sent the name of the Group Managing Director of Zenith Bank, Godwin Emefiele, to the Senate for confirmation as the  new CBN governor.

Abati said  that  Alade would remain in charge until  the  conclusion of ongoing investigations into breaching of enabling laws, due process and mandate of  the CBN levelled against Sanusi.

 Abati’s  statement reads, “Having taken special notice of reports of the Financial Reporting Council of Nigeria and other investigating bodies, which indicate clearly that Mallam  Sanusi’s tenure has been characterised by various acts of financial recklessness and misconduct which are inconsistent with the administration’s vision of a central bank propelled by the core values of focused economic management, prudence, transparency and financial discipline;

 “Being also deeply concerned about far-reaching irregularities  under Mallam Sanusi’s watch which have distracted the central bank  from the pursuit and achievement of its statutory mandate; and

 “Being determined to urgently re-position the  CBN  for greater efficiency, respect for due process and accountability, President   Jonathan has ordered the immediate suspension of Mallam   Sanusi from the Office of Governor of the CBN.

 “President Jonathan has further ordered that Mallam Sanusi should hand over to the most senior Deputy Governor of the CBN, Dr. Alade, who will serve as acting governor until the conclusion of ongoing investigations into breaches of enabling laws, due process and mandate of  the CBN.

“The President expects that as acting governor of the CBN she will focus on the core mandate of the bank and conduct its affairs with greater professionalism, prudence and propriety to restore domestic and international confidence in the country’s apex bank.

“The Federal Government  reassures all stakeholders in Nigeria’s financial and monetary system that this decision has been taken in absolute good faith, in the overall interest of the Nigerian economy and in accordance with our laws and due process.”

The  Senior Special Assistant to the President on Public Affairs, Dr. Doyin Okupe,  also  defended     Sanusi’s suspension saying it  was neither a witchhunt  nor a deviation from the anti-corruption drive  of the Jonathan administration.

 He  said  that there were several grievous issues bordering on impunity, incompetence, nonchallant attitude, fraud, wastefulness, and gross abuse of and noncompliance with provisions of the Public Procurement Act 2007 by   Sanusi.

 These, Okupe  said,   caused the   President to issue a 22-paragraph query to the suspended CBN governor on   May 4,  2013.

He  added that  a written explanation by  Sanusi   was forwarded to the President on May 22,  2013.

He  explained that   after painstaking analysis and examination, the response was forwarded to the Financial Reporting Council of Nigeria for further scrutiny and professional advice.

 The FRCN, according to  Okupe,   thereafter forwarded a 13-page response to  the President with various critical observations and far-reaching recommendations.

 One of the recommendations, according to him,  states thus: “ Your  Excellency (Jonathan) may wish to exercise the powers conferred   onyou by Section 11(2) (f) of the CBN Act 2007 or invoke Section 11 (2) (c) of the said Act and cause the governor and deputy governors to cease from holding office in the CBN.”

The section states  that  “a person shall not remain a Governor, Deputy Governor or Director of the Bank if he is; guilty of a serious misconduct in relation to his duties  or is removed by the President,provided that the removal (of the CBN governor)   shall be supported by two-thirds majority of the Senate praying that he be so removed.

 • I’m not surprised, says Sanusi

 But unfazed Sanusi, whose tenure would end in June,  said he was surprised that his suspension took  too long to come.

He also said he would challenge his suspension (in court).

“Well, I don’t know what they are talking about. … I don’t think there’s any issue that’s being raised that has not been raised before;  but you know we all know what this is about. This is about the consequences for the changes that I have made and this (suspension) is something that is long overdue. I’m surprised it took them so long,” he told the  CNBC Africa.

 “When I come back, I’ll see what those allegations are,” the Kano State-born banker  added.

He claimed that the Financial Reporting Council looked through CBN’s  audited accounts some time ago and asked a few questions which were sent to the President, who gave no feedback.

Highlighting  low inflation, stable exchange rate, a reformed and well governed banking system, robust reserves, financial inclusion and  independent central bank  as some of his achievements, Sanusi said  he hoped the CBN’s   integrity  would  be protected.

He said, “Basically, my biggest concern is for the system and I hope that the Nigerian economy will not be hurt by this. I also hope the integrity of the central bank will be protected … I’ve been fortunate to have had an opportunity to do some good work on the bank on stability. I would not want to see all of that unravelled and no individual is worth it.

“You can suspend an individual, but you can’t suspend the truth. If this is all about the concerns around oil revenues in the oil sector, if this is going to bring back the $20bn unremitted oil money,   then that is fine.”

Sanusi, in an interview he later  granted an online news portal, Sahara Reporters, said he considered the allegations against him “ridiculous.”

He said,” I have not seen the details of the allegations but some of what I’ve read is very ridiculous . The  CBN, as an institution,  will respond to all the allegations because we’ve always operated in line with the rule of law.

“A week ago for example, the NNPC(Nigerian National Petroleum Corporation),  came out on national television and agreed that they have spent $3.5bn on kerosene subsidy without appropriation. Nobody has called that financial recklessness but the CBN is audited every year.

“In fact,  we have just concluded the audit  for  2013. We are supposed to submit those accounts within two months of every financial year; we have a board meeting to approve the audited account on February 27, and to submit on February 28. This has been happening since I became  CBN  governor.

“The  NNPC has not been audited since 2005 and yet  nobody talks about financial recklessness in the corporation.  Since I became CBN governor, I have constantly reduced operating cost and increased operating surplus.

For instance, the year before I became governor in 2008, the CBN contributed N8bn to the federal budget. By 2012, I contributed N80bn.

‘This year, I’m contributing N159bn, that is 20  times what was being contributed. For me, this is not something that comes as a surprise, the President has asked me to resign and I refused.  I knew there was going to be a backlash. The important thing is that I don’t want to  present myself as the focus. The issue on  the ground is that between January 2012 and July 2013, there is $20bn that  the NNPC sold crude oil  and has not come back.   I am  questioning  the NNPC’s right to keep that. I will challenge  my  suspension not because I want to go back.

“I have  done everything expected of me;  I have written letters and I have given all the documents. This is $20bn in 19 months period; we  have  not even talked about 2011 and 2010. We have to be sure we know what we are saying. I think people should be more angry about theft happening.”

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