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Tuesday, 28 February 2017

RE: CBN's Reintroduction of Charges on Cash Deposits - A Sad Commentary on CBN's Insensitivity to the Plight of Nigerian Consumers.

Press Release

Re: CBN's Reintroduction of Charges on Cash Deposits - A Sad Commentary on CBN's Insensitivity to the Plight of Nigerian Consumers.

1. Last week, the CBN released a directive to Deposit Money Banks (DMBs) to commence punitive charges on cash transactions as it rolls out its cashless policy nationwide starting March 1, 2017. Under this rehashed policy,individual transactions over N500k and corporate transactions in excess of N3m will attract varying percentages of penalties between 1-5%. CBN's explanation for this unpopular policy, touts this as its strategy to force consumers to go cashless.
2. While we applaud the CBN's efforts at encouraging a cashless economy, we are gravely concerned about the impact assessment of its implementation strategy, especially in a biting recession as consumers are currently experiencing. Any penalty charges levied on deposits or withdrawals especially within this period, is an extra burden on already overcharged and heavily exploited bank customers.
3. It is pertinent to note that an effective cashless economy requires seamless, real time, 24/7 functioning infrastructure which is currently not the case in Nigeria's experience. Consumers grapple with bank system shutdowns, non dispensing ATMs, frequent network failures, inadequate equipment deployment, significant e-frauds and poor customer service across the sector. Little wonder why some consumers still prefer cash transactions.
4. An effective cashless economy requires over 90% of the cash in the economy to circulate within the formal sector.  According to the National Bureau of Statistics in its 2015 GDP report, the informal sector of the Nigerian economy was about 41.1% which was about N38.7 trillion three years ago! CBN policies should thus be geared towards improving access and promoting inclusion; both of which the new directive negates.
5. There are many positive ways for CBN to achieve market compliance with its cashless policy that will add value to consumers, excite the market and generate willful and eager compliance. It is thus curious that CBN prefers to employ punitive measures that further alienates the market, impoverishes consumers and generates resistance to an otherwise beneficial policy
6. If CBN's genuine motive is truly to force compliance, the apex bank should explore incentives and not disincentives. Instead of penalizing cash transactions, why not introduce the same up to 5% interest to accounts that achieve minimum of 80% cashless transactions monthly? This will not only encourage existing customers to go cashless, it will attract a great percentage of cash circulating in the informal sector into the banking system thus improving statistics on access as well as deepening inclusion. Such an incentive will also improve liquidity and encourage savings, thus reducing cost of funds so banks can provide traditional banking services like loans to oil the economy.
Mrs Sola Salako, President, Consumer Advocacy Foundation of Nigeria (CAFON) Convener, #NoBankingDay
7. Excessive bank charges is one of the major reasons why many Nigerians still prefer to operate outside the formal sector. Punitive measures like these charges on cash transactions, rather than attract the over 40% cash in the informal sector into the banking system, has the potential of not only keeping them out, but also preventing new cash from coming into system. Why should any customer who runs a cash business be motivated to bring such to the bank when he will be penalized for cash lodgments?
8. The only beneficiaries of this punitive strategy are the deposit money banks and CBN itself as the circular indicated that both parties would be sharing the proceeds of this controversial penalty on a 60:40 ratio. This brings to question the real motive for the punitive charges; is it truly to force compliance or merely a cover up for CBN's collusion to aid deposit money banks in increasing their profits without offering commensurate traditional banking services?
9. CBN is aware of the deposit money banks' habitual tendencies of excessive and sometimes illegal charges on customer accounts. The apex bank's Consumer Protection Department (CPD) reportedly ordered DMBs to refund over N6 billion to aggrieved consumers in 2015 alone! In spite of the CPD's efforts, consumers are still daily exploited and overcharged for all kinds of spurious reasons which the apex bank is yet to effectively curb. Approving additional charges for cash movement is therefore tantamount to aiding deposit money banks to continue exploiting their customers for profit instead of providing banking services to support them like their counterparts do globally.
10. The fact that this policy was the outcome of the Bankers Committee's uncomfortable alliance with CBN increases the suspicion about the true motive of these punitive charges. It is mind boggling that CBN as the Regulator of deposit money banks, would take regulatory and policy decisions in conjunction with the regulated institutions! There is no greater proof of conflict of interest than this.
11. How would CBN expect DMBs to consent to any policy except that which will be in their pecuniary interests? Why would CBN share its regulatory functions with an anti- competitive body like the Bankers Committee, made up of the CEOs of all regulated institutions? At best, the Bankers Committee is no more than a trade association yet, CBN as apex regulator in that sector, chairs the 'trade association' and shares proceeds of regulatory policies with them! Wherein then, lies the primary responsibility of CBN which is to  act as government's bank, protect the interest of the citizens and regulate conduct in the financial sector?
12. How do you effectively and impartially regulate institutions you share profit with?
13. It is very ironic that the new CBN directive is scheduled to commence on March 1, 2017, exactly one year after consumers observed #NoBankingDay in protest of excessive and illegal banking charges. This is a sad commentary on CBN's insensitivity to the plight of millions of consumers who are victims of exploitation in the banking industry under its watch. Instead of assuming its expected role as  "Moses", the deliverer from unexplainable charges, CBN has rather assumed the role of the proverbial "Pharaoh" in the book of Exodus who added to the burden of Israelites.
14. It should be noted that the #NoBankingDay Protest 2017 was shelved this year in consideration of the harsh economic environment in order to avoid causing more damage to the economy. However, while Nigerian consumers have shown great sensitivity to government's effort to revive the economy, CBN has not shown commensurate concern to the plight of the Nigerian consumer.
15. Since it appears that consumers can no longer look to CBN to protect them from exploitation by DMBs, it may encourage more organized consumer resistance activisms until both CBN and DMBs recognize that even in the financial sector, the Customer must be King.
16. We therefore call on CBN to revisit this directive and adopt more consumer sensitive options in achieving its goals of stabilizing the Nigerian economy.


Sola Salako
Consumer Advocacy Foundation of Nigeria (CAFON)
Convener, #NoBankingDay
28th February 2017

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