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As the Central Bank of Nigeria (CBN) strives to redress the issue of mutilated naira notes in circulation, MARK ITSIBOR writes that allowing alternative payment channels to thrive will have positive impact on the economy, with much benefit for the citizenry Last week, there a serious disagreement which led to an exchange of fisticuffs between a bus passenger, simply identified as Mrs. Maureen and a bus conductor, Moshood Olaitan in Lagos state broke out over a torn naira note. “Conductor, which kind money be this? Take am back – nobody go collect am from my hand.” “Madam, waitin do that money? Na me print am? Abi no bi passenger use am pay me for your presence just now? If you get N100, bring am because I no get another one wey I go give you oo.” “I hear you. You never see anything. Make I get down and you no give me my change.” The problem was that the bus conductor allegedly gave a torn N100 note to Mrs. Maureen as balance for her transport fare. Except for the intervention of passers-by who finally settled the crisis from a supposedly cordial business transaction, “I for show you say Kaki-no-bi-leather,” Mrs. Maureen boasted. The problem is one of the greatest challenges in several lines of duty for operators in the informal section of the Nigerian economy. The complaint has been that people give worn out monies as payment but reject them in exchange, tagging them as dirty money. The case of Maureen and Olaitan is one of the many incidences of avoidable hostility, commotion and even deaths arising from business transactions in recent time. From Loss of profit and cancelation of transactions to injurious outcomes, the end results from cases of mutilated currencies in circulation have been unpalatable, to say the least. The truth is that, there is widening spread of the number of mutilated or dirty notes in circulation across the country. The observation is that a large percentage of the naira notes in circulation are torn or dirty. Who is to blame? The Problem The fact that Nigerians are still affected by the incessant cases of mutilated or dirty naira note in circulation is because they chose to have them. They have deliberately or otherwise decided to continue to cope with the several experiences of rejections recorded on daily basis at every point of financial transactions. Dirty and defaced currency projects money that has gone through the worst form of contamination, which is why most people reject them. The problem is big. Many Nigerians do not like using wallets or purses, and the currency is mostly tossed in handbags or schoolbags, or crumpled and shoved deep down a child’s pocket. Others prefer to tie them in their waist cloths, or even when they do use wallets, just squeeze them in there without particularly taking time to arrange them in. Besides the physical defacement the naira notes are subjected to on daily basis, there is the other unsettling but seeming unavoidable danger that the currency handlers are exposed to. Findings have shown that individuals from almost every socio-economic background routinely hold and transfer paper currency, and any object that can spread communicable diseases throughout a diverse population must be considered a risk to public health. Solution The solution to the rising incidence of mutilated notes in the country is for Nigerians to treat the naira notes with care and handle them properly. As it is often said, whatever way money is used, it will definitely end up back in our own pockets and wallets. This is why experts have urged that Nigerians make conscious efforts to maintain their currency. In one of its column on proper money handling, GhanaWeb noted that money is the most widely used and sought after thing on the planet, and has been the model of economic exchange since 1000 AD. As a way out of the situation, the online medium suggested that “IT is very important that we take utmost care of it.” Countries such as Malaysia and China have modern notes which are made from a special blend of cotton and linen, and coated with animal gelatin. This gives them a plastic- like feel which cannot be pulled apart. It also makes it easy to wipe off and even clean the money with a wet fabric. Alternative payment system Beyond proper handling of the currency notes, there is a call on Nigerians to embrace alternative payment system for settlement of business transactions. There are some alternative payment methods flowing into the payment processing industry that can be integrated into business now. The most common alternative payment methods are debit cards (ATM cards), Point of Sales (PoS), Change Cards, Prepaid cards, direct debit, bank transfers, phone and mobile payments, money orders, among others. Benefits The benefits are enormous. For the consumers, alternative payment system offer faster, easier payments. It enhances increased convenience / access (more payment options) and reduced risk of robbery. For government: Firmer grip on Monetary Policy, and its attendant effect on Inflation and economic stability; increased / transparent tax collection; greater financial inclusion; increased economic development, among other positives. One of the most commonly referenced benefits of alternative payment systems is reduced transaction costs, although Stephen Baseby, ACT associate policy and technical director, says that the costs faced by businesses vary widely. “The higher the transaction volume and average transaction size, the cheaper electronically processed payments are, which means that processing costs can be surprisingly low for a large utility relative to income, but high for a small retailer,” he explains. Interchange fees – the fee paid by a merchant’s acquiring bank to a cardholder’s issuing bank as part of an electronic payment card transaction – are in flux (see The cost of payments, below) and the impact of recent changes is not yet clear, Baseby continues. “Most of the payment applications generate a Faster Payment,” he says, “which accounts for the bulk of the cost. Payments made via Faster Payments – a UK banking initiative to reduce payment times between different banks’ customer accounts – remain expensive relative to debit cards. This is partly down to the volume of transactions, although that should change as volume increases.” A report on alternative payments, produced by payment-processing provider Worldpay, had revealed that the value of payments processed by more than 300 alternative payment schemes in operation globally rose by 21 per cent in 2013. It estimates that they will account for 59 per cent of transactions by 2017. The concern for the regulatory authorities is that Nigeria does not even account for up to 4 per cent of the alternative or electronic payment system recorded in 2013. Besides the huge cost that government bears to wipe out defaced currencies from the system, the new trend is e-transaction for settlement of business transactions worldwide. For example, there have been concerted and deliberate efforts by the Central Bank of Nigeria (CBN) to change the tide in payment for business transactions in recent times. For instance, as part of effort to address the rising incidence of mutilated notes across the country, the Central Nigeria, reduced the amount of money it charges banks for sorting mutilated naira notes from clean ones to N1,000 per box from N12,000 per box. The bank has been carrying out series of awareness campaigns against manhandling of the naira notes. The bank had cautioned Nigerians against abusing the currency notes, with a warning that anyone caught risks six months imprisonment or pay a fine of N50,000. According to the bank, the awareness programmes are aimed at sensitising the public on the need to accord respect to naira notes, online transfer system, how to identify fake currency notes, as well as how to approach the CBN for complaints on related issues.