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Driving Cashless Initiative in a Cash-based Economy



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  • Driving Cashless Initiative in a Cash-based Economy

The combined efforts of industry players in the financial and telecommunications sectors in driving the cashless initiative, are beginning to yield results, writes Emma Okonji

Although Nigeria is still regarded as a cash-based economy among comity of nations due to the volume of physical cash transactions carried out in the country on a daily basis, the cashless initiative introduced by the Central Bank of Nigeria in 2012, no doubt, is beginning to change the whole narrative.

More Nigerians are adopting the cashless drive that is fully supported by MasterCard, financial technology solution providers, banks the telecommunications operators.

The recently concluded Cashless Africa Expo, organised by MobileMoneyAfrica, which held in Lagos , where MasterCard was the headline sponsor, among other sponsors, highlighted the adoption growth rate of cashless initiative in Nigeria and across Africa despite the love for physical cash.

Adoption Rate

The cashless initiative by the CBN, beginning with a pilot scheme in Lagos, which was later extended to five other states and the federal capital in 2013 before the commencement of a nationwide cashless policy across the remaining states of federation. Since then the adoption of cashless transactions has improved, according to participants at the Cashless Africa Expo 2017, which held in Lagos to appraise cashless initiative in Nigeria and other African countries.

The conference, however, noted that most of the transactions were done through Automated Teller Machines (ATM), which still shows the use of physical cash handling by Nigerians.

Speaking on the adoption rate of cashless in Nigeria, the Vice President and Area Business Head, West Africa at MasterCard, Omokehinde Adebanjo said: “The adoption rate of cashless in Nigeria is quite impressive and we have seen that growth rate in our partners that use our technology solution that drives cashless.”

“At the Cashless Africa Expo, we are talking about FinTech and the banks and their drive towards financial inclusion. Digital is the way to achieve financial inclusion and we have all partnered to achieve this. What we have achieved in midst of the challenges, shows that cashless adoption has improved in Nigeria,” she said.

She explained that Africa currently records 83 per cent of mobile penetration across African countries, adding that the target is for Africa to gain 100 per cent mobile penetration in financial inclusion.

“We are looking at 100 per cent penetration because the growth is enormous. It means that telcos need to expand their network to accommodate more people and they should have better data coverage.

The MasterCard Drive Towards Cashless

According to MasterCard, two things motivated their interest to support cashless initiative in Nigeria and across Africa.

“Nigeria is driving cashless and MasterCard is interested in further driving it by sharing our knowledge and providing technology solutions and initiative that will further drive cashless across Africa nations

Again, digital payment is also key to us because it will enable financial inclusion, hence our synergy with partners,” she said.

According to Adebanjo, Mastercard remains focused on working with partners to develop a cashless Nigeria, “and we are working globally to achieve the same goal of a world beyond cash.”

“In order for us to develop a digital economy, for all citizens, we need to all get behind the shift towards digital solutions. It is well documented that digital payments such as those made using a mobile device is ensuring that easier, faster and more secure payment solutions are easily accessible to everyone.”

Digital Disruption

Speaking on digital disruption as the main driver of financial inclusion, the Principal Associate, MobileMoneyAfrica, Mr. Emmanuel Okoegwale said digital disruption is changing how traditional banking services, payments, remittances are now offered in the digital economy. According to him, almost all sectors of financial services including payments, money transfers, banking and more, is being re-imagined by non-traditional providers and FinTechs, while the traditional incumbent providers are reinventing themselves very quickly to understand better the puzzle presented by the FinTech and how they can leverage on the digital movement.

He said the Cashless Africa Expo 2017 was designed not only to highlight the challenges and opportunities in the FinTech space in Africa, but to also provide knowledge and networking platform that would bring the African FinTech industry at par with its counterparts across Africa.

Technology Gap

Speaking on technology gap, Adebanjo said: “Yes there is a gap period but it can be bridged just like the case of Kenya. We rolled out an initiative across Africa, beginning from Kenya and it is a pilot programme that supports farmers to sell their products on a market platform where the buyer and seller meet. We started with Kenya because we have our research laboratory in Kenya. The initiative was fully embraced because there was a gap. So with mobile phone, buyers and sellers can meet at the online market place, and the initiative is between farmers in the rural areas and the buyers in the urban areas.

We have other initiatives in agricultural environment and retailers and we are working with a lot of partners including FinTech.”

She said no country of the world has gone completely cashless, even the United States, has 50 per cent cashless and 50 per cent cash.

However, she said in Nigeria we still carry cash, noting that there is improvement in cashless.

She said MasterCard has impacted so much on cashless and would continue to invest so much in cashless initiative to meet our global vision of a world beyond cash.

