ON
the back of recently rebased Gross Domestic Product (GDP), a study by
US-based financial payment solutions firm, Mastercard, has revealed that
Nigeria spends an estimated $5.1 billion (N800bn) yearly on printing
and handling cash.
The
study explains that countries across the globe spend an average of 1
percent of their GDP yearly to fund minting of currency notes and
logistics involving handling, processing and shipment.
“MasterCard
advisers have done studies in many countries and found out that the
cost of cash to an economy is about one per cent of the country’s GDP,”
Ventures Africa quoted Mrs Omokehinde Ojomuyide, Vice President, West
Africa, MasterCard as having said.
“The studies show that countries spend from 0.5 to 1.5 per cent of their GDP,” she said.
This
implies that Africa’s largest economy, following the recently devised
GDP figures of $510 billion, spends an average of $5.1 billion annually
on cash logistics, as $5.1 billion represents 1 per cent of GDP.
This
revelation underscores the need to devise strategies of reducing cost
of cash, an area where recently implemented cashless policy becomes even
more critical.
The
Central Bank of Nigeria (CBN), in January 2012, launched the innovative
cash-less policy, with Lagos – the country’s commercial hub – its kick
off base. The policy sought to limit the amount of daily cash handling
in circulation by increasing charges on daily withdrawals and deposits
that exceeded N500,000 ($3,000) for individuals and N3 million ($18,600)
for corporate bodies, encouraging individuals to rather patronise
electronic forms of payment.
While
several socio-economic reasons were listed for the need to reduce cash
in circulation, including insecurity and the high risk of moving hard
currency and maintaining economic stability by controlling inflation,
the most critical point was reducing the cost of minting and circulating
adequate cash across the country.
“I
believe that is the discussion the CBN had some years ago and started
pushing the cashless policy. There is a reason to the cashless
initiative,” added Ojomuyide. “And the reason is simple. It is because
the government has done the numbers and realised that there is a cost to
cash, and it is only when you realise that there is a cost to cash that
this conversation that we call cashless can start”, she stated.
According
to Ojumuyide, “that is what is motivating their policies. You see them
bringing out policies to reduce cash, make Point of Sale (PoS) work, and
if you deposit above X amount, you will get charged.”
Nigeria is set to deepen the cashless initiative’s reach mid-2014, with plans to expand offerings nationwide.
Courtesy: Nigeria Tribune
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