The Central Bank of Nigeria circulated a memo in February of last year (2017) calling for the implementation of cashless policies. This came as a shock to many in a country where mobile payment adoption rates have been lagging behind compared to other African counterparts.
The central bank suggested that fees be introduced on cash withdrawals and cash deposits. For individuals, these would have started at 1.5% on cash deposits of 500,000-1,000,000 Nigerian Naira ($1,390 USD – $2780 USD) and 2% for withdrawals of the same amount. The fees could have gone up to 7% for higher amounts. Corporate cash deposits and withdrawals would have been charged starting 3,000,000-10,000,000 Nigerian Naira ($8340 USD – $27,800 USD): 2% for deposits and 5% for withdrawals, reaching up to 10% for amounts greater than 40,000,000 Naira ($111,200 USD).
Thankfully, this policy was quickly retracted until further notice. It however offers food for thought about the way certain governments are going about enforcing cashlessness. Instead of carrying out consumer behavior studies and in-depth analyses of their country’s available infrastructure, many are too easily wooed into such policies by outsiders. While India, Rwanda and Nigeria are choosing to go down the road of enforcement without choice, there are countries like Sweden that are expressing their alarm at the current speed of change. What’s worth noticing, though, is that Sweden has been recording a shift in consumer behavior for over a decade in a country perfectly equipped to ensure a properly functioning digital payments system.
Although not clearly stated in India’s case (President Narendra Modi’s main motives for demonitisation were a fight on corruption and tax evasion), while more so in Rwanda’s (cashless leads to greater spending and more profit), one could wonder why Nigeria was that close to actually implementing such a radical policy. It could have had a devastating effect on the poor and the unbanked. Furthermore, despite aggressive marketing campaigns by mobile money operators, only 6 out of 10 Nigerians are aware of mobile money services and, of those that are aware, only 13% of them use them. How would imposing fees on cash services help these people feel better integrated into the financial system? And why was Nigeria so keen on implementing this policy?
The reply might as well lie in MasterCard’s involvement in the Nigerian Identity Card Program where people’s identities are expected to be linked to payments. Interestingly, MasterCard made social inclusion and the UN’s Sustainable Development Goals (SDGs) its top priorities in 2015. For a corporation that issued over 600 million cards worldwide and is present in 210 countries, social inclusion in cash-heavy regions can especially sound like the most effective way to sustain its growth ambitions for the future – more so than providing the most vulnerable echelons of society with free and easy-to-use payment tools.