N50 charge on PoS transaction’ll derail cashless policy –- Analysts

* Agents, operators protest
* Customers resort to ATM, cash transactions
* N50 stamp duty on PoS transactions above N1, 000

As Nigerians continue to lament over the recent imposition of
‘N50 stamp duty’ charge on every Point of Sales (PoS) transaction
above N1, 000, some economic and public affairs analysts in the
country at the weekend said the charge could derail the cashless
policy of the Federal Government.

The extra charge on customer’s transaction followed a CBN’s
directive to banks to charge N50 Stamp Duty on individual
transactions, rather than merchants’ accounts.

Many filling stations and supermarkets are already adding the
new fee to the customer’s purchases.

To avoid dispute with its customers, filling stations have
pasted notices on their pumps.

In a notice to its customers, a filling station official said:
“N50 Stamp Duty Charge on PoS Transactions. Following the CBN
directive of September 17, 2019 to charge applicable taxes and
duties on individual electronic transactions, all Rain Oil Retail
Stations shall henceforth charge N50 extra on all PoS transactions
from N1, 000.”

A visit to ShopRite Apapa in Lagos showed that more customers
made cash payments instead of transaction via PoS terminals.

The same situation played out at Jus Rite Jakande Estate, Isolo
Lagos. One of the officials, who preferred anonymity, said: “Most
people today (Friday) made payments via cash. They said they can’t
part with additional N50 charge.”

Before now, the fee paid by merchants on the aggregate PoS
transactions carried out on a particular period, was never passed
to customers.

The directive on the Unbundling of Merchant Settlement Amounts
was contained in the CBN circular to banks, processors and
switches, titled: “Review of Process for Merchants Collections on
Electronic Transactions”.

The policy stipulates stamp duties payment on individual
transactions that occur on PoS, rather than previous plans where
charges occurred on aggregate transactions.

The circular signed by CBN Director, Payments System Management
Department, Sam Okojere, authorised banks to unbundle merchant
settlement amounts and charge applicable taxes and duties on
individual transactions as stipulated by regulators.

Merchant Service Charge was also reviewed downward from 0.75 per
cent (capped at N1, 200) to 0.50 per cent (capped at N1, 000).

Speaking with the Sunday Telegraph on the Central Bank of
Nigeria’s involvement in this stamp duty charges collection, the
Director, Corporate Communications, CBN, Mr. Isaac Okoroafor, said
the charge is not a Central Bank charge.

“It is a Nigerian Postal Services (NIPOST) charge, not a CBN
charge. Our involvement in it is as directed by the Court that we
should play our statutory role in the implementation of the law. It
is a law,” he stressed.

Agents, operators protest

Against the backdrop of the new charge, PoS agents and operators
have continued to protest the introduction of the charge, saying
they are losing customers as a result.

They said the volume of electronic payments carried out daily
had reduced drastically as a result of the new policy.

The operators under the aegis of Association of Mobile Money and
Bank Agents in Nigeria (AMMBA), said bank customers who had been
enjoying cashless transaction since the roll-out of agent banking
had resorted to across-the-counter cash withdrawals.

It was gathered that some customers had started using ATM as an
alternative means of cashing out, which they found to be more
cost-effective.

Sunday Telegraph investigation revealed that many filling
stations in Lagos State have notified their customers of the N50
stamp duty charges on payment above N1, 000 on the PoS terminals
and web platforms, even as most of them have started implementing
it.

However, most supermarkets in Lagos are yet to start
implementing it as their managements told Sunday Telegraph that
their fear is that it would affect patronage.

A mobile money operator with agents in five locations in Lagos
and Imo and Enugu and Abia states, Mr. Chidi Maduforo, said before
the new policy by the CBN, he conducted between 2000 and 4000
transactions daily across the four locations.

But with the introduction of N50 stamp duty on individual
payments, he said the volume of payment deals had reduced to
between 1,000 and 1,500 daily.

The President, AMMBAN, Mr. Victor Olojo, said the N50 stamp duty
charge was discouraging cashless transaction and savings.

According to him, customers have gone back to using
cost-effective cash-out methods such as the ATMs and
across-the-counter withdrawals.

He called for the reversal of the policy, saying the cost of
financial services was becoming too burdensome and would affect the
financial inclusion mandate of the Central Bank.

Olojo said, “It has grossly affected transactions. People now
prefer to go back to the Automated Teller Machines rather than the
PoS because of the charges.

“It is a big issue for us and we feel that the government needs
to listen. That policy should be reversed. We have written a letter
of protest to the CBN and other relevant stakeholders. We feel that
the policy is anti-people because it is the same government that is
driving financial inclusion that is also imposing this tax that is
affecting those at the base of the pyramid.”

President of the Bank Customers Association of Nigeria (BCAN),
Dr ‘Uju Ogbunka, had stated in a chat with Sunday Telegraph that
the reintroduction of the stamp duty charge on PoS transactions
above N1,000 would force customers who have already taken to
cashless transaction to go back to use of cash.

He said the policy will enhance CBN revenue; it will discourage
people from embracing the cashless policy.

Also speaking a financial expert, Dr. Vincent Nwani, Managing
Consultant/CEO, RTC Advisory Ltd said the return of N50 stamp duty
will slow financial inclusion in the country.

He said: “The implementation of these charges in Nigeria is
capable of weakening the financial inclusion drive and financial
development goal as a whole especially within the environmental
sphere of business activities which point to enormous size of
informal market.”

Ogubunka said: “The move is a two- edged sword. While it is
intended to enhance revenue, it will deal a deadly blow on the
cashless policy, it could also deter savings.  Why should
people be charged N50 for every purchase they make on PoS? People
are not happy with the charge.”

Customers shun PoS, buy with cash

Meanwhile, many Nigerians have continued to shun transactions
via PoS terminals; owing to the implementation of a N50 additional
charge by merchants, as directed by the Central Bank in
collaboration with the Nigeria Inter- Bank Settlement System
(NIBSS) on behalf of NIPOST.

Customers, who previously cheered CBN’s decision to infuse the
PoS policy, saying it would eliminate the risk of carrying cash and
reduce the cost of printing Naira notes, have criticised the move
to collect stamp duty charges on PoS transactions.

It must also be mentioned that other payment channels, including
the Automated Teller Machines (ATMs), Instant Transfers, Online
Banking, and Mobile Banking are still seriously challenged.
Already, financial transactions are replete with all manners of
charges by the banks and merchants, even when services are not
delivered as and when due.

According to the CBN 2017 to 2019 Banking Guide, Nigerians,
especially bank customers are made to face several charges by the
financial institutions. These include N52.50 monthly card
maintenance fee; N65 after third withdrawal in ATM interbank fees.
Most times, banks remove the N65 at the first and subsequent
withdrawals.

The banks still deduct N4 for SMS alerts, including unsolicited
ones for birthday wishes, national and international day
celebrations and operational updates. There is also N52 deduction
in electronic transfer service. Banks also collect as much as
N4,000 as fee for hardware token and N4 for one-time pin (OTP) SMS
charge as well as N20 per page of a Statement of Account, among
others.

While all these are imposed, then comes the N50 stamp duty
charge on Nigerians, who use the PoS terminals.

PoS transactions drop

The NIBSS data has shown that the total volumes of PoS
transactions for 2017 stood at 146.3 million which was worth N1.4
trillion; 285.9 million transactions in 2018 valued at N2.3
trillion, and 187.7 million for six months- January to June 2019
worth N1.4 trillion.

According to the President, Association of Telecoms Companies of
Nigeria (ATCON), Olusola Teniola, there should be an urgent
stakeholders meeting that will include the CPC, CBN, legislators,
civic society, NCC, and Ministry of Communications and Digital
Economy. Also to attend the meeting is other wider stakeholders –
banks, telecom and service providers, and consumers to address the
charges being applied by the banks and ratify the best approach to
addressing the infrastructural deficit vis-a-vis the cashless
policy objectives.

Confirming the drop in PoS transactions in a telephone chat the
Managing Director, ITEX Integrated Services, a CBN licensed
Super-Agent, Ernest Uduje, while commending the apex bank in the
drive to improve financial inclusion in the country, insisted that
“this N50 charge is ill-timed.”

According to him, transactions through PoS have dropped within
the last few weeks.

“In a nutshell, I think it is affecting transactions negatively,
because now most businesses like filling stations, if you go there
now, they will show you their prices, and they will say they will
charge you N50 extra. Then, in some places they will tell you go
and bring cash, they are not interested because they don’t know
other charges that will follow.

“I don’t know why government is focusing on PoS alone because
there are other platforms, the ATMs, and others. If they are
looking at driving cashless, this is not a time to add additional
fees. Already, merchants are suffering lots of other taxes directly
and indirectly, then another N50. The merchant would just abandon
the process and collect cash.

“I still mentioned it to them at a function that government has
reduced what we can charge. In other countries, they charge two to
five per cent per transaction, depending on what you are doing. On
our own, we came together and said we should do 1.75 per cent to
encourage the market. But when CBN got into the entire process,
they said go and start at 2.75; we will allow you to increase later
on. Rather than increase it, they reduced it, and now charging
N50.

“This means that on one hand you say you are encouraging people,
you bring down to .5, to drive the numbers, but again you have
added N50 as stamp duty, so nobody is coming. We have seen a
decline in our transaction volumes. I think there should be a
rethink to stimulate the entire ePayment process. It looks like
small money, but N50 is something to the merchant, and also to the
end user,” Uduje stressed.

Last line

Most of the experts spoken to by Sunday Telegraph were unanimous
in their opinion that the cashless policy which is not yet being
implemented across the country to succeed, there wont be any need
for any charge that could make the cash economy more cost effective
to the end users.

Culled from Telegraph