New Telegraph

December 8, 2023

Cashless Policy: Leveraging technology to detect, curb fraud

Given that the deployment of technology is generally touted as an effective strategy for combating corruption, Nigerians can expect to soon see a significant reduction in the high rate of criminal activities, such as advance fee fraud, graft and extortion, following the nationwide implementation of the Central Bank of Nigeria’s cashless policy, writes Tony Chukwunyem

In September last year, while speaking at the presentation of demo- hacking solutions by some innovators in Abuja, the Chairman of the Independent Corrupt Practices and Other Related Offences Commission (ICPC), Prof. Bolaji Owasanoye, stated that the deployment of technology is crucial to the fight against corruption and Illicit Financial Flows (IFFs). He said: “Technology is crucial to eliciting, analysing and preserving evidence for prosecution. In the past fifteen years, the government has generally invested in technology to fight corruption, especially by prevention. “The role of the Integrated Payroll and Personnel Information System (IPPIS), Government Integrated Financial Management System (GIFMIS), Treasury Single Account (TSA), Open Treasury Portal (OTP), establishment of Nigerian Financial Intelligence Unit (NFIU) and the private sector initiated Bank Verification Number (BVN) has contributed in no small way to reducing corruption.”

Curbing corruption

Indeed, when the Central Bank of Nigeria (CBN), in a circular dated April 20, 2011, announced its decision to introduce a cashless policy with effect from January 1, 2012, it gave a number of reasons for the move. These included: To drive development and modernisation of the country’s payment system in line with the Federal Government’s then Vision 2020 goal of being amongst the top 20 economies in the world by the year 2020; to reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach; to curb some of the negative consequences associated with the high usage of physical cash in the economy, such as, high cost of cash, high risk of using cash, high subsidy and inefficiency and corruption and to improve the effectiveness of monetary policy in managing inflation and driving economic growth. Owing to the need to allow banks deploy the technology that would enable the cashless policy to operate seamlessly, the CBN, however, implemented the programme in phases in different parts of the country. But while it was giving lenders sufficient time to invest adequately in their e-payment infrastructure, the apex bank also introduced other initiatives that help to promote the cashless policy, such as its launch of Africa’s first Central Bank Digital Currency (CBDC)-the eNaira- in October 2021. In fact, it was during his speech on the one year anniversary of the eNaira in October, that the Governor of the CBN, Mr. Godwin Emefiele, hinted that the regulator was set to unveil new initiatives that would ensure that Nigeria moves from being a predominantly cash economy to a predominantly cashless economy.

Naira redesign

The first of such initiatives was the announcement by Emefiele on October 26 that the CBN had obtained President Muhammadu Buhari’s approval to change the design of the old N200, N500 and N1,000 denominations. The CBN Governor, who said that the new currency notes would become legal tender as from December 15, 2022, explained that the move was aimed at addressing the increasing ease and risk of currency counterfeiting as well as the worsening shortage of clean and fit currency, with the attendant negative perception of the central bank. According to Emefiele, there was significant hoarding of naira notes by members of the public, with data showing that over 80 per cent of the currency in circulation was outside the vaults of the commercial banks. He disclosed that as of September 2022, a total of N3.2 trillion was in circulation, of which N2.73 trillion was outside the vaults of the banks, a development, he described as unacceptable. Also commenting on the naira redesign project when he appeared on a TV programme, a few days later, the Director, Monetary Policy Department at the CBN, Dr. Hassan Mahmud, noted that the policy was also an opportunity to get more Nigerians to embrace the regulator’s cashless policy. Mahmud said: “The transformation of the payment system landscape has been phenomenal so why waste those resources in technology and infrastructure that people are not using. So maybe this will be an opportunity for more adoption of those e-payment options because if you are not pushed to do something…, change is extremely difficult especially in our environment where literacy and education are a bit limited and there is that scepticism that ‘my money may get lost.’ But a lot of campaign and sensitisation has gone onboard.”

