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Going Cash-less: Hard Choices, Easy Life

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Yesterday, the CBN released a circular on the “Implementation of the Cash-less Policy”. Much of the social media dialogue diverted from Andela’s restructuring to the policy’s potential impact on the economy – especially for micro, small and medium enterprises (MSMEs). A lot of comments highlighted the perceived “ineptness” of this policy and conceived it as an attempt to further complicate things, frustrate small businesses and increase the number of businesses within the informal economy.

Do the facts agree with this position? No.

In this article, I argue that yesterday was calculated and is a step in the right direction.

A Short History Lesson

On 1 January 2012, there was an attempt by the government to curb excess cash in circulation by introducing the Cash-less Nigeria Policy. It was first introduced in Lagos and prescribed handling charges on cash in excess of N500,000 (individuals) and N3,000,000 (corporate bodies).

The policy was not put in place to remove cash from the equation but to reduce its volume. It also aimed to encourage more electronic based transaction systems e.g. POS terminals, short codes and the like. The policy was first rested in Lagos state with service charges taking effect from 30 March 2012.

Under the policy, effective from June 1, 2012 daily cumulative withdrawals and lodgment in banks by individual would be limited to a maximum of N150,000, while daily cumulative withdrawals and lodgments by corporate customers is pegged at N1million. However, individuals and corporate organizations wishing to withdraw above the fixed amount would have to pay special charges.

Essentially – this has happened before, it was always in the offing.

Why is Everyone Worked Up on Social Media?

To clarify the position in yesterday’s release, if you withdraw or deposit N500,100, the charge will be levied on the N100 and not the entire sum. After all, it’s little drops of water that makes an ocean. Dissenting opinions on the issue argue from two major standpoints and I have set them out in the following bullets.

Financial Inclusion

The first and most popular argument against the CBN’s cash-less move borders around financial inclusion. Proponents say Nigerians will be less interested in the banks and frequently conjure an illiterate Nigerian man who lives under a rock in some remote Nigerian village to prove their point. However, Nigeria’s current vector does not support the conclusions many commentators have reached.

Strong economies have equally strong banks; Nigeria’s banks are only beginning to get back on their feet. The informal economy valued at $240bn (IMF) presents an opportunity for the government to stabilize monetary policy and redefine banking in Nigeria. The pertinent question is, how does the government intend to do it?

Enter the CBN’s National Financial Inclusion Strategy (NFIS)

The long term move for the NFIS is to ensure that 80% of bankable adults in Nigeria have access to financial services. This is the reason why you have telecommunications companies offering Mobile Money nationwide, why there are more vending machines on the Island and why POS Terminals are available at barbershops in Modakeke (for a commission, you can withdraw and send money).

It has taken time but, it is working out – execution is key.

Ease of Doing Business

Another argument borders around ease of doing business, especially for MSMEs. Ask anyone who makes this argument a simple question: what is easier, physically depositing/withdrawing N3,000,000 or transferring N300,000,000 via internet banking?

This particular argument sees the entire situation as high risk because, if handled improperly, there is the possibility that businesses in the informal sector are crushed in the wake of yesterday’s announcement. Businesses and individuals alike have to pay N52 bank charges (plus VAT) on inter-bank transactions. Arguments from this quarters note that transferring money or using POS Terminals to make payments can reduce the incentive to have money in the bank in the first place.

I will use an illustration to explain how difficult it is to agree with the above position. A woman walks into Tejuosho market with N500,000 – she intends to buy 4 items from 4 different vendors. Which of the following options makes her life easier?

  1. Making those payments with *737# mobile transfer and paying N208 extra or
  2. Withdrawing N500,000 from her bank, taking it into Tejuosho market and making payments at 4 different shops.

Would you rather risk your personal safety because you intend to save N208? If we consider ripple effects in the illustration above, there seems to be an upside for companies involved in online payments, procurement and logistics. An upside any responsible government should leverage. If you do not want to use electronic payment channels, you would have to shoulder time costs, transport and think carefully about security.

Understanding the N500,000 Threshold

The statistics show that if 100 Nigerians read this article, only 2 will have over N500,000 in their bank accounts. Thus, there is at least a 20:1000 chance that this policy may never apply to you. On the off chance that it does, you most likely are in the 2% of Nigerians that own 90% of all bank deposits.

