Assessment Of Cashless Banking In Nigeria Challenges, Benefit And Policy Implementation

Project and Seminar Topics with material for Banking and Finance

Assessment Of Cashless Banking In Nigeria Challenges, Benefit And Policy Implementation


The Nigerian payment systems are largely cashed based. Though the country is left behind compared to other industrial countries, its use of electronic payment system is gradually gaining prominence. The emergence of cashless banking policy, the systems where transactions function and operate without the use of coins or banknotes, has increased the extent of economic activities in Nigeria. This study examined the impact of cashless banking policy on economic growth in Nigeria, over the period of 2010 to 2012.Based on the findings, the study recommended that banks should invest more in information communication technology (ICT) to enhance the efficiency of e-payment systems as this will enhance the revenue of banks in the long-run and improve economic growth in Nigeria. The Central Bank of Nigeria (CBN) should also embark on public enlightenment to educate the populace more on the nitty-gritty of the cashless system particularly in terms of web payment and cheque transactions. This is expected to raise the level of public awareness and reduce possible resistance by the banking public so that the economy will be well positioned to reap the benefits of cashless banking policy.

Table of Content

Chapter One:


  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objective of the study
  • 1.4 Research questions
  • 1.5 Hypothesis of the study
  • 1.6 Significance of the study
  • 1.7 Scope of the study
  • 1.8 Limitation of the study
  • 1.9 Definition of terms
  • 1.10 Organizations of the study

Chapter Two:

Review of Literature

  • 2.1 Conceptual Framework
  • 2.2 Theoretical Framework
  • 2.3 Empirical Review

Chapter Three:

Research Methodology

  • 3.1 Research Design
  • 3.2 Population of the study
  • 3.3 Sample size determination
  • 3.4 Sample size selection technique and procedure
  • 3.5 Research Instrument and Administration
  • 3.6 Method of data collection
  • 3.7 Method of data analysis
  • 3.8 Validity of the study
  • 3.9 Reliability of the study
  • 3.10 Ethical consideration

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Analysis of Data
  • 4.3 Answering Research Questions
  • 4.4 Hypothesis testing

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References

Chapter One


1.1 Background of the Study

The recent advancement of financial transaction technology raises interesting questions for policymakers and financial institutions about the suitability of current institutional structures and the availability of instruments to ensure financial stability, performance, and effectiveness of monetary policy. There have been several various types of payment schemes throughout history. ‘Trade by barter’ was popular at first. The introduction of different types of money was necessitated by the problems of barter, such as the double coincidence of wants. Nonetheless, pundits have predicted the complete extinction of study instruments and the advent of a theoretically superior replacement for cash or monetary exchanges, that is ‘cashless society’. Since Nigeria‘s Independence in 1960, there have been different governments, constitutional reforms, change in economic policies and banking reforms, mainly directed at enhancing social welfare and achieving developmental goals but there has been no substantial positive change in Nigeria‘s Human Development Indicators. This also calls to question the effectiveness of the cash-less policy of the Central bank of Nigeria(CBN).The use of cash for buying consumer products in the United States has steadily decreased since the end of the 1980s (Humphrey, 2004). As a result, most LDCs, such as Nigeria, are making the transition from a cash economy to a cashless economy for growth purposes. It’s no surprise that Nigeria’s Central Bank recently implemented a “cashless” scheme. To reduce the cost of banking services (including credit) and increase financial inclusion by offering more flexible transaction options and expanding scope, as well as boost the effectiveness of monetary policy in controlling inflation and driving economic growth. The cash policy aims to reduce some of the negative effects associated with the widespread use of physical cash in the economy, such as high cash costs, high risk of using cash, high subsidies, the informal economy, and inefficiency and corruption (CBN, Website,2011).

Cashless banking is a banking mechanism that seeks to reduce, rather than eliminate, the amount of physical cash (study notes and coins) circulating in the economy while promoting more electronic-based transactions (payment for goods, services, transfers etc.).To put it another way, it’s a hybrid of two e-banking and cash-based schemes. It represents a transitional step in the growth of payment systems in most developed countries.