Encouraging Cashless

The Cashless African Expo encouraged Nigerians and Africans to resist the use of cash and embrace the cashless drive that CBN is currently pushing.

Panelists at the Cashless African Expo said more households in Africa own a mobile phone than they have access to electricity or clean water and that nearly 70 per cent of the poorest fifth of the population in developing countries own a mobile phone.

They said the power of mobile transcends demographics, economic disparity, and location. It has proven to be a crucial tool for driving financial inclusion on the most financially excluded continent.

According to the World Bank, only 34 per cent of adults in sub-Saharan Africa have bank accounts. To put that into perspective, the global average is almost double that.

MasterCard key strategic priorities for the past few years have been driving the African digital revolution with the aim of building financially included societies.

According to Adebanjo, rising trend on the content is that of governments which are increasingly going digital, and a greater share of government jobs in developing countries is ICT-intensive than in the private sector.

By 2014, all 193 United Nations member states had national websites: 101 enabled citizens to create personal online accounts, 73 to file income taxes, and 60 to register a business. Unfortunately, developing countries have invested more in automating back-office, than in services directed at citizens and business.

ICT and Cashless

The Cashless African Expo forum was of the view that ICT is helping communities, especially the women in those communities, to create, innovate, and improve their economic and social outcomes, and would want to continue building on this tradition of success.

The forum said while exponential technologies might be the driving force behind the digital revolution, it is Africa’s most important resource – its people, especially the younger generation – who will determine the direction it will take.

Africa’s biggest challenge over the next five years will be how it will reconcile the demands of its strident youth, and their take on how to shape the post-colonial continent, in the face of established and entrenched power structures.

Awareness Creation

In a bid to create further awareness on cashless, the E-Payment Providers Association of Nigeria (E-PPAN) said it is set to embark on a massive national awareness campaign on the cashless Nigeria Initiative, just as the CBN, re-introduced the cash processing fees on deposits and withdrawals.

The awareness campaign will cut across 30 states of the federation as the cash processing fees takes effect in different states of the country. From April 1, 2017, the cash processing fees will take effect in the existing cashless states which are: Lagos, Ogun, Kano, Abia, Anambra, Rivers and Abuja. While in Bauchi, Bayelsa, Delta, Enugu, Gombe, Imo, Kaduna, Ondo, Osun and Plateau states, it will take effect on the May 1, 2017.

Edo, Kastina, Niger, Oyo, Adamawa, Akwa-Ibom, Ebonyi, Taraba and Nasarawa will begin the implementation of the cash processing fees from August 1 2017, while the last states to implement the cash processing fees on October 1, 2917, will be Borno, Benue, Ekiti, Cross River, Kebbi, Kogi, Yobe, Sokoto and Zamfara State.

CBN in partnership with E-PPAN has deemed it imperative to continue to sensitise the populace on the many benefits of the cashless initiative, which include easier opportunities for Micro, Small and Medium Enterprises (MSMEs) to access funds; reduction of government leakages; increased security; accountability and transparency; reduce cost of providing financial services and gradual reduction in conventional bank charges among others.

As the cashless initiative spreads across the country and the cash processing fess is being implemented, E-PPAN said it will also visit more states such as Katsina, Oyo, Ebonyi, Ekiti, Kogi and Cross River states. E-PPAN will engage one-on-one market traders and their customers, artisans, trade associations, schools, traditional rulers and other key influencers. This is to make sure that everyone is aware and enlightened on the policy and its benefits for greater adoption of electronic payment channels.

The Executive Secretary/CEO of E-PPAN, Mrs. Onajite Regha, who made the disclosure, stressed that one of the main reasons for the awareness campaign, is to make people embrace the alternative payment to cash. She listed the alternative electronic payment system as: mobile phone for mobile payments or banking; the Point-of Sales Terminal (POS), for payment of goods and services and the internet for online purchases or internet banking, among others.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Crude Oil

Oil Rises as Threat of Immediate Iran Supply Recedes




Oil prices rose on Tuesday, with Brent gaining for a fourth consecutive session, as the prospect of extra supply coming to the market soon from Iran faded with talks dragging on over the United States rejoining a nuclear agreement with Tehran.

Brent crude was up by 82 cents, or 1.13%, to $73.68 per barrel, having risen 0.2% on Monday. U.S. oil gained 91 cents, or 1.3%, to $71.79 a barrel, having slipped 3 cents in the previous session.

Indirect discussions between the United States and Iran, along with other parties to the 2015 deal on Tehran’s nuclear program, resumed on Saturday in Vienna and were described as “intense” by the European Union.

A U.S. return to the deal would pave the way for the lifting of sanctions on Iran that would allow the OPEC member to resume exports of crude.