The aforestated shows that the Central Bank of Nigeria has by default safeguarded most Nigerians and inadvertently created an exception to the policy – the 98%. It is simple, the bulk of Nigeria’s individual and business demographic will never have to shell these fees. It shows that this policy was carefully thought out, all that’s left is effective implementation.

Government Considerations

Corruption has been touted as an existential threat to Nigeria. As a country, we hold multiple records on several corruption indexes. Through this policy it has become easier to monitor the movement of money and track illicit financial flows. Whether we grasp this or not, it is a big win for Nigeria.

Monetary inflation is becoming an increasing threat to efforts to stabilize the economy. Monetary inflation happens when there is a consistent rise in the amount of money available within a currency area/country. When this happens especially with the admixture of several other factors including the transmission mechanism, there is a tendency for prices of goods and services to cost substantially more. Essentially, with less cash in circulation – chances that the price of garri will go up become minimal (too much money makes garri expensive).

Also, it is impracticable for this government to pay interests on loans, fund the new minimum wage, protect the foreign reserves, subsidize petrol, cover federal salaries and continue projects under the current revenue streams. The government realizes this and is taking steps to create long term sustainability. More money from the 2% means that more projects are possible going forward.

Going Forward

There are obvious risks with the policy especially as there seemed to be no warning or a phasing stage. The Buhari led administration has brought this policy at a time when there is the ban on CBN forex for importation of certain goods, proposed increased in VAT to 7.5% and tons of other policies that we cannot seem to agree are in Nigeria’s best interests. However, we can all agree that the government is driving change with monetary policy.

For the Cash-less policy to work, proper execution is more important than a viral A4 printout/PDF with the CBN letterhead. The government must clarify exemptions to the rule, increase the ease of access to mobile money and better network coverage.

Also Read SMEs: Carefully Navigating The Loan Agreement

The Cash-less Policy, if properly executed, might put an end to tally numbers and long queues in banks, increase the amount of diversified small businesses (small businesses providing peripheral financial services) and increase the formal economy.

Irrespective of Nigeria’s lingering challenge with implementation, I am taking the road less travelled by saying, Nigeria is actually playing to her strengths – we will be fine.

Author: 

Samuel Korie is a graduate of Law from Obafemi Awolowo University (formerly University of Ife). He is passionate about policy, volunteering and the unchartered frontiers of the legal profession.

 

 

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UK-Africa Investment Summit 2020: Investors urged to speed up economic role on the continent

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London, United Kingdom- January 20, 2020- UK companies must leap at the chance to deepen economic ties with Africa, a continent with unmatched investment opportunities, several African leaders said at a high-level panel.

At an oversubscribed opening ceremony for the 2020 UK-Africa Investment Summit, Monday, attended by dignitaries and delegates from 16 African countries, including President El Sisi of Egypt, British Prime Minister Boris Johnson made the case for bigger investments in Africa and called for increased and renewed partnership  between  the UK and Africa.

Referring to Africa as a booming continent with “staggering levels of growth,” Prime Minister Johnson said:  “Look around the world today and you will swiftly see that the UK is not only the obvious partner of choice, we’re also very much the partner of today, of tomorrow and decades to come,” he said in his opening address.

Also Read: Interview with James Lawson, Founder, Intergreatme; A RegTech Company Helping You Create Your Own Digital Identity

The UK-Africa Investment Summit, the first of its kind hosted by the UK Government, was attended by the foreign secretary, Dominic Raab, the international development secretary, Alok Sharma, and Prince Harry.

The President of Ghana, Nana Akufo Addo, of Kenya, Uhuru Kenyatta, of Mauritania, Mohamed Ould Cheikh el Ghazouani,  African  Development Bank President Akinwumi Adesina, and Secretary of State for International Development, MP Alok Sharma, addressed a plenary panel discussion on ‘Sustainable Finance and Infrastructure – Unlocking the City of London and UK financial services for growth in Africa.’

President Kenyatta who rang the opening bell at the London Stock Exchange (LSE) marking the launch of Kenya’s first green bond at the LSE, made the case for innovative and sustainable investments in energy infrastructure. “We all must think out of the box in terms of energy…to ensure we produce more green energy. This first-ever sovereign green bond of $41.45 million will be used to build environmentally-friendly student accommodation in Kenya.”