1.2 Statement of the Problem

Monetary policy as a technique of economic management to bring about sustainable economic growth and development through cashless banking policy and banking introduced by the Central bank of Nigeria (CBN) is not fully operational due to high rate of illiteracy, in-adequate sensitization/education of the benefits of the cashless banking policy, and in-adequate logistics (such as the provision of internet connections in commercial areas, computers and Point on Sale (POS) machines).

Apart from the physical challenges, economic data and indicators are not fully available and reliable. There is a great challenge in attempting to analyze the true impact of the cashless banking policy on the economy of Nigeria as only few monetary and macroeconomic indicators can be traced with relation to the subject matter. Several scholars have attempted to analyze the cashless system or e-banking. However, it becomes clear that few studies present a comprehensive evaluation of cash-less banking implications in developing countries. Most ignore its economic benefits of the equation while some do incomplete examination of its negative implications. This is often due to unreliable panel data for monetary and macroeconomic indicators. Although, this study focuses on Nigeria, it is difficult to translate cashless studies from one country to another. Even payments instruments that look similar across countries on the surface may be different due to historical and legal variations (Daniel et al, 2004).

1.3 Objectives of the Study

The main objective of the study is an assessment of cashless banking in Nigeria challenges, benefit and policy implementation. Specific objectives of the study include:

  1. To examine the impact of the cashless banking on economic growth of Nigeria.
  2. To examine the various challenges associated with the implementation of the cashless policy/banking.
  3. To proffer suggestions on how cashless Banking and other monetary policies can be managed for better contribution to the economic growth and development of Nigeria.

1.4 Research Question

The following questions was answered by the study;

  1. What is the impact of the cashless banking on economic growth of Nigeria?
  2. What are the various challenges associated with the implementation of the cashless policy/banking?
  3. How can cashless banking policy and other monetary policies be managed for better contribution to the economic growth and development of Nigeria?

1.5 Research Hypothesis

Hypothesis One
  • Ho: Cashless policy has no significant impact on the reduction of inflation in Nigeria
  • Hi: Cashless policy has significant impact on the reduction of inflation in Nigeria.
Hypothesis Two.
  • Ho: Cashless policy has no significant impact on economic growth of Nigeria
  • Hi: Cashless policy has significant impact on the economic growth of Nigeria.

1.6 Significance of the Study

This study will be of significance to the general public as it will serve as a public enlightenment program about the cashless system so that everybody will be acquainted with the system, it will also be of significance to scholars and researchers who wish to carry out further research on this study.

1.7 Scope of the Study

In pursuance of the objective of the study; attention shall be focused on cashless banking among other electronic commerce implementation. In order to conduct an empirical investigation into the adoption of cashless banking in Nigeria and will also examine the nature of cashless banking operations from the CBN bulletin from2010-2012.

1.8 Limitation of the Study

Finance, time constraint and lack of research work were major challenges the researcher encountered during the course of this study

1.9 Definition of Terms

Access Products

Products that allow consumers to access traditional payment instrument electronically, generally from remote locations.

ATM Card

An ATM card (also known as a bank card, client card, key card, or cash card) is a payment card provided by a financial institution to its customers which enables the customer to use an automated teller machine (ATM) for transactions such as: deposits, cash withdrawals, obtaining account information, and other types of banking transactions, often through interbank networks.


Central Bank of Nigeria.

Chip Card

Also known as an integrated circuit (IC) Card. A card containing one or more computers chips or integrated circuits for identification, data storage or special purpose processing used to validate personal identification numbers, authorize purchases, verify account balances and store personal records.

Electronic Data Interchange (EDI)

The transfer of information between organizations in machine readable form.

Electronic Money

Monetary value measured in currency units stored in electronic form on an electronic device in the consumer’s possession. This electronic value can be purchased and held on the device until reduced through purchase or transfer.

Internet Banking

This is a product that enables the Bank leverage on the Internet

Banking System Module

In-built on the new Banking Application (BANKS) implemented by the Bank to serve the Internet Banking needs of the Bank’s customers.

Mobile Banking

This is a product that offers Customers of a Bank to access services as you go. Customer can make their transactions anywhere such as account balance, transaction enquiries, stop checks, and other customer’s service instructions, Balance Inquiry, Account Verification, Bill Payment, Electronic fund transfer, Account Balances, updates and history, Customer service via mobile, Transfer between accounts etc.

Payment System

A financial system that establishes that means for transferring money between suppliers and of fund, usually by exchanging debits or Credits between financial institutions.

