I got a call sometime last week from one of my favorite account who wanted to tell me that she has just recently been promoted by her bank. As is often expected with such promotions she has now been hit with a new target of N200m every month in new accounts. To achieve that, you and I know what it will take for her to meet her target not just once but monthly. Her looks and finesse will definitely come in handy as she sways moneybags into opening accounts. Sadly, most times, nothing goes for nothing in this regards. Promotions are mostly as good as your last heavy cheque. She has no choice but to perform, she needs all the help she can get. She would prefer a force that can by default compel the moneybag to come to her without her having to use more than her brains.
Abu, is a trader and handles a business that involves movement of cash of about N10m daily, or N310m monthly. His business is a cash and carry one. He pays his sellers in cash and receives cash from his customers. His margin is about 0.6% (N66k) per N10m worth of transaction. After all cost, dues and cut backs his margin probably drops to N10k a day. Even at that it’s still N330k a month, enough to send to his family of 4 wives and 15kids in far away Kano. This business off course isn’t all rosy. Abu is constantly on a bike from one location to the other as he transports his merchandise to end users. One day he was tracked down by robbers who only out of sheer luck managed to spare his life. Since then a notable man with immense diabolic powers gives him some form of protection against the hazards of his job. That off course he says has repercussions as his libido may drop from it’s notorious highs in the future. Only a force can make his transaction cashless, with lesser risk and more protection than he is currently getting.
Priye, has just finished secondary school and came out tops in his class. This was after so much pressure considering that both his parents died before became an adult. He faces the stiffest test yet as his admission into the University is looking more like a nightmare than a dream come true. His fees, is more than all the plantain he sells to staff of Government House even if he sells for a whole year none stop. As he strolls grudgingly to his customers to get his money, he stumbles into a a group of people holed up in an open office with 5 sacks of “Ghana must go” deliberating on a sharing formular. Just as he tries to regain his bewildered state of mind, “Oga” works and ask why the money is taking so much time to count. Only a force can stop the Oga from stop this trend which as he learnt happened once every month. Just as the states get their monthly allocation.
That force may just be the The CBN cash policy. It is set to revolutionize banking in Nigeria and how money is moved across the various spectra of business. The policy set to kick off next year and limits individual cash withdrawals to N150k a day for individuals and N1m a day for corporates. Their “target” is to “by force” ensure that the estimated N1trillion outside the banking sector is netted. It’s a New regulation that has attracted divergent views from various parts if the country. People view it as a constitutional breach but forget that the same policy has existed in the movement of foreign exchange for years in Nigeria. It’s simple, if you want inhibited access to your money the do not use the banks at they fall under the purview of the CBN which like a GSM company can limit the amount of credit you can share from your phone even though it’s your money that funded it. Customers who withdraw above this limit face a penalty of N100 for every N1000.
For the trader he can’t possibly do without the bank as even if he doesn’t use it, his customers do. Bad business for him. He has no choice but to accept a wired transfer or a cheque. By default he is drawn into the banking sector as he faces a N1m charge everyday on his N10m. The account officer just like the bank, faces less pressure to target new customers. Rather than have the same money move from one bank to the other, they suddenly have cash coming their way be default. They only now need to concentrate on improving their brand, ensuring effective customer service and looking for ways to help the trader grow his business. The trader suddenly realizes there is a lot more he can do with his money and other people’s money. Even his margin increases and his libido is in no danger of shrinking.
The shock the plantain seller got may well be his last. The Government House Staffs won’t be needing the “Ghana Must Go bags”. They probably will just wire the funds to a proxy account and from there to another and then to another. The risk determines the amount transferable and as such a deterrent is set by default. He can’t afford to leave traces, especially as banks are mandated to report transfers over N1m. Interpol jus like the EFCC also has an interest in such transfers. The corruption chain is probably not erased as people will device new means to beat the system, but it’s definitely taken a hit. In fact the more it is wired the more it remains in the banking system.
As for Nigeria as a macro-economic entity the effect is widespread. Banks awash with cash have no choice but to expand their loan books. Interest rates will crash and cost of doing business will certainly reduce. Banks can now give a mortgage for 30 years and not the paltry 5-10 they occasionally give. The government will come up with all sorts of schemes which I am sure will include Student loans. We can now afford quality education and don’t have to pay for it now. We pay for it when we start working.
I hardly agree with Sanusi but I’m in on this with him. I proposed this policy in one of my blogs some 2 years back and I am glad its going to happen. People abhor change, but celebrate it when it works. For me I will by default celebrate it.