It is “looking increasingly unlikely that we will see the U.S. rejoin the Iranian nuclear deal before the Iranian Presidential Elections later this week,” ING Economics said in a note.

Other members of the Organization of Petroleum Exporting Countries (OPEC) along with major producers including Russia — a group known as OPEC+ — have been withholding output to support prices amid the pandemic.

“Additional supply from OPEC+ will be needed over the second half of this year, with demand expected to continue its recovery,” ING said.

To meet rising demand, U.S. drillers are also increasing output.

U.S. crude production from seven major shale formations is forecast to rise by about 38,000 barrels per day (bpd) in July to around 7.8 million bpd, the highest since November, the U.S. Energy Information Administration said in its monthly outlook.

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Crude Oil

Oil Prices Rise as Demand Improves, Supplies Tighten



Oil Prices - Investors King

Oil prices rose on Monday, hitting their highest levels in more than two years supported by economic recovery and the prospect of fuel demand growth as vaccination campaigns in developed countries accelerate.

Brent was up 53 cents, or 0.7%, at $73.22 a barrel by 1050 GMT, its highest since May 2019.

U.S. West Texas Intermediate gained 44 cents, or 0.6%, to $71.35 a barrel, its highest since October 2018.

“The two leading crude markers are trading at (almost) two-and-a-half-year highs amid a potent bullish cocktail of demand optimism and OPEC+ supply cuts,” said Stephen Brennock of oil broker PVM.

“This backdrop of strengthening oil fundamentals have helped underpin heightened levels of trading activity.”

Motor vehicle traffic is returning to pre-pandemic levels in North America and much of Europe, and more planes are in the air as anti-coronavirus lockdowns and other restrictions are being eased, driving three weeks of increases for the oil benchmarks.

The mood was also buoyed by the G7 summit where the world’s wealthiest Western countries sought to project an image of cooperation on key issues such as recovery from the COVID-19 pandemic and the donation of 1 billion vaccine doses to poor nations.

“If the inoculation of the global population accelerates further, that could mean an even faster return of the demand that is still missing to meet pre-Covid levels,” said Rystad Energy analyst Louise Dickson.

The International Energy Agency (IEA) said on Friday that it expected global demand to return to pre-pandemic levels at the end of 2022, more quickly than previously anticipated.

IEA urged the Organization of the Petroleum Exporting Countries (OPEC) and allies, known as OPEC+, to increase output to meet the rising demand.

The OPEC+ group has been restraining production to support prices after the pandemic wiped out demand in 2020, maintaining strong compliance with agreed targets in May.

On the supply side, heavy maintenance seasons in Canada and the North Sea also helped prices stay high, Dickson said.

U.S. oil rigs in operation rose by six to 365, the highest since April 2020, energy services company Baker Hughes Co said in its weekly report.

It was the biggest weekly increase of oil rigs in a month, as drilling companies sought to benefit from rising demand.

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Crude Oil

FG Spends N197.74 Billion on Subsidy in Q1 2021



Crude oil - Investors King

The Federal Government has spent a total sum of N197.74 billion on fuel subsidy in the first quarter (Q1) of 2021, according to the Federal Account Allocation Committee (FAAC) report for May.

The report noted that the value of shortfall, the amount the NNPC paid as subsidy, in the March receipts stood at N111.97 billion while N60.40 billion was paid in February.

In the three months ended March, the Federal Government spent N197.74 billion on subsidy.

The increase in subsidy was a result of rising oil prices, Brent crude oil, against which Nigerian oil is priced, rose to $73.13 per barrel on Monday.

The difference in landing price and selling price of a single litre is the subsidy paid by the government.

On May 19, the Nigerian Governors Forum suggested that the Federal Government removed the subsidy completely and pegged the pump price of PMS at N380 per litre.

The governors’ suggestion followed the non-remittance of the NNPC into the April FAAC payments, the money required by most states to meet their expenditure such as salaries and building of infrastructure.

However, experts have said Nigeria is not gaining from the present surge in global oil prices given the huge money spent on subsidy.

Kalu Aja, Abuja-based financial planner and economic expert, said “If Nigeria is importing Premium Motor Spirit and still paying subsidy, then there is no seismic shift.”

“Nigeria needs oil at $130 to meet the deficit. In the short term, however, more dollar cash flow is expected and with depreciated Naira, it will reduce short term deficit.”

Adedayo Bakare, a research analyst, said that the current prices do not really mean much for the country economically.

He said, “The ongoing transition away from fossil fuels and weak oil production from the output cuts by the Organisation of Petroleum Exporting Countries will not make the country benefit much from the rising oil prices.

“Oil production used to be over two million barrels but now around 1.5 million barrels. We need OPEC to relax the output cuts for the naira to gain.”

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