Withdrawal limit

To further boost compliance with the cashless policy, the CBN in December announced that full implementation of the policy nationwide would commence on January 9, 2023, with new cash withdrawal limits that barred individual bank customers from withdrawing more than N100,000 in cash over the counter, through ATMs or POS in a day. For corporate customers, the CBN announced a withdrawal limit N5 million per week, translating to N20 million per month. The regulator also placed a limit of N100,000 limit on over the counter third party cheques. “Third party cheques above N100,000 shall not be eligible for payment over the counter, while extant limits of N10,000,000 on clearing cheques still subsist,” it said. The CBN, however, stated that, in compelling circumstances where cash withdrawal above the limits is required for legitimate purposes, such requests will be subject to a processing fee of three per cent and five per cent for individuals and corporate organizations, respectively.

Reducing e-payment fraud

Reacting to some analysts’ views about having mixed feelings about the new withdrawal limits, Director, Payments System Management Department at the apex bank, Mr. Musa Jimoh, pointed out to journalists at the 2022 annual retreat of the Nigeria Electronic Fraud Forum (NeFF), held in December, that the restrictions would lead to a further drop in incidents of electronic payment (e-payment) fraud in the country. He noted that cybercriminals, after hacking bank customers’ accounts, usually go to Automated Teller Machines (ATMs) at an unholy hour to withdraw the stolen funds. According to him, the implementation of the new cash withdrawal limits would deter such fraudsters. He said: “We envisage that as we begin to put some limits on the cash withdrawal that can happen on a daily basis, incidents of fraud will also be trimmed down. This is because, currently, what the fraudsters do is that they steal huge amounts of money and then at about 2a.m., 3a.m., they go to an ATM and withdraw everything (they withdraw N500,00, or a million naira). With the cash limits, you will not be able to take that money. The system will be able to trace and block such accounts before the money is taken away. So, the cashless limit is also a way of deterring the fraudsters from taking away our money.” Jimoh, however, acknowledged that the apex bank in expecting that the cash withdrawal limits would compel members of the public to embrace e-payment, also believed that situation would tempt cyber criminals to want to target more victims. He disclosed that, it was in order to address this challenge that the NeFF resolved to intensify its sensitisation campaigns to prevent people from being deceived into giving out their sensitive bank account information to fraudsters. According to industry analysts, although increased adoption of e-payment by Nigerians will also likely mean an increase in the activities of fraudsters, the benefits of having a cashless economy outweigh the risk posed by criminals. As the Managing Director of JumiaPay, Nigeria, Mr. Adedamola Giwa, emphasised in a recent article, despite the challenges some Nigerians are facing with regard to the cashless policy, it is important to recognise that a lot of progress has been made with the adoption of digital payments over the last five years. He stated: “For instance, the number of Point of Sale (PoS) terminals rapidly increased from roughly 155,000 to 1.1 million between 2017 and April 2022 reflecting the growth in merchants and agent networks. According to the Nigeria Interbank Settlement System (NIBSS), the value of electronic transactions recorded under the NIP platform increased by 42 percent to N387 trillion in 2022 from N272 trillion recorded in 2021. “The growth in adoption can be attributed to greater awareness and understanding of online payments and how they work. In addition, the increasing availability of digital payment services – including peer-to-peer payments, mobile wallets, pointof- sale devices, and digital coins – proffers a plethora of options for businesses and customers, each promising transparency, efficiency, and convenience.” Also commenting on the benefits of a cashless economy, when she appeared before members of the National Assembly, the Deputy Governor, Financial System Stability Directorate, Mrs. Aishah Ahmad, stated: ‘‘The implementation of the cashless policy was a critical element that catalyzed the transformation being witnessed in the Nigerian financial and payments system.’’ She listed some of the key achievements of the policy to include: Expansion in financial access points (ATM, PoS, Agents and mCash); proliferation of e-payment platforms; growth in electronic channels adoption; enhancement financial inclusion; international recognition of Nigeria’s payment system and growth in vibrant fintech ecosystem; positive impact on GDP; and financial resilience of citizens during COVID-19.


However, the general consensus among analysts is that one of the main benefits of the cashless policy, especially as far as the man in the street is concerned, is that it would help individuals and businesses to enhance their financial efficiency and security by facilitating the detection and combating of fraud.

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