The Central Bank Of Nigeria (CBN) Cashless Policy And The Nigeria Economy

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The Central Bank Of Nigeria (CBN) Cashless Policy And The Nigeria Economy


Abstract


This study titled” Central Bank of Nigeria Cashless Policy and Nigeria Economy (A study of CBN Enugu) intends to drive development and modernization our payment system in line with Nigeria’s vision 2020. The study also intends to investigate whether the efficient and modern payment system is positively correlated with economic development. The study also intends to ensure that the key for economic growth is conducive. The study also intends to investigate the reduce cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach. The research work also intends to improve the effectiveness of monetary policy in managing inflation and driving economic growth. The researcher made use of survey method for gathering information after which the following findings were derived; That the development and modernization of our payment system is in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020.


Chapter One


Introduction

1.1. Background of the Study

It is no longer news that the cashless policy introduced by the Central Bank of Nigeria (CBN) has formally taken effect nationwide on July 1, 2014. It is good to know that despite the challenges that characterized the preparation and test run of the scheme in a few selected states, the CBN has gone ahead to implement the policy nationwide. It is believed that the policy implementation will get better as time goes by as it is almost impossible to record a perfect launch anytime in Nigeria.

The scheme which was initially introduced in Lagos in 2011, soon spread and cashless transaction became effective in Abuja and the five states of Abia, Anambra, Kano, Ogun and Rivers in October 2013. On the back of the successes of the scheme observed in these states and the federal capital territory, the Apex bank decided to implements the policy in the remaining thirty states in the country.

Under the policy, CBN pegged withdrawal by individual and corporate accounts at N500,000 and N3million respectively. Charge fees for withdrawal above the limits of individuals and corporate accounts are pegged at 2% and 3% respectively. However ministries, departments and agencies, (MDA), diplomatic missions, embassies, multilateral, aid donor agencies and specialized banks are exempted from the policy penalties and charges are to continue in the seven states where the scheme was earlier launched, the CBN has decided to grant a one year waiver on the applications of withdraw charges in the thirty states set to roll out the policy.

For the proponents of the scheme, the cashless policy if properly implemented should reduce inflation and curtail the illicit act of money laundering in the country. Over time monetary watchers have been of the opinion that a reduction in the huge cash manually transacted in the country could lead to a reduction in inflation rate. Besides, there is the need for the country’s monetary system to fall in line with standard practices obtained across the world which the cashless policy exemplifies.

However, many Nigerians are still doubt over the success of the scheme. For some financial analyst and even laymen, a lot of issues have to be put in place before the much talked about cashless scheme can success in Nigeria.

For some Nigeria, the nationwide launch of the cashless scheme is good its timing is wrong. Some argument that for this policy to be successful, the apex bank needs to embark on a massive enlightenment programme. This is because key business, especially the small scale enterprises seem not to understand yet what the cashless policy is all about.

Indeed, the banks need to organize forums where key stakeholder especially customers would be educated and their fears on the new policy allayed. Enlightenment cannot be overlooked if this scheme must succeed. Though the objectives seemed good, inadequate enlightenment hindered the success of its launch and the actions of those who had not fully understood the benefits of the policy brought this nation to its knees.

In a recent parley with journalists in Lagos, EPPAN’s Chief Executive Officer, Mrs. Onajite Regha did reveal some of the drawbacks to the launch of the cashless scheme ranging from education to infrastructure among others. She said, “a lot of people have heard about the policy but many believe it does not affect them. The people concerned felt very upset about the policy saying it’s a punishment. Like the Timber Association in Sapele, Delta State. This was because they didn’t associate themselves with the merit of operating cash-less which involves inconveniences and safety for the users.

According to Onajite Regha (2013.30) on the challenges faced by the people at the grassroots level, which include, armed robbery, theft, loss of market to sea pirates amongst others, stressing that majority of the people in the hinterland still lack bank accounts because they have apathy towards banks.

Okonkwo M.G (201:56) said that others challenges are the fear of fraud, fear of loosing their phones, fear of ATM scam. During the awareness campaign, it was discovered that many share their Personal Identification Numbers (PIN) with friends, relatives and office assistants with the ignorance of fraud. People were also informed on the new improvement of the CBN to provide a consumer Protection Department, exclusively dedicated to the ash-less policy. The department operates 24 hours per day for complaints and problems regarding the cashless policy.


1.2. Statement of the Problem

Indeed, the CBN, which initiated the policy about two years ago, informed that it will take the initiative across the country by July 1, with the hope of reducing cash handling by Nigerians and subsequently drive financial inclusion.

