A Critical Analysis On The Impact Of E-Naira On Deposit Money Bank

Project and Seminar Topics with material for Banking and Finance

A Critical Analysis On The Impact Of E-Naira On Deposit Money Bank


Abstract


The broad focus of this study is to critically examine the impact of e-Naira on deposit money banks using Firstbank Nigeria Plc in Lagos Metropolis as case s as a case study. Survey research design was employed for the study and with aid of convenient sampling sixty female (66) staff of Firstbank Nigeria Plc in Lagos Metropolis was selected as the participant of the study. The questionnaires were properly completed as well returned by only 60 respondent after being administered and this was a basis by which the primary data were collected. The hypothesis was tested using chi-square test statistical tool (SPSS v.2.3)and the result were similar to those of the responses drawn from the questionnaires. Findings of the study revealed that The invention of e-Naira would not reduce the customer threshold of deposit money banks. The invention of the e-Naira will have a significant impact on the survival of deposit money banks. E-Naira would enhance digital transactions and is unlikely to completely replace existing forms of money. The study therefore recommends that the CBN needs to continue to deepen its knowledge and familiarity with new technologies that support digital currency, engage with stakeholders in the technology ecosystem and prepare the necessary infrastructure for the commencement of the use of eNaira. Finally, Deposit Money Banks and financial institutions should develop strategies to respond to the opportunities and threats of digital money.


List of Tables


Chapter One:

Introduction

  • 1.1 Background of the study
  • 1.2 Statement of the problem
  • 1.3 Objective of the study
  • 1.4 Research hypotheses
  • 1.6 Significance of the study
  • 1.7 Scope of the study
  • 1.8 Limitation of the study
  • 1.9 Definition of terms

Chapter Two:

Review of Literature

  • 2.1 Review of concepts
  • 2.2 Theoretical Framework
  • 2.3 Review of Empirical studies

Chapter Three:

Research Methodology

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

Chapter Four:

Data Presentation and Analysis

  • 4.1 Data Presentation
  • 4.2 Inferential Statistics

Chapter Five:

Summary, Conclusion and Recommendation

  • 5.1 Summary
  • 5.2 Conclusion
  • 5.3 Recommendation
  • References
  • Appendix

Chapter One


Introduction

1.1 Background of the Study

Banks are a vital part of every economy. It is the driving force behind society and economic progress. The importance of banking services to any economy’s growth and development cannot be overstated. Prior to the introduction of electronic devices in the delivery of financial services in Nigeria, incompetence, time-consuming bureaucracy, bottlenecks, lengthy lines, crowds, and other public complaints plagued banking operations. The birth of the information age, on the other hand, is the most significant development of the millennium that has had a considerable impact on company operations throughout the world today. Information and communication technology (ICT) has advanced to the point that it is now feasible to digitalize information and transfer it quicker and cheaply in mega and tetra bytes (Ezuwore, Eyisi, Emengini, & Alio, 2014).

Ezuru et’al (2014) went on to say that, as a result of this rapid technical advancement and financial market expansion, a number of new transaction-related products have been launched in recent years. The transfer of monetary value from one individual to another is involved in these transactions. Currency and notes are turned into data, which is then sent via the internet or through satellite. Through cashless economic policies and the introduction of digital currencies, these new financial services via the electronic medium have resulted in a significant reduction in transaction costs and the convenience of transferring funds. The usage of digital currencies is typically regarded as a complement to traditional financial transactions rather than as a required or beneficial replacement.

Digital currencies, according to Gilbert, Scott, and Loