After almost 10 years of policy execution the latest information is that there is no end to cash remaining dominant part of financial transactions, not only in Nigeria but across the world.
Consequently, cash management in Nigeria should become a major part of monetary policy actions in line with global best practices.
In this interview, Charles Nwodo Jnr, the Chairman of Integrated Cash Management Services Limited, (ICMS), Nigeria’s leading cash management organisation gives more insight into the value chain and the challenges.
What services does ICMS render?
The cash industry in Nigeria is relatively new and therefore just evolving and the CBN deserves credit for this development which aligns Nigeria with global best practice in currency operations.
What we call the cash industry was part of what used to be called Branch and Currency Operations until it was excised and made a full Department of Currency Operations as part of the strategic and continuous efforts of the CBN to modernize the Nigeria Financial Industry.
This move was both in recognition of the importance of cash and also to give vent and expression to the need to attract investments into the nascent cash industry.
The cash industry ecosystem is made up of cash-in-transit (CIT) companies, of which there are nine licensed companies and two cash processing companies of which ICMS is one.
The CIT companies essentially distribute cash from point to point, city to city, bank branch to bank branch, bank branch to CBN and retailers to banks etc .
Before the CBN licencing, Nigerian banks used to distribute cash themselves, using their own vehicles mostly regular Pick Up trucks that exposed the passengers and the cargo to armed robbery attacks that were rampant.
CASHLESS ECONOMY: Cash is going nowhere – ICMS boss
Similarly most banks processed their own cash and in doing so the banks operated according to no standards in terms of CIT and Cash processing operations and were answerable to no authority since they were licenced to provide banking services and not cash handling services.
So you could say that there was total chaos and disorder before and this must have informed the CBN action to give effect to the creation of a regulated cash management sub sector under the Currency Operations Department of the CBN.
By licensing ICMS and the other operators the CBN has a responsibility to engender a conducive operating environment for the licencees to avoid the past trends where operators in this sector folded up due to poor operating environment and hostile regulatory disposition.
For example, the CBN has rolled out policies and operating guidelines that expressly disallow banks from distributing and processing their own cash or apply to be licenced as such if they wish to operate these services.
But, the CBN has not been able or willing to enforce this policy as we still have several banks distributing cash with poorly equipped vehicles and processing their own cash. This is one of the challenges we are having to contend with as an industry.
The cash industry value chain is made up of the following players; the retailers that generate a lot of cash, such as Shoprite, petrol stations, Spar, markets, gambling casinos, churches and mosques. And of course you have the CIT companies and Cash Processing companies, Banks and then the CBN.
Today, part of the challenge we face is persuading the CBN to enforce its own guidelines. What that has done is that it has created a situation where certain practices that are against official policies and guidelines and even our country’s laws are continuing unchecked. Some of these practices are the spraying of money at events, as well as hawking of new naira notes openly. Nigeria is the only country where such happens.
Now, there is a CBN policy that prohibits banks from issuing notes that have not been processed. The reason is because if they are not processed, the state of the notes cannot be determined. If they are not processed, you don’t even know whether they are counterfeits. If they are not processed, they continue to be recycled with the implication of rapidly polluting the rest of the notes that are fit for circulation.