Cash is King

The Story of Cashless

These last few months have been very demanding. I mean, we see shege on a steady, but this last quarter took the cake. Night and day, men, women and dogs queued for one thing: cash.

Although the Supreme Court has now weighed in, and the old notes continue to be valid until the end of the year, it is important to look at why Gov. E. was so keen to reduce the amount of cash in circulation.

Our journey doesn't begin in 2023; it begins in 2012 – the year of the Olympics and Wizkid's Ojuelegba – when the then apex governor, Oga SLS, introduced the cashless policy – a policy he had hoped would make more people use banks and reduce the cost of banking. He placed charges on cash deposits and withdrawals in excess of a certain threshold, forcing people to use ATMs for large-volume transactions. Essentially, he wanted to push more people to make online transactions.

The Real Cost of Cash

According to the World Bank, the CBN set us on the path to going cashless with the creation of the NIBSS Instant Payment (NIP,) the sixth-largest real-time payment system in the world. Why go cashless? For one, printing money is expensive. In 2020, the CBN reportedly spent ₦58.6 billion to print ₦1.1 trillion.

Essentially, the cost of printing Naira notes represented 5.5% of the value of the notes printed.

Furthermore, the apex bank delivered 2.5 billion individual notes in the same period, which means that it cost ₦23 to produce each note, on average. This was even less than the previous year due to an increase in online transactions as a result of COVID. Naira notes are then distributed to all the CBN branches across the 36 states and the FCT at a huge logistics cost. In 2020, it cost the apex bank ₦4.5 billion to distribute new notes; we are assuming this includes all the logistics and insurance involved. They also have to destroy old notes which cost the CBN N539 million in 2020 and N647 million in 2019. This cost does not include the banks' incur. With over 4,500 commercial bank branches across the country, distribution, insurance, security personnel and physical infrastructure costs add up.

Even Though

Who would have thought that this much money goes into enabling the use of physical cash? And yes, it's not necessarily wrong to spend money on printing. It's normal all over the world. The US spends 17 cents (₦8.20) on every $100 note and 13.3 cents (₦6.30) on every $50 note. The US dollar, today, is a standard for trade and is still cheaper to produce than the Nigerian naira. The British pound costs between 6 - 7 pence (₦33) to produce, according to the Bank of England. Of course, technology options are not exactly free. There is the cost of maintenance and initial infrastructure. Even today, transfers are not exactly fail-proof except if you are using OneBank (if we do say so ourselves); that needs to be sorted out if we are going to convince our people to go cashless.

With These Few Words of Mine

Evidently, we can't completely divest from cash transactions.; However, we must put in more effort to go cashless and drive digital transactions through lightning-fast innovation, infrastructural deployment and even more people-friendly policies e dakun!!!

Cash is expensive, but we all need to understand that the strength of money is less about how much of it is in our pockets, but in what it can be used for (oshey Ikorodu Adam Smith).

The End.