CENTRAL BANK ROLLS OUT POS LEVY REGIME THAT MAY HAMPER BUSINESSES AND FG’S CASHLESS POLICY

By Tolu Oyewole

The Central Bank of Nigeria, CBN, has announced and directed the strict implementation of a new Merchant Service Charge, which imposes a levy of N50 on all Point of sale (POS) transactions.

The directive was contained in a circular entitled ‘Review of Process for Merchants Collections on Electronic Transactions’ was addressed to banks, processors and switches and focuses on the ‘Unbundling of Merchant Settlement Amounts’. The effect is that individual transactions that occur on PoS will attract ‘Stamp Duties Payment’ instead of on aggregate transactions as was the case before the new directive came on board.

The circular signed by CBN Director, Payments System Management Department, Sam Okojere, mandated banks to unbundle merchant settlement amounts and charge applicable taxes and duties on individual transactions as stipulated by regulators. As a nod to consumers who would be hit hard by the new policy, the CBN also directed the downward review of the merchant service charge from 0.75 percent (capped at N1,200) to 0.50 percent (capped at N1,000).

Under CBN’s Guidelines on Point of Sale (POS) Card acceptance Services, the ‘POS environment’ encompasses the following: countertop; Wireless/Portable; Handover (PIN Entry only/Customer-activated with PIN Entry); Automated Dispenser (e.g Automated Fuel Dispenser, token dispenser, etc.); Biometric point of sale; and Contactless.

Specifically, the CBN also designates the following as ‘Point of Sale Card Acceptance Services Stakeholders’: Merchant Acquirers; Card Issuers; Merchants; Cardholders; Card Schemes and Card Associations; Switches; POS Terminal Owners;. Payments Terminal Service Aggregator (PTSA); Payments Terminal Service Providers (PTSP); and. Processors. These stakeholders will, to varying degree assume responsibility for the implementation of the new policy – as well as risks, technology and personnel challenges as well as benefits that go with it.

According to data from the Nigeria Inter-Bank Settlement System Plc, NIBSS there was, until the announcement, a progressive increase in total volume of POS transactions over the preceding three years as 2017, 2018 and the first half of 2019 recorded 146.3 million transactions (worth N1.4 trillion), 285.9 million transactions (valued at N2.3 trillion) and 187.7 million transactions (worth N1.4 trillion) respectively.

The projected 2019 aggregate transaction volume, experts speculate, may be at risk as reports indicate that Nigerians are increasingly beginning to shun the use of POS and other e-payment platforms affected by the policy in preference for cash payments. It is a trend that could significantly affect, negatively, the Federal Government’s plan to maintain the CBN’s cashless policy focused on reducing significantly the challenges of heavy dependence on cash payments including, cost of currency printing, handling and security. Businesses projected to be directly hit are commercial centers which have come to depend heavily on PoS payments like fuel stations, supermarkets and other businesses where cash handling is deemed cumbersome and sometimes a bottleneck,

It would be recalled that the CBN in a circular issued to all banks and dated Tuesday, September 17th, which was entitled: “Re: Implementation of the Cashless Policy,” also imposed new charges on deposits and withdrawals of depositors starting as a pilot in Lagos, Ogun, Kano, Abia, Anambra, Rivers state and the FCT. effective September 18, 2019.

[Tolu Oyewole, a legal strategist, filed this report with additional reporting from Sam Eleanya]