CBN’s withdrawal policy and the doom it portends for fintechs, employment

Expectedly, rants have rented the air over Emefiele and his team’s latest monetary policy, and it is a development that needs to be examined from both sides of the coin.

The CBN governor, Godwin Emefiele, already said that the policy is to ensure that Nigeria is on the right path to digitisation and cashlessness while ensuring life gets easier for Nigerians.

Another mooted positive is that it will help curb the payment of ransom when it comes to kidnapping, as authorities can easily track digital payments. Since there can’t be huge withdrawals, kidnappers will have fewer options for collecting ransoms. Mobile app transfer will probably be the only option left, leaving a trail that can be monitored.

With these restrictions, the ultimate big winner is the Federal Government and its coffers. For anyone who wants to withdraw big over the counter, then you will pay a 5% charge. For an administration that has plunged the country into an abyss of debt, it desperately needs all the money it can get and the 5% appears to be a convenient clause that will leave many with no option but to bite.

Although trying to restrict the use of physical cash across the country to drive a cashless economy and handicap kidnappers is an understandable move, the timing and order are inappropriate.

Accusations are already flying against the police for extorting youths in cryptocurrency and other decentralised tenders. If there is an iota of truth to these allegations, what should one then expect from terrorist elements who regularly shame the nation’s security and communication frameworks, move weapons around, bomb trains and shoot down fighter jets? The CBN wants to try hard, but it’s our security agencies that should try harder.

Also, it is commendable to want to continue to push for a cashless economy, but the underlying issues of poor network coverage, rural exclusion, inter-bank settlement issues and mobile app malfunctions, among others, raise a valid argument that this is a policy at the end of the implementation of an effective web of systems, not before it.

Perhaps the biggest losers from this policy are fintechs and underemployed Nigerian youths. There are numerous fintechs whose niche is mobile money. Through PoS terminals, they serve underbanked Nigerians, provide employment to thousands of Nigerian youths, if not millions, and make banking services accessible. The success of the mobile money agency is such that even banks now have subsidiaries that explore it.

The tech space is already sore from layoffs, and when it badly needed a respite, the government brought out salt to rub upon its injury. A walk through any street in Lagos, Kano, Port Harcourt or Ilorin will show a glimpse of how many youths have been employed, albeit under, through mobile money banking.

Reducing the withdrawal limit over Point-of-Sale (PoS) from N200,000 to N20,000 means that the profitability of most businesses will be slashed by a whopping 90%. For startups in this area, it means that from January 2023, they can only make 10% of what they used to make off customers. The ripple effect is – you guessed it – layoffs. Startups in this sector will lay off workers because they can only make a tithe of what they used to.

PoS merchants will now need to find alternatives to their livelihood. Even banks will find no need for a large number of workers, given that you can only get N100,000 over the counter in a week. And Nigerian banks are notorious for being swift with the sword.

The National Bureau of Statistics is yet to release the unemployment statistics for 2022, and there are opinions that it is scared to because of the alarming situation. The bureau’s last estimate of unemployed Nigerians was 23.18 million (Q4 2020). One can bet that the number is already doubled and is about to triple in the coming months should the policy take effect.

For a government that has made several promises to make Nigeria the dream destination for investors, the ironic reality is that investors are in a hurry to leave. The tech sector is arguably Nigeria’s best performing, alongside entertainment, and it should be encouraged by enabling favourable policies and programmes.

Youths are going above and beyond to drive investment into the country through technologically-oriented solutions to our perennial challenges, but again, we see how one wave of policy threatens commendable efforts.

Godwin Emefiele continues to come under fire for his policies, policing and positioning. During his tenure, AbokiFX has been accused of sabotaging the economy, allegations of printing money without caution have been made, and presidential campaign banners were printed in his name.

The economy of Nigeria has never had it this worse, and this policy, for all the supposed positive intent, will not help this government’s rating.

Given that Meffy’s tenure ends in 2024, fintechs, mobile money merchants and youths employed in these spaces may need to fasten their seat belts. More will come where this came from.

**The views expressed in this article are that of the author and not of the organisation Business Insider Africa