Cashless Policy And Economic Growth Evidence From Nigeria
This study was carried out on the impact of cashless policy on the economic growth of Nigeria. The research design that was adopted in this study was the Descriptive design. The population for this study was the entire city of Abuja. The respondents were drawn from the residents and workers in Abuja. For the purpose of this research, data for this study was gathered through the use of primary data (questionnaire). The study concluded that Operating cashless society in and indeed Nigeria is a wise strategy for fast tracking growth in the nation’s financial sector because of the fact that it saves time and protect against fraud and crimes. Also, the factors that can improve the impact of the adoption of the Cashless policy in includes improvements of infrastructures, proper identification system and customer orientation and education. The study further recommended that Since the implementation of the policy is now nationwide, each states of the federation must have the facilities needed in adequate proportion in order to facilitate a wide acceptance and usage by Nigerians.
1.1 Background to the Study
As at today, Nigeria occupies the unenviable position of number one country in Africa with largest number of people with no access to financial services. According to data compiled by Micro Finance Information Exchange (MIX) last year, Nigeria and the Democratic Republic of Congo were found to have the largest gaps between populations living in poverty and those with no access to financial services-80 million in Nigeria and 48 million in the Congo. Besides, managing the few that have access to the banks is said to cost banks a huge amount of money with cash management taken a large chunk of the expenses. Also, the cost of printing new bank notes as a result of frequent handling is said to cost the Central Bank of Nigeria (CBN) terrifying amount annually.
To address this and many other issues facing the banks and the nation’s economy the CBN, introduced the cashless economic policy. The initiative is to expand the horizon of banking and make financial services reachable to “Banking adults” at an affordable cost. According to CBN, (2011) a large number of Nigeria adults do not enjoy bank services, and this has serious economic and developmental implications. The overall goal of the cashless policy is to reduce adult exclusion rate from 46.3% in 2012 to 20% in 2020. According to CBN, (2012) financial inclusion is a development when adults have easy access to a broad range of formal financial services that meet their needs and are provided at affordable cost.
Omotunde et al (2013) defined cashless economy an economic state where transaction can be done without actually holding raw cash as a means of transaction but rather with the use of credit or debit card payment for goods and services. Ejiro (2012) in Omotunde et al (2013) posits that cashless economy policy initiative of the Central Bank of Nigeria (CBN) is a move to improve the financial terrain but in the long run sustainability of the policy will be a function of endorsement and compliance by end-users. According to Tunde Lemon, the Deputy Governor of CBN, the CBN cash policy stipulates a daily cumulative limit of N150, 000 and N1, 000, 000 on free cash withdrawals and lodgments by individual and corporate customers respectively in the Lagos state with effect from March 30, 2012. Service fee will be charged on individuals and organizations that make cash transactions above the cumulative limits. Omotunde et al (2013) further clarified that the policy through the advanced use of information technology facilitates fund transfer, thereby reducing time wasted in Bank(s). e implementation of cashless policy and hence, the growth of cashless economy in Nigeria.
According to these scholars the introduction of the implementation of cashless policy began in Lagos State, Nigeria. Why Lagos? According to Central Bank of Nigeria (2011) Lagos state accounted for 85% of POS and 66% of cheques transaction in Nigeria. Cashless economy helps to reduce the amount of raw cash circulating in the Nigerian economy and also helps to encourage more electronic-based transaction. The policy is expected to reduce cost incurred in maintaining cash-based economy by 90% upon its full implementation in Nigeria (CBN, (2012). This study aims to investigate cashless policy and economic growth evidence from Nigeria .
1.2 Statement of the Problem
The introduction of the cashless policy by the Central Bank of Nigeria was aimed at aiding monetary policy as a technique of economic management to bring about sustainable economic growth and development This introduction is not fully operational due to high rate of illiteracy, inadequate sensitization/education of citizens on the benefits of the cashless policy, and inadequate 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.
