Nigeria spends $5.1bn on cash management yearly —MasterCard

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