This apex bank initiative is expected to enhance the integration of the country’s economy as presently 78.8 per cent of the nation’s rural population is largely unbanked.

The CBN is optimistic that the cash- less policy, when fully implemented will help the financial services industry capture Nigerian`s huge informal economy, which is driven by small scale farmers, traders, craftsmen and other types of small and medium sized business and consequently integrate it into formal economy.

Another major area of concern to many Nigerians is the telecommunications angle. The telecommunication network infrastructure seems not to have capacity to accommodate the envisaged increase in electronic transactions.

About 130millions active subscribers in the country currently grapple with increased drop quality of services, as exemplified by the incessant drop alls, poor voice clarity, network congestion, inconsistency of the billing system, high tariffs, among others, which persist on the networks.

This has become the practice because fraud thrives a great deal in transactions involving cash, but the situation is well checked if the electronic platforms are used. Investigation, however, showed that a lot of store attendants, who try to lure customers to pay cash, do so with the intention to make personal profit from such transactions.

Another issue that must be thoroughly addressed to ensure the success of the scheme is the issue of infrastructure. Infrastructure, no doubt, is a huge challenge for the system already; the human factor is another problem staring the policy and the CBN, in the face.

According to Mr. Femi Adeoti (2014:23) at a recent forum in Lagos, the Chief Executive Officer of Inlaks Computer, revealed that there are only 13,000 Automated Teller Machines (ATMs) spread across the country. This figure according to the financial expert is still very low and could also stand as roadblock for the expansion of the programme. He stressed that poor ATM and PoS terminal penetration, slow mobile money growth, and poor internet connectivity are some of the sore points that have since inception of the initiative reinforced earlier claims by industry stakeholders that the nation is not ripe for a nationwide implementation.

Meanwhile, over 70 percent of the total PoS terminal deployed and connected in Nigeria to drive the cash-less policy in the country are currently inactive. The figure was arrived at following a nationwide audit by the NIBSS of the PoS terminals so far deployed in the country as at the end of October last year.

On the human angle, investigations have revealed that the non-working state of most PoS terminals is predominately caused by the people who man the terminals.

Investigations have shown that some of these terminals are functional, but for dubious reasons, potential users are discouraged from using them, under the false pretence that they are bad. A good number of stores in the country have these terminals as payment options for customers, but most times people who want to use their electronic cards for payment are discouraged to do so: but are rather advised to pay cash.


1.3. Objectives of the Study

The purpose of this study is to examine the cashless policy, These includes the following;

  1. To drive development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020.
  2. To investigate whether the efficient and modern payment is positively correlated with economic development.
  3. To ensure that the key for economic growth is conducive.
  4. To investigate the reduce cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction option and greater reach
  5. To improve the effectiveness of monetary policy in managing inflation and driving economic growth and finally, the study will makes some recommendations on how to improve the cashless policy in the Nigeria economy.

1.4. Research hypotheses

  1. Ho: The development and modernization of our payment system is not in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020.
    Hi: The development and modernization of our payment system is in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020.
  2. Ho: The efficient and modern payment system is not positively correlated with economic development.
    Hi: The efficient and modern payment system is positively correlated with economic development.

1.5. Significance of the Study

The cashless policy which aims at reducing the dominance of cash in the Nigerian economy specifies charges for individuals and corporate organization that want to withdraw or lodge cash above prescribed threshold just as it encourages the use of electronics payment channels.

Under the policy, the cumulative cash withdrawal or deposit limit for individual accounts was pegged at N500, 000 per day and N3 million per day for corporate accounts.

The policy which commenced in Lagos in 2012 was last July extended to the Federal Capital Territory, Kano, River, Ogun, Abia and Anambra states.

According to the Head, shared Services CBN, Mr. Chidi Umeano, the decision by eth bankers committee to extend the policy was as a result of the success recorded in states where the policy had been implemented. Umeano explained: “From the success we have recorded in those areas” we have decided as an industry to move it to other states in the country.

“In other words, by the July 1, we are going live in all the states of the federation. As you well know, this is a critical part of the payment system modernization and the success registered so far has been very impressive”.

He states that statistics have shown that there had been a significant improvement in electronics banking channels.

Some of the alternatives channels being offered by banks and services providers include; Internet banking, mobile money transfer, Point of sale Terminals (PoS) and the use of Automated Teller Machines (ATMs). In a 2013 Banking Industry Customer Satisfaction Survey, conducted by KPMG professional services Nigeria, which covers more than N14,000 retail customers in 18 states, indicates an increase in ATM usage in the country.

