Demystifying CBN Response to Cashless Scheme Criticism - There is a WRONG way to do the RIGHT Thing


Saturday, 21 September 2019   /  03:37PM  / OpEd By Dr Charles Omole  / Header Image Credit: EcoGraphics


The CBN Governor gave a press briefing yesterday in which he defended the timing of his unpopular charge on Cash deposit policy and other punitive measure such as charge on Individual POS transaction as essential for Nigeria to meets its International obligations.


According to The Nation; Emefiele gave the strategic reason why the decision to reintroduce the charges was taken by saying: "This is a strategic timing of these actions because on Monday, September 23rd, the mutual evaluation by Inter-Governmental Action Group against Money Laundering in West Africa (GIABA) on the country's anti-money laundry and CFT regime will begin. Passing the mutual evaluation, positions Nigerian as a safe and credible destination for financial transaction across the world."


Emefiele added that "GIABA will be in Nigeria to assess the rate at which Nigeria has embraced anti-money laundry and CFT regime. It is important that we display and show to them that Nigeria is indeed in conformity with their practices as enshrined in their anti-money laundry and CFA laws. If we do not do what we are doing today, if they pass us negative, even your so-called cards that you carry abroad, you will not be able to use them."


On one hand, Emefiele is correct; but he is also wrong at the same time. Let me explain.


It is correct that if we are deemed Non-compliant by GIABA, it is not good for the country. But he is Incorrect to link the specific charges on Cash transactions measure he announced with the GIABA/FATF Assessment. There is nothing in the assessment framework that FORCES a country to impose charge on cash transactions the way the CBN has done.


It is clearly stated on its website that GIABA conducts Mutual Evaluations of Member States in accordance with FATF standards and also in compliance with its enabling Statutes. GIABA has adopted the FATF procedure in the evaluation of Member States.


The evaluated country is rated depending on the efficacy of measures put in place to detect, prevent or sanction cases of money laundering and terrorist financing. I agree Nigeria should be found compliant and over the past few years CBN and NFIU have done a lot of commendable work to move the nation in the right direction. So, I am not condemning CBN wholesomely. I am just not happy with the way the cashless policy specifically is being implemented. So, the blind defenders of CBN should chill, my concern is targeted.


The Criteria used in the FATF methodology is quite high level and adaptable by each country. On page 12 of its 176-page Methodology guide, FATF stated categorically as follows:


"Provided the FATF Recommendations are complied with, countries are entitled to implement the FATF Standards in a manner consistent with their national legislative and institutional systems, even though the methods by which compliance is achieved may differ."


So while reducing the money supply outside the banking system available for Terror Financing (TF) or Money Laundering (ML) is an aim; there is NOTHING in FATF or GIABA guidelines that says a Charge MUST be imposed on Cash Deposits or Withdrawals. It is left to each country to decide the best way to achieve the outcome.


So, CBN CHOSE this punitive way, it was not imposed on it. Since Carrot can work as effectively as Stick, why is CBN obsessed with Sticks all the time. Unless there is a hidden agenda to raise more revenue for the government and profits for the bank. Many suspects this may be the real motivation.


FATF acknowledge in its policy document that: "assessors should be aware that the legislative, institutional and supervisory framework for AML/CFT may differ from one country to the next."


Therefore, this is not a one size fits all exercise. Emefiele cannot hide under GIABA/FATF to make it look as though the CBN is being FORCED to take these specific measures. THAT IS NOT TRUE. It is the CBN's choice to choose these specific punitive measures to achieve an objective that could be achieved via other means. In my opinion, CBN's actions show a lack of creativity and deep thinking; unless there is a different agenda at work here. So, let this be clear; It is CBN's choice to use Sticks that will take money out of Nigerians pockets as the chosen tool. It has not been forced into doing any of these.


Also, for FATF assessment; There are FOUR possible levels of compliance:

1.       Compliant - There are no shortcomings

2.      Largely compliant - There are only minor shortcomings.

3.      Partially compliant - There are moderate shortcomings.

4.      Non-compliant - There are major shortcomings.


In exceptional circumstances, a Recommendation may also be rated as not applicable. It is not a simple pass or fail exercise as CBN try to make it look.