Responding to a question about UK-Ghana partnerships, President Nana Akufo-Addo said in a world where Africa’s wealth is undisputed, “the City of London can play a significant role in bridging Africa’s huge infrastructure gap… and LSE can be a pivot in the new relationship with the continent. Indeed, 1 in 4 consumers will live in Africa by 2030,” President Akufo-Addo said.

African Development Bank President Akinwumi Adesina announced a new $80 million Bank-DFID infrastructure financing partnership.

According to Adesina, the continent’s $68-$108 billion infrastructure investment gap per year is massive, but it depends on how you look at it. “Either the cup is half full or half empty. To us, that is a $68-$108 billion opportunity.”

Adesina added, “The issue of risk in Africa is exaggerated. The risk of loss is lower than Latin America. Yet, funds are not being channeled into Africa. There are $8 trillion of assets under management in London, but only 1 percent is invested in Africa.”

The Bank president urged investors to look to Africa and recalled the achievements of the Africa Investment Forum – a game-changing initiative led by the African Development Bank and key partners, to accelerate investment in the continent. The unique multi-sector platform is designed to advance bankable deals to financial closure. At the 2019 Forum, which took place in Johannesburg, South Africa, deals valued at $40.1 billion secured investment interest.

President Mohamed Ould Cheikh el Ghazouani of the Islamic Republic of Mauritania, shared opportunities offered by the blue ocean economy and substantial reforms currently under way to attract foreign investors.

“We have reinforced security along our coasts. Other measures include the establishment of a Council on Investment. These huge efforts are showing tremendous results and it is giving comfort to investors,” he noted.

The African continent is home to eight of the 15 fastest-growing economies in the world. By 2030, 42% of the world’s youth will be African and will constitute an incredible workforce and potential consumers.

In his concluding remarks, UK Secretary of State for International Development, MP Alok Sharma expressed confidence in the continent. “Africa has a fabulous future.” Sharma announced five partnerships to mobilise private sector investment in quality infrastructure on the continent. “The City of London can play a role in mobilizing resources for Africa,” Sharma said.

Speaking earlier, Prime Minister Boris Johnson made a major announcement on the UK’s policy on climate change.

“From today, the British government will no longer provide any new direct development assistance for thermal coal mining or coal power plants overseas,” Johnson said.

The declaration aligns with the African Development Bank’s green agenda aimed at increasing investment in renewable energy. President Adesina announced last year at the UN General Assembly that the Bank was moving away from investing in coal.

African Development Bank

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Kola Adesina Urges Investors To Focus On Access To Power At The Ongoing UK-Africa Investment Summit

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Kola Adesina, GMD Sahara Power Group

London, United Kingdom– Leading energy conglomerate, Kola Adesina of Sahara Group has urged participants at the UK-Africa Investment Summit to explore committing resources towards addressing the energy needs on the continent that is home to about 1.3 billion people.

The Summit which holds on January 20, 2020 in London, will be hosted by the Prime Minister, bringing together businesses, governments and international institutions to showcase and promote the breadth and quality of investment opportunities across Africa.

Sahara Group said UK and African businesses need to commit more funds to grid electricity development while ramping up investment in renewable energy to bring electricity to over 600 million people, a figure that is 10 times the population of the United Kingdom.

Also Read: Interview with James Lawson, Founder, Intergreatme; A RegTech Company Helping You Create Your Own Digital Identity

According to Kola Adesina, Executive Director, Sahara Group, access to power in Africa is crucial to ensuring sustainable economic growth and seamless transition to the fourth industrial revolution. “Investment in off-grid electricity will light up homes and small businesses in rural and poor communities, mostly in Sub Saharan Africa. This is an auspicious time for investors in the UK and across the globe to explore this opportunity which promises a win-win situation for all,” he stated.

Adesina said apart from having the potential to promote access to clean energy, off-grid electricity from renewable energy sources, including solar, wind and hydro, has the potential of becoming more affordable for more Africans in the long run. “The aspirations of Africa’s youth population, some 400 million people aged between 15-34 – which is about twice Europe’s entire population – rest on the decisions UK and African investors take at this summit. We can promote the agenda of bringing energy to life through enhanced access to electricity in Africa and Sahara Group is committed to spearheading this cause through more investment and collaboration,” he added.