The survey however revealed that amidst the proliferation of channel options, customers wanted banks to remember that convenience should remain a key focus. It also pointed out that cash availability at ATMs was the most important issue for retail customers in 14 of the 18 locations covered. It showed that 93 per cent of retail customers rated quality of services at the ATM as their most important services measure.


1.6 Scope and Limitation of the Study

The scope of the study covers the central bank of Nigeria cashless policy and the Nigeria economy. The researcher encounters some constrain which limited the scope of the study;

a) Availability of Research Material:

The research material available to the researcher is insufficient, thereby limiting the study

b) Time:

The time frame allocated to the study does not enhance wider coverage as the researcher has to combine other academic activities and examinations with the study.


1.7 Definition of Terms

CBN:

Means Central Bank of Nigeria

This is the central financial body that is charged the responsibility of managing Nigeria money and ensuring economic development.

Cashless Policy:

As the name implies, Cashless Policy means you can carry out financial transactions without the use of banknotes. The Cashless Policy introduced the use of debit or credit card as well as electronic transfer in financial transactions

Economy:

An economy is an area of the production, distribution, or trade, and consumption of goods and services by different agents


1.8 Organization of the Study

This research work is organized in five chapters, for easy understanding, as follows

  • Chapter one is concern with the introduction, which consist of the (overview, of the study), historical background, statement of problem, objectives of the study, research hypotheses, significance of the study, scope and limitation of the study, definition of terms and historical background of the study.
  • Chapter two highlights the theoretical framework on which the study is based, thus the review of related literature.
  • Chapter three deals on the research design and methodology adopted in the study.
  • Chapter four concentrate on the data collection and analysis and presentation of finding.
  • Chapter five gives summary, conclusion, and recommendations made of the study

Chapter Five


Summary, Conclusion and Recommendation

5.1 Introduction

It is important to ascertain that the objective of this study was to ascertain the central bank of Nigeria cashless policy and the Nigeria economy

In the preceding chapter, the relevant data collected for this study were presented, critically analyzed and appropriate interpretation given. In this chapter, certain recommendations made which in the opinion of the researcher will be of benefits in addressing the challenges of the central bank of Nigeria cashless policy and the Nigeria economy


5.2 Summary

This study was on the central bank of Nigeria cashless policy and the Nigeria economy. Five objectives were raised which included: To drive development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020, to investigate whether the efficient and modern payment is positively correlated with economic development, to ensure that the key for economic growth is conducive, to investigate the reduce cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction option and greater reach, to improve the effectiveness of monetary policy in managing inflation and driving economic growth and finally, the study will makes some recommendations on how to improve the cashless policy in the Nigeria economy. In line with these objectives, two research hypotheses were formulated and two null hypotheses were posited. The total population for the study is 200 staff of CBN in Enugu State. The researcher used questionnaires as the instrument for the data collection. Descriptive Survey research design was adopted for this study. A total of 133 respondents made up human resource managers, accountants, customer care officers and junior staff was used for the study. The data collected were presented in tables and analyzed using simple percentages and frequencies


5.3 Conclusion

This study shows that the introduction of cashless economy in Nigeria can be seen as a step in the right direction. It is expected that its impact will be felt in modernization of Nigeria payment system, reduction in the cost of banking services as well as reduction in high security and safety risks. This should also include curbing banking related corruptions and fostering transparency. It is also assumed that the introduction of cashless policy in Nigeria will help to reduce the amount of bills and notes circulating in the economy. This should, therefore, reduce handling operation cost incurred on conventional money, as well as reduction in cash related crimes. It should also help to provide easy access to banking services for Nigerians


5.4 Recommendation

The cash-less policy should however not been seen as having no consequences. For instance, the use of POS in cash-less setting will attract special charges that do not go with cash transactions as shown in the data analysis section. To mitigate the challenges of the cash-less policy it is recommended that power and electricity infrastructures should be put in place to provide support for electronic banking equipment. Situations where banks have to provide own power supply practically every working day (like the banks in Abraka environs) will increase overhead costs and diminish the gains accruable to them. Legal and regulatory framework that will check electronic fraud should be put in place by the government. The mandate of anti-graft agencies like the Economic and Financial Crimes Commission (EFCC) should be expanded to cover fraudulent practices that are associated with operations of cash-less economy. In addition, the policy should have local content by ensuring that it is in tune with fundamental economic policy of Nigeria founded on socio-cultural ideals of Nigerians. A situation where foreign banking culture is imported and imposed should not be associated with the cash-less policy. Finally, the CBN should embark on public enlightenment to educate the populace on the nitty-gritty of the cash-less system. This will raise the level of awareness and reduce possible resistance by the banking public


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