Market News

Cash Squeeze: As Buhari Plays Pontius Pilate - INDEPENDENT

MARCH 20, 2023

  • Fears over job losses, poverty
  • ’Public confidence in banks dropping’

The fallouts of the ongoing controversial implementation of the naira redesign policy of the Central Bank of Nigeria (CBN) may reverse gains of Nigeria’s financial inclusion programmes.

The resultant cash crunch from the policy could also undermine confidence in the banking sector, as small savers and micro businesses revert to holding on to cash.

Increased reliance on banking apps and USSD platforms has negatively impacted bank performance, putting strain on the already unsteady infrastructure of digital banking.

While bank transfers often take longer than usual and failed transactions take up to 10 days to be resolved, network failures, higher traffic, and understaffing in critical information technology departments have continued to challenge the e-payment industry and reduce confidence in the banking system.

Most experts, who spoke on the implementation status of the naira redesign policy, expressed concerns over the negative fallouts of what they described as “poor implementation” of the policy, calling for more concerted efforts by the apex bank to address the crisis.    

A source at the Presidency, who plays a key role in banking, said the country may miss its much-touted financial inclusion target as many Nigerians have lost confidence in the banking system.

The CBN had set to achieve a 95 per cent financial inclusion target by 2024.

 “We will not reach the desired result of 80 per cent financial inclusion that we want on time.

“Small traders are a bit disenfranchised. Somebody that has N100,000 and below cannot get access to N20,000 for a week and they are petty traders how do you expect them to operate,” the source said.

The government official, however, assured that there would not be a run on the banks, following weakened deposits by average Nigerians and more withdrawals.

He noted: “If you have N1 million, you don’t have any option but to go the banks.”

The official dismissed suggestions that there would be staff layoffs as a fall out of the currency crisis. He believed that banks had made provisions for the crisis, arguing: “Once this cash crunch is over, the banks will reactivate redundant staff and departments to meet demand”.

 Prof Uche Uwaleke of Nasarawa State University said: “The major threat to the bankers now is also this cash crunch.

“The way the currency redesign has been implemented such that a lot of people are beginning to lose confidence in the banking sector. People will prefer to keep their money at home instead of taking them to the bank.

“You will notice that in recent times the level of cash deposits in the bank has dropped. Most people go to the bank for withdrawals and not deposits, and those who have cash prefer to sell them or take them to places where they can get money for them.

“When you have this type of situation, of course it may lead to banks having no need for some categories of staff. It’s not something I think will cause banks to begin to layoff because I see this as temporary.

“Now that the CBN has complied with the ruling, I am sure that with time this crisis will be over and banks will still need those staff so they may not really drop them.

“This is something I don’t expect to drag beyond December. Once the situation normalises there will be use for everybody in the banks again. So, the point am making is yes, the situation is threatening the confidence in the banking sector and making people keep money at home instead of the banks and defeating the process of this financial inclusion.

“CBN should try and avoid that by ensuring that more cash is pushed out. The cash withdrawal limit is eased, because as long as the limit is there, the scarcity will still remain and also ensure the situation gets normalised, otherwise some banks may be forced to close down some branches and that will mean laying off some staff.”

“But if banks know the situation will normalise soon, that expectation will not allow them lay off their staff except they see that it will linger and there won’t be hope then they will have no choice because at the end of the day it will affect their earnings and they will have to report to their shareholders.”

To ease the cash crunch and give the banks some breathing space, Uwaleke called on the Federal Government to consider paying in cash part of the salary for March for  civil servants.

According to him, one way the government could ease the cash crunch is to get the Minister of Finance and the Accountant-General of the Federation (AGF) to arrange for the payment of civil servants salaries for March in cash or a percentage of it just for this month, a one-off thing to make cash easily circulate to ease the crunch we are having.

“If the CBN is certain, there’s enough cash, the government should pay March salary or a percentage by cash to civil servants,’’ he added.

Managing Director, Mr Gbolade Idakolo, SD&D Capital Management Limited said the resultant effect of cashless policy would lead to job losses but the timing of the massive job loss is what had not been determined.

According to him, with recent events, it could be a matter of months before we start seeing massive layoffs in the banking sector.

Idakolo believes: “The efficiency of new financial services companies will also have negative implications for banks because these services will be encroaching into their traditional business areas which they have not efficiently served their customers.

“I think bank staff should brace for these eventualities and have contingency plans in case of layoffs. The staff in the banking sector should also be prepared to seek employment in financial related environments where their services would be needed.”

Also, increasing adoption of cash-less banking may have difficult implications for the teller jobs in banks and operators of the Banks Neutral Cash Hubs.

In many of the banks’ branches, the bulk room tellers have little or nothing to do on daly basis.

Many of them have been re-assigned to marketing customer service units, where they will add more value to the banks.

A financial sector status report stated that the new development could lead to the scrapping of teller jobs in the next three years.

Already, banks are cutting bulk teller jobs, and limiting cash handling to one or two tellers at every branch.

In a report entitled: Repositioning for Relevance in a Competitive Environment former president, Chartered Institute of Bankers of Nigeria (CIBN), Uche Olowu, said the business model of the banks was being challenged by technology.

He said Artificial Intelligence (AI) and Robotics are changing the game in customer relationships and front office operations.

He said jobs previously reserved for officers such as tellers might become obsolete, adding that in the next three years, machines would be perform approximately 30 per cent of bank work.

He said in recent years, banks have gone from investing in branches or other brick and mortar establishments to greater investments in financial technology (Fintech) and specialised human capital.

Speaking on the rise of e-payment, Co-founder and Chief Executive Officer, Grey Inc, Idorenyin Obon, said the company takes major steps to ensure transaction integrity and protect customer’s transactions.

“At Grey, we are very mindful of legal and regulatory rules regarding our products and services. This is why we have a highly-competent compliance and legal team that conduct rigorous checks to ensure we remain compliant with the laws in each country.

“Definitely. We are registered and regulated by FINTRAC and FinCEN. Though we are a fintech company, not a bank, our banking services are provided in collaboration with licensed banking partners who are also subject to all of the appropriate regulatory bodies in their countries,” Obon said.

He added that the Covid-19 pandemic also helped to boost e-payment acceptance.

“I like to think that the year of the pandemic was significant for us. We realized we could go beyond what we believed was possible during this year. Grey was established the same year the pandemic began, so it’s been an incredibly fruitful opportunity for us,” Obon said.


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