Financial Inclusion, Cashless Policy and Electronic Transaction Charges

Data from the World Poverty Clock shows that the number of people living in extreme poverty in Nigeria as of October 11, 2019 is about 94.5 million. As scary as the number is, more worrisome is the fact that the report also puts the current escape rate at -4.4 people per minute. This means on average, about four Nigerians become poor every minute!

Though poverty can be self-inflicted by one’s actions or inactions, a large chunk of it is milled out of bad government policies. In essence, government policies and programmes, especially as they affect access to quality education, healthcare services, availability of critical infrastructures, among others are the major determinants of the number of people that would slide in and out of poverty at any point in time. Successive governments in Nigeria have rolled out programmes after programmes with promises of changing the economic fortune of the country while lifting millions of citizens out of poverty. 

As it has always turned out, the country and her citizens are often worse off at the end of the day. Most of the programmes are often borne out of what is in it for the powers that be at the time of their initiation. Hence, they are not institutionalized, usually wrapped in corruption, and therefore lack continuity after plunging billions of naira into them.

Well, the crux of this piece is to examine the impact of the recent introduction and enforcement of fifty naira stamp duty for Point Of Sales (POS) transactions on the already impoverished masses and Micro, Small and Medium Enterprises (MSMEs). How would this affect both the cashless policy and financial inclusion drive?

I recall clearly that one of the cardinal objectives of the financial inclusion strategy, which is aimed at bringing as many people into the financial system as a way of taking them out of poverty, is to make financial services accessible to the excluded populace at a minimal cost. From my interactions with some merchants, as expected, they are looking for ways to pass the cost to their customers without having to lose market share. What did I hear you say?

Let’s have a look at what would play out between retail merchants, small scale (financial) service providers and their customers. For instance, a retail trader who bought an article for N900 and decides to sell at N1,000 and also wants to be compliant with cashless policy would have to contend with: merchant service charge (0.5% of the transaction amount, N5 in this case), N50 stamp duty, taxes from local government, shop rent, transportation cost and electricity bill. 

All these are supposed to come from the gross profit of N100 per article! Mind you, we are talking about a retail trader in a rural environment. Meanwhile, the trader has option of dealing in cash and ‘saving’ the N55 charge associated with the attempt to go cashless. Should the trader toe the path of cash based transactions to avoid stamp duty payment, it would be an obvious blow to the cashless drive. What if the merchant wants to pass the POS associated cost to the consumer? Assuming the buyer has no option, his purchasing power would be affected and consequently his living standard. But if the buyer has cash purchase alternative, he will certainly choose that. Still a knock to the cashless society pursuit. A friend said he would slow down on POS usage as much as the stamp duty charge persists.

In my opinion, this recently introduced N50 stamp duty charge for every POS transaction value for N1,000 and above, is at variance with both the cashless society and financial inclusion drive. To achieve the cashless society or financial inclusion objectives, the use of POS and other electronic means for financial transactions are supposed to be incentivized instead of being ‘punished’. If the N50 stamp duty as a means of revenue generation must be implemented on POS and other electronic transactions, the applicable threshold should be reviewed upward, say N10,000 and above.

Also, while it is important that government expands its revenue net, it is even more crucial that leakages in the existing revenue collection structures and in the application of the revenues generated are sufficiently plugged. If corruption right from revenue collections to civil service payroll fraud and inflated contracts are not tackled, no amount of tax increment would be enough to settle Nigeria’s debt obligations let alone build the much needed infrastructure. 

Thankfully, as one of my bosses, Chima Azubuike (a passionate man about data and technology driven governance) would say, “Internet of Things (IoT), Big Data Analytics, Machine Learning, Cloud Computing, Artificial Intelligence (AI), Blockchain Technology and Robotics are near convergence. This will deliver superior services to global population and streamline processes… Get ready!” and “What’s your experience with doing business with entities with zero integrity? 

Yes, I mean trustless people and companies? The wheel of the law is so slow and most times frosted in aberrations beyond sensibilities. Not to worry, we are approaching the dawn of SMART CONTRACTS. Self-executing agreements leveraging Blockchain Technology, where information and data decentralization will unmask dangerous patterns and profiles, so as to nip criminality in the bud”. However, my question is, will the current crops of politicians ever think of deploying such technology in governance?