Point Of Sale (POS) Machine

A Point-of-Sale machine is the payment device that allows credit/debit cardholders make payments at sales/purchase outlets. It allowed customers to perform the following services Retail Payments, Cashless Payments, Cash Back Balance Inquiry, Airtime Vending, Loyalty Redemption, Printing mini statement etc.

Smart Card

A Card with a computer chip embedded, on which financial health, educational, and security information can be stored and processed.

Transaction Alert

Our customers carry out debit/credit transactions on their accounts and the need to keep track of these transactions prompted the creation of the alert system by the Bank to notify customers of those transactions. The alert system also serves as notification system to reach out to customers when necessary information need to be communicated.

Western Union Money Transfer (WUMT)

Western union Money transfer is a product that allowed people with relatives in Diaspora who may be remitting money home for family up-keep, Project financing, School fees etc. Nigerian Communities known for having their siblings gainfully employed in other parts of the world are idle markets for Western Union Money Transfer.

1.10 Organizations of the Study

The chapter one consist of the introductory part of the study which includes the study background, the statement of the research problem, the study objective and scope of the study.

The second chapter is a critical review of other literatures relevant to the study and its objectives including the theoretical framework for the study. While the third chapter is methods of data collection, sampling and data analysis used in conducting the study. The fourth chapter centres around the research findings including an analysis of how it relates to previous findings. The fifth chapter consists of the summary of findings, conclusion and recommendations base on the study objectives.

Chapter Five

Summary, Conclusions and Recommendation

5.1 Introduction

This chapter summarizes the findings on the assessment of cashless banking in Nigeria challenges, benefit and policy implementation, First Bank Plc as case study. The chapter consists of summary of the study, conclusions, and recommendations.

5.2 Summary of the Study

In this study, our focus was on the assessment of cashless banking in Nigeria challenges, benefit and policy implementation, First Bank Plc as case study. The study is was specifically focused on examining the impact of the cashless banking on economic growth of Nigeria; examining the various challenges associated with the implementation of the cashless policy/banking and proffering suggestions on how cashless policy and other monetary policies can be managed for better contribution to the economic growth and development of Nigeria.

The study adopted the survey research design and randomly enrolled participants in the study. A total of 50 responses were validated from the enrolled participants where all respondent are staff of the bank.

5.3 Conclusions

With respect to the analysis and the findings of this study, the following conclusions emerged;

Empirical studies have shown that cashless banking policy is linked to economic growth. Following the objectives, the study estimated the real GDP as a function of Automated Teller Machines, Online web payments, Point of sale operations and Cheque payments in Nigeria. The findings of the study showed that the value of cheque payments and point of sales operations have a positive relationship with economic growth in Nigeria. On the other hand, the values of transactions on automated teller machines, and online web payments have a negative relationship with economic growth in Nigeria.

The implications of these results are that since there is negative and significant impact of ATM transactions on economic growth in Nigeria, further regulatory framework that will check electronic banking fraud should be put in place by the government to enlighten bank customers who make use of ATMs on the dangers inherent in the transactions. The commercial banks as well as the CBN should embark on public enlightenment campaign to educate the populace on the nitty-gritty of the cashless system especially as it relates to web payment and cheque transactions. This will raise the level of awareness and reduce possible resistance by the banking public so that the economy will reap the benefits of cashless banking policy

The cashless banking policy serves as a good tool in influencing economic growth especially as it relates to the value of cheque and POS payment patterns.

5.4 Recommendations

  1. Government should provide uninterrupted power supply and adequate communication link while shortfall should be covered by banks through back-up arrangement to power standby generator in case of power outage;
  2. Government should also support banks in the aspect of financing the payment system which requires a lot of capital to maintain;
  3. Government and the CBN should create awareness on the benefits derivable from cashless banking policy for the improvement of businesses and economic development;
  4. Skilled manpower and computer experts should be employed by every bank to prevent fraud and hacking of banks’ data to steal customers’ fund;
  5. Electronic payment system is capital intensive, therefore banks are encouraged to collaborate to finance some of the infrastructures needed for the smooth implementation of the policy by sharing cost to reduce the initial cost of setting up electronic banking;
  6. Government should provide adequate security so as to create safe environment that will make people to imbibe the policy.

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