Attempting to identify the effect of the cashless policy on the Nigerian poses a greater challenge as only few monetary and macroeconomic indicators can be found in relation to this. Countless numbers of scholars have attempted to identify the effect of cashless policy or e-banking. However, it is evident that few studies provided a comprehensive assessment of cashless policy and its impacts on the economy of developing countries like Nigeria. Most do not pay proper attention to the economic importance of this while some ignore its negative implications. This is often due to unavailability or unreliable panel data for monetary and macroeconomic indicators. This study focuses on Nigerian economy it is however difficult to translate cashless studies from one country to another.
1.3 Research Objectives
The general objective or main objective of this study is to investigate the effect cashless policy and economic growth evidence from Nigeria. The specific objectives are:
- To study the economic impact of cashless policy in Nigeria
- To examine the reasons for the adoption of cashless policy by the Central Bank of Nigeria.
- To determine the various banking channels that encourage cashless policy in Nigeria.
- To identify the challenges of cashless policy in Nigeria.
1.4 Research Questions
The following are some of the questions which this study intends to answer:
- What are the economic impacts of cashless policy in Nigeria?
- What are the reasons for the adoption of cashless policy by the Central Bank of Nigeria?
- What are the various banking channels that encourage cashless policy in Nigeria?
- What are the challenges of cashless policy in Nigeria?
1.5 Significance of the Study
This study will contribute to understanding the challenges faced with cashless policy and its adoption by Nigerians. The study also contributes to theory by providing information on various theories on economic development through the banking industry as well as the business sector as a whole which adds more value. The information contained in this report will also be of use in providing empirical evidence on the impact of cashless policy and economic growth. It will be of use to other studies within the banking sector.
1.6 Scope of the Study
This research is on the effect of cashless policy and economic growth. This study will be therefore carried out among bankers, business owners and individuals who use electronic banking in Nigeria.
1.7 Limitation of the Study
This study entailed investigation into a variety of issues to be able to achieve a comprehensive study of the problems; a lot of constraint were encountered in form of data collection, lack of adequate information from the respondents. The main limitation of this survey was the difficulty in getting accurate information from the bank employees as most of them were busy with their work schedules ad were unwilling to give adequate information about their job.
1.8 Definition of Terms
The following terms were used in the course of this study:
An economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.
It means 24-hour access to cash through an automated teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts. But electronic banking involves many different types of transactions, rights, responsibilities — and sometimes, fees.
Conclusion and Recommendations
On the basis of the afore-mentioned findings, the researcher drew the following conclusions:
- The impact of the adoption of the policy in has improved significantly.
- Operating cashless society in and indeed Nigeria is a wise strategy for fast tracking growth in the nation’s financial sector because of the fact that it saves time and protect against fraud and crimes.
- A lot of challenges liming the acceptability and adoption of the Cashless policy in are inadequate infrastructures, security concerns and illiteracy
- Finally, the factors that can improve the impact of the adoption of the Cashless policy in includes improvements of infrastructures, proper identification system and customer orientation and education
On the strength of the findings and conclusions derived from this study, the researcher wishes to make the following recommendations:
- Measures that will ensure that the reasons for the implementation of this policy are achieved should be put in place.
- The relevant stakeholders should intensify their efforts in achieving a successful implementation of the cashless policy.
- A major problem in the working of the cashless policy is internet related fraud. Nigeria is a major hub of electronic fraud and this can only be expected to increase as we march into the cashless economy. It is recommended that a country as large as Nigeria should have a signed law preventing cybercrime. Nigeria should make concerted efforts to design an internet security framework to check online fraud so that the public can be assured and protected against cyber-attack and fraud.
- There is the need to intensify the public enlightenment programme about the cashless system so that everybody will be well acquainted with the system since it will affect everybody. Since there is a high rate of illiteracy, and all people must be brought into the system, the government should design special enlightenment programmes for the non-literates, using probably signs and symbols to educate this segment on how to operate the cashless system (post on sale vis-à-vis mobile phones)
- The social infrastructural facilities should be adequately enhanced and maintained in order for success to be attained.
- The adequate technological infrastructures sufficient enough to carry the whole country along with this policy should be put in place. Since the implementation of the policy is now nationwide, each states of the federation must have the facilities needed in adequate proportion in order to facilitate a wide acceptance and usage by Nigerians.
- Relevant legislative laws curbing cyber crimes must be put in place by the initiators of this policy. This will create confidence in the mind of the masses.
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