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BUSINESS: *The New CBN Cashless Policy *Insurance, You and the Nation

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The New CBN Cashless Policy

By Olaolu Bilau

After successfully com­pleting the phases 1 and 2 of the pilot project in six states namely: Lagos, Ogun , Abia, Anambra, Kano and Riv­ers including Abuja, Central Bank of Nigeria (CBN), finally rolled out its cashless policy in the 30 remaining states of the federation.

The policy which took effect from March 30, 2012 was introduced to reduce the amount of Naira notes and coins used for business. The Ni­gerian economy uses too much cash for business transactions particularly, buying and selling and according to the CBN, this practice is not in line with modern business trend which now employs alternative forms of payments including, Debit and Credit Cards, Bank Transfers, Bank Direct Debits, Automated Teller Machines (ATM) and Mobile Phone Money for commercial activities as against the heavy reliance on cash transactions.

Main Element of the Cashless Policy

The policy according to CBN does not restrict the amount of cash that an individual can withdraw or de­posit. It allows bank customers to withdraw or deposit any amount of money from or to their account.

However, if the cash transaction is done above the daily free total limit of N500, 000 and N3 million across all accounts owned by Individuals and corporate organizations respectively, they will charged 3% service fee of the amount withdrawn as an individ­ual or 5% as a corporate organization or 2% of the amount deposited as an individual and 3% as a corporate or­ganization over the limit.

But the 30 states where the policy takes effect on July 1, 2014 would enjoy a one-year waiver of charges on withdrawals above the stipulated limits as the application of the poli­cy would become effective by July 1, 2015. According to a statement signed by Isaac Okoroafor for CBNs Director of Communications, “ The waiver is to allow ample time for the deployment of adequate infrastruc­ture needed to support the policy, as well as additional sensitization of vari­ous stakeholders on the merits of the policy”, the statement said.

Its Benefits

The major thrust of the cashless policy was to reduce the use of cash while increasing the use of alternative forms of payment thus increasing

The volume of all available payment instruments in Nigeria. According to a statement released on its website, CBN stated that among other bene­fits, the policy would: “establish change in payments systems in Nigeria. This is very important for economic growth and ultimately attainment of the Ni­geria’s Vision 20:2020. It will reduce the huge costs of providing banking services as the money saved could be used to lend credit to Nigerians. The new policy would also help the Cen­tral Bank and commercial banks bet­ter manage the economy to ensure the Monetary Policy works.

Other benefits of the alternative forms of payment are convenience and safety – It saves customers from robbery, theft and cost of cash man­agement by reducing huge cost as­sociated with cash handling (print­ing, storing, processing, distributing, etc).

Risks of the policy

Despite its many inherent benefits, the new cashless policy has many risks associated with it. For exam­ple, there have been reported cases of ATM fraud in the past even be­fore the policy was introduced and some people are already express­ing concern about the capacity of stakeholders in the banking sector to protect customers who would be using the alternative payment options from fraudsters and cyber criminals.

But the CBN stated that all cards in Nigeria have adopted “the Chip and PIN technology which is more secured and has succeeded in reduc­ing the fraud level by 99%”. With Chip and PIN, the bank assured chances of fraud are reduced; provided the cus­tomer keeps his PIN secret. It said the Nigeria electronic Fraud Forum (NeFF), an industry anti-fraud initia­tive comprising banks, the Economic and Financial Crimes Commission (EFCC), Interswitch, NIMC, Valucard and many others meet monthly to deliberate on ways of making the na­tions e-payments more secured.

 

Insurance, You and the Nation

Insurance is a financial mechanism that mitigates the impact of a loss in a business. However, for anybody to enjoy the benefits of insurance, he or she must have paid the required premium. The paid premium must not be for any speculative motive but for a potential loss which must happen by chance not by design or arrangement.

Players in the insurance are four. We examined them last week and they are intermediaries (brokers and agents), underwriters, reinsurers, and loss adjust­ers.

Risk is the subject of insurance. Where there is no risk, there is no insurance. But not all risks are insurable. For a risk to be insurable, it must satisfy the following:

The loss must be measurable in monetary terms

There must be large number of similar or related risks

The risk cover must not be capable of leading to a profit for the insured as insurance is a business of indemnity

The loss must be accidental and not deliberate Reasonable premium should be chargeable

The insured must have insurable interest in the risk

The risk must be concrete and not speculative

The risk must not be fundamental as to the nature of our society like earthquake

The risk must be particular

The risk must not be against public interest

Benefits of Insurance to You

It mitigates your losses

It allows you to concentrate on your competency thereby making you to be more productive

It provides security to you

It saves man from being jettisoned on water if the ship over weighted as only goods will be jettisoned and insurance will pay for such goods

It compensates you if you have an accident and/or your dependants/family

Benefits of Insurance to Your Organisation

It compensates for losses out of fire, theft, engineer­ing, contractor all risks, marine, aviation, oil and gas, fleet, etc

The January 27, 2002 bomb blast in Lagos, Nige­ria could have sent many of your companies into oblivion but insurance paid them for their losses in order to remain in business and today they are still in business

It aids operations of other industries like banking, manufacturing, courier, telecommunications, etc. Do you know that no bank can operate without insur­ance cover? Or that no loan can be given by any bank without insurance cover?

Benefits of Insurance to the Society

Summation of the benefits to the individuals and companies are also benefits to the society

Maintenance of economic equilibrium for the society

Provision of supports to economic growth and development for the society

Providing avenues for investments especially through life assurance

Big roles in both the money and capital markets

It minimises capital flight through reinsurance

It earns foreign exchange for the economy espe­cially through reinsurance as insurance is a global business

It carries out corporate social responsibilities

It makes important contribution to the GDP

It is the only business that exists for the continued existence of other businesses

It ensures the being of humanity as no form of transportation can take place in the world without insurance.

Really, insurance is a way of life especially in ad­vanced countries. It is not surprising that even retail shops like Tesco, Sainbury’s and others in the UK encourages their customers to buy insurance. It is for this that no nation can grow above the level of its insurance growth. Nigeria should first seek the kingdom of economic prosperity through insurance and all the rest shall follow.

If I may ask: Do you have insurance policies asides from your car insurance? If yes, it is well with Nigeria.

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