Adesina stated that Sahara Group, with its profile as one of the largest private power business operators in Africa, was already in partnership with the United Nations Development Programme (UNDP) on a project aimed at boosting access to sustainable energy in Africa.

He concluded that governments and businesses must work together to develop and implement a plan to transform regulatory and operational issues in the power sector. “We also need a sustained awareness plan to change the mindset of Africans to navigate from consumption to production; this will require reliable and affordable electricity. Sahara Group remains passionate about electrifying Africa and believes the time for all stakeholders to act is now.”

According to the International Energy Agency (IEA), despite being home to 17% of the world’s population, Africa currently accounts for just 4% of global power supply investment. The IEA’s World Energy Outlook 2019 report found that achieving reliable electricity supply for all would require an almost fourfold increase, to around $120 billion a year through 2040, noting that mobilising this level of investment would require huge investments and thorough policy and regulatory measures to improve the financial and operational efficiency of utilities.

Sahara Group

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Future Females and Ideas Cartel are driving female-focused entrepreneurship through coworking and community

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The Future Females community isn’t only forward thinking in what they work for, but also how they work

CAPE TOWN, South Africa, January 17, 2020- Over a short period of time, the partnership between Future Females and Ideas Cartel has quickly shown the benefit of connecting like-minds in inspiring spaces, with expansion just around the corner.

From a team of two in 2017 to a present state of 26 chapters across Africa, Australia, Europe and North America; a growing online community of 30K female entrepreneurs, and now a thriving local coworking space, Future Females is a Cape Town success story worth paying attention to. 

“For early-stage solopreneurs, the process of starting a business can be a lonely one, and getting stuck in your own head is almost unavoidable. The growth of Future Females has helped combat this; the community we’ve created is a source of support, advice and encouragement that would otherwise be absent.” ~ Lauren Dallas, Co-founder of Future Females.

Source: Ideas Cartel

Apart from the obvious numbers-based growth, the real power of their rise comes from what underlies it: a shared vision for a platform that empowers female entrepreneurs to connect, be inspired, inspire others, and feel supported to create, fail and ultimately win. The movement is underpinned by a framework that helps members to maximise their four scarce resources – time, money, energy and relationships – to transform their businesses, careers and lives.

Also Read: Interview with James Lawson, Founder, Intergreatme; A RegTech Company Helping You Create Your Own Digital Identity

The Future Females community isn’t only forward thinking in what they work for, but also how they work. Inner City by Ideas Cartel (http://bit.ly/2Rl9DKq) has been a crucial growth partner in this regard; providing a beautifully curated, inspiring work environment in which the company could not only comfortably scale, but thrive in the process.

“We’re so proud to have Future Females as part of the entrepreneurial community at Ideas Cartel. Their story is inspiring, and has also acted as a proof point for us – that the Inner City spaces we’ve built are doing their part to create connection, drive innovation and support growth.”
~ Schuyler Vorster, Founder of Ideas Cartel

As one of Ideas Cartel’s four business pillars, Inner City focuses on creating thoughtful, resilient workspaces for ambitious entrepreneurs, freelancers, creatives and business travellers. These inspiring spaces are intentionally crafted to facilitate an essential element of innovation: connection—connection with people, places and spaces; of ideas, perspectives and purpose.

Source: Ideas Cartel

In September 2019, Future Females moved into their own private space to launch one of the first female-focused South African workspaces, at Ideas Cartel’s 113 Loop Street premises. The design of the space was based on feedback from a co-creation workshop held with potential tenants, to ensure it met the requirements of the community it would serve.

Launching on 1 February, 2020, the expanded coworking space includes Hot Desks, Fixed Desks and Private Offices. Future Females members can also access the rooftop pool.

Source: Ideas Cartel

“You become like the people you surround yourself with. We’ve created a space where everyone shares the same vision and is there to support one another on the entrepreneurial journey.”
~ Sasha Zakharova, Program Manager of Future Females

Source: Ideas Cartel

Future Females and Ideas Cartel share a belief in the entrepreneurial lifestyle—a wholesome, holistic approach to working life, fueled by passion and a desire to drive change in the world. The Future Females coworking space is a reflection of this belief, where everyone is supported in working towards their goals. If you want to become a member, sign up here (http://bit.ly/2TsZP3C) or email [email protected] for more information.

Ideas Cartel

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