There are 40 Technical Compliance Ratings as well as 11 Effectiveness Ratings. The overall goal of the FATF assessment of countries is to ensure Countries understand its ML/TF risks, that there are National policies to address identified ML/TF risks with adequate Exemptions, enhanced and simplified measures. They also assess the activities of competent authorities in ensuring national coordination and cooperation. Finally, they assess Private sector's awareness of these risks.


Nothing in the entire Assessment and Methodology framework prescribes CHARGING Customers for Deposits or Withdrawal. That is a CBN Decision; pure and simple. It's like being given an objective to reduce the number of new babies in an overpopulated town. You can simply give free contraceptives & family planning to people and give other incentives if childbearing is staggered or delayed; thus reducing pregnancy rate. Or you can give orders for every new born baby to be executed. This may work but at a high human cost. So, while the objective is the same and we may all agree it is necessary; the methodology employed is equally important. You cannot use a desirable objective to justify any means employed to achieve it as the CBN is doing.


Now that the deliberate muddling of the waters by CBN has been exposed, how could they have gone about this exercise in a way that will also achieve the FATF objectives. While I agree with the objectives CBN is trying to achieve, I disagree with its TIMING and METHOD.


With the announcement of increase in VAT by 50% by FG, consumer spending will be depressed while inflation will go up in many sectors. This is not the right time for additional measures to be introduced that will further depress spending that is essential for economic growth. So, the timing is wrong in my view.


As for the method employed by the CBN, I would have loved to see Carrots used first and proven to have failed, before Sticks and punitive methods is deployed. With banks already charging customers all manner of fees with the acquiescence of the CBN, introducing more punitive measure against the customers is not only bad optics but bad preferred policy choice.




1.    CBN can work with Telcos to ensure greater mobile coverage across the country. States like Lagos and Ogun have many blackspot, much less other states with bigger rural settlements. Until the Infrastructure is there, no amount of punitive measure will effectively change habit. Whenever I go to America, I do not take cash because I know POS machine work all the time. If I try that when I am in Nigeria, I will be stranded very quickly as POS after POS fails to work due to signalling problem. Earlier this year POS machines failed on me at FIVE establishments in one day...all in Lagos. So, CBN should provide funding intervention support if needed to ensure a wide spread of availability of Signals. This alone will encourage more folks to use less cash.


2.   CBN can raise the Stamp Duty threshold to a much higher number. This will make electronic transfer free for many more transactions. The current plan of paying N50 plus VAT on N1,000 or more is too low. That captures almost 99% of bank transfers. A N10,000 threshold for example will see less people needed to collect cash as electronic transfer will be free.  If you want to pay FIVE people 2K each. That will cost you N250 plus VAT. That is a lot of charges. So, I will rather use cash to pay them.


3.   The incremental impact of these new charges is also alarming. CBN could have considered how to force banks to lower certain other fees and charges, while introducing these new ones in such a way that it will be cost neutral in its liability effect on many customers. But simply adding new charges on an already many unfair charges is insult upon injury and will be unbearable for many. This could depress consumer spending and cause the economy to contract.


With over 12 incentive-based policies in my notes; I have many more Carrot options for CBN to take, but I will stop here for now. I will send them my ideas if they ask for it. Otherwise, I may just be casting my pearls before swine, metaphorically speaking. The CBN Governor is doing a great job in many other areas of monetary policy, but when it comes to regulating commercial banks charges and fees to customers....he is failing in my view. And there is surely a wrong way to do the right thing. May God bless our Nigeria.


External Links for Further Information

1.       GIABA Link

2.       FATF Methodology & Assessment Document (176 Page Document):

3.       Guide To Bank Charges Circular To All Banks, OFIs And Mobile Payments Operators - 2017  


Other Relevant CBN Circulars

1.       CBN Issues Approvals-In-Principle To Three Payment Service Banks - Sep 18, 2019

2.      CBN Approves Charges On Withdrawals And Deposits; Unbundles Charges on Electronic Merchants - Sep 18, 2019

3.      CBN Amends Guide To Charges By Banks And Other Financial Institutions In Nigeria - Sep 10, 2019

4.      Guide To Bank Charges Circular To All Banks, OFIs And Mobile Payments Operators - 2017 - Apr 2017


About The Author

Dr. Charles Omole is a Lawyer, Strategist and Governance Expert. He can be reached via @DrCOmole


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