Nigeria’s push for a cashless economy faces challenges as high transaction fees deter small business owners and low-income earners from fully adopting digital payments. Despite the CBN’s goal of expanding financial inclusion, excessive bank charges discourage many from embracing digital transactions. WikkiTimes’ Babaji Usman writes.
Sagir Adamu Dewu, a petty trader in Bauchi’s Muda Lawan market, Northeastern Nigeria, depends on mobile transfers to run his business in a market where cash flow is unpredictable.
Yet, he finds himself in a cycle where the fees associated with transfers and withdrawals cut deeply into his already slim profit margins.
For a trader like Kirfi, earning an average of N3,000 daily, paying fees of N50 to N100 multiple times a week means sacrificing a significant portion of his earnings.
These levies added to the range of fees when using financial services, including transfer charges, SMS alerts, account maintenance costs, etc, affecting low-income individuals and small business owners.
“Sometimes customers don’t have cash, so they transfer money. But when I calculate the charges for withdrawals, I lose part of my profit,” Kirfi lamented.
As Nigeria transitions to a cashless economy, digital payment systems have become indispensable for everyday transactions.
These platforms, designed to promote financial inclusion and simplify access to funds, hold immense potential for driving economic growth and reducing the inefficiencies associated with cash-based transactions.
However, for millions of Nigerians, the high costs of these services pose a significant barrier, discouraging widespread adoption and threatening the inclusivity of the cashless policy.
The weight of transaction fees – from bank charges to withdrawal levies – falls disproportionately on small business owners and low-income earners, amplifying the challenges they face in their daily financial activities.
These transaction costs deter traders from fully adopting digital payment systems and undermine the country’s ambitious push for a cashless economy targeted to bring 95% of the adult population into the formal financial system by 2024.
Analysts argued that these charges discourage financial inclusion and push people towards informal and riskier methods of transferring money.
Data from Enhancing Financial Innovation and Access (EFInA) 2023, show that 26% of Nigerians are financially excluded, down from 32% in 2020.
According to Paul Daniel, a Bauchi-based financial expert, the high cost of digital transactions increases financial inequality.
He warned that such charges may deter financial inclusion efforts and push more people toward informal, unregulated transaction methods.
Rural Nigeria: A Cashless Divide
In rural Nigeria, the challenges of digital payment systems are even more pronounced.
For residents like Ahmed Garba, a wheat farmer from the remote village of Ganuwa in Jigawa State, digital payment systems offer potential convenience but come with unaffordable costs.
Ahmed often travels 15 kilometres to the nearest Point of Sale (POS) agent to transfer money or access cash.
For every N10,000, he is charged N200 – a fee that could have been used for something else.
POS operators, the backbone of financial transactions in rural areas, often charge fees ranging from 1% to 2%.
For some low-income earners, digital payment platforms, which should ideally bridge the low-high income gap, are instead widening it for low-income earners.
The high costs of digital payments stifle their growth and innovation, reducing their ability to compete in an increasingly digital marketplace.
Josephine Moses, a domestic worker in Jos, Plateau State, explains why she avoids mobile transfers.
“If I send N5,000 to my mother in the village, I pay N100 as a transfer fee. That’s too much for me, so I prefer to send cash through someone travelling home.”
These charges, though seemingly small, are crippling for rural residents who earn little and rely on cash for daily survival.
As a result, many small business and low-income earners are forced to revert to informal systems of transferring and accessing funds, bypassing digital payment platforms entirely.
For many Micro, Small, and Medium-sized Enterprises (MSMEs), transaction fees are inconveniences and barriers to digital transformation push.
Businesses like Kirfi’s are forced to make tough choices between absorbing these costs or reverting to cash-based transactions, undermining the country’s cashless policy.
The International Labour Organisation (ILO) disclosed that MSMEs contribute 48% to Nigeria’s GDP.
The Costly Reality of Digital Transactions
High transaction fees are not limited to low-income earners or rural areas or small-scale traders; they are part of a systemic challenge in Nigeria’s financial ecosystem. Banks charge customers for services ranging from SMS alerts to account maintenance.
Eben Freeman tweeted his frustration: “This fraud in Nigerian banks is becoming something else. Over N110 deductions on every transaction are a big fraud,” he said.
These ordeals of several Nigerians in bank transactions indicate the depletion of amounts on customers who often feel helpless.
During the 2023 cash redesign policy, transfer or withdrawal fees with fintechs soared as high as 20% in some regions, making digital payment systems an even less viable option for many Nigerians.
While the firms argue that these fees are necessary to sustain operations and improve services, critics maintain that the costs disproportionately affect vulnerable populations.
Overcoming the Challenges
The challenges of high transaction fees are compounded by systemic inefficiencies within Nigeria’s financial sector.
For Paul Daniel, the financial expert, to break this cycle, Nigeria must adopt practices that reduce operating costs without burdening consumers.
The Central Bank of Nigeria (CBN) should establish caps on fees across platforms, while fintech companies could explore tiered pricing structures to cater to low-income users without compromising their profitability.
He added that public awareness campaigns that highlight the benefits of digital payments and explain how to navigate the system could drive broader adoption, particularly in underserved areas.
Moreover, he said government incentives could offset the costs of digital transactions for vulnerable groups to encourage more Nigerians to embrace digital payment systems without fear of financial strain.
According to him, it is up to policymakers, financial institutions, and fintech innovators to ensure that this vision is not just a promise but a pathway to economic empowerment for all.
CBN Charging Guidelines
In 2019, CBN replaced the then existing flat fee of N50. The charging system had it that transfers below N5,000 would attract a maximum charge of N10; transfers from N5001 – N50,000 cost N25; and transfers above N50,000 were pegged at N50.
While card maintenance fee on current account was removed, savings accounts attracted card maintenance fee of N50 per quarter from N50 per month.
ATM charges with inter-bank are reduced to N35 after third withdrawal within a month from N65, fee for SMS mandatory alert would be on cost recovery from previous maximum charge of N4.
Four years later, in September 2024, the Nigerian government imposed an N50 levy on electronic transfers exceeding N10,000 made through OPay, and other fintech platforms.
While fintechs like OPay clarified that they do not gain from the levy, the notice drew criticism from customers and financial analysts who maintained that the cumulative effect of such charges undermines the affordability of digital transactions.
But in compliance with Nigeria’s Federal Inland Revenue Service (FIRS) regulations, OPay announced the mandatory charge:
“Dear valued customers, please be informed that starting September 9, 2024, a one-time fee of N50 will be applied for electronic transfers of N10,000 and above into your personal or business account in compliance with FIRS regulations.
“It is important to note that OPay does not benefit from these charges in any way as it is directed entirely to the federal government,” the Opay notice read in part.
Similarly, Moniepoint, in a notification to its customers, said: “A N50 fee would be charged on inflows you receive of N10,000 and above from Monday, September 9, 2024.”
Neither the CBN nor the FIRS has publicly issued a specific response regarding the N50 Electronic Money Transfer Levy (EMTL).
The EMTL was introduced under the Finance Act 2020, which mandates a one-time levy of N50 on electronic receipts or transfers of N10,000 or more collected by financial institutions and remitted to the FIRS as part of the government’s revenue generation efforts.
However, these inflated charges have added to the range of fees when using financial services in the country, affecting low-income individuals and small business owners.
