Banking Recapitalisation Is Fundamental Policy Error – Ex Finance Minister

[Shola Sholaz]

Dr. Kalu Idika Kalu, served as a member of the Development Committee of World Bank.
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He worked as former Commissioner for Finance and Economic Planning in Imo State, ex- Minister of Finance, under two regimes, Federal Minister of National Planning and Minister of Transport. He was designated Nigeria's Candidate for the Deputy Director General position at the World Trade Organisation (WTO) in 1999. He served in a special Niger Delta Technical Committee on the final resolution of the Niger Delta crisis.
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In January 2012, he was also appointed to chair the Special Task Force on the Nigerian refineries. In the concluding part of the interview with him, he speaks on the banking consolidation, on-going reforms in the financial sector and the need for the Central Bank of Nigeria to ensure increased rural banking in the country.
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You worked as Commissioner of Finance and Economic Planning in Imo State, Finance Minister under two regimes,  With your experience, how will you assess the cashless monetary policy of the Central Bank of Nigeria (CBN), being implemented in some parts of the country?
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To start with, there should be a proper definition of the monetary policy of the CBN in trying to reduce cash transactions in the economy. The reason being that, the word cashless, is a misnomer. We can't be talking cashlessness in the cities, rather we should emphasize non cash instruments and not cashless economy. Not America, Japan, China, Russia,Indonesia, Singapore Switzerland and other advanced economies have reduced cash to zero. That is why I called it a misnomer, because there must still be cash transactions. For instance, in America, you pay cash for hair cut. The Fiduciary policies on management of currency and financial instruments in the economy are geared towards reducing the use of cash and correspondently moving into the use of non cash methods of transactions. Such methods include the use of cheques, Automated Teller Machines (ATM), Point of Sales (PoS), credit cards, electronic money transfers and other financial instruments other than cash. These instruments when adequately utilised can reduce the proportion of cash in the system. For instance, in super markets, shops, everywhere people need goods and services, they should be able to issue credit cards for immediate transactions instead of carrying large volumes of cash about.
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The apex bank as the monetary authority has the autonomy to formulate and implement monetary policies to regulate the financial sector of the economy. Don't you think that the current cashless policy is one of such initiatives?
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Obviously, it is the duty of CBN to regulate the financial industry in order to reduce inflation in the economy. In doing that, the apex bank should not be talking about cashlessness, because there are areas you cannot talk of cashless economy since people in such places need cash for daily business transactions. For instance, a good number of people live in the rural areas where there are no banks and they use cash on a daily basis. So, if CBN is talking of cashless economy, where will these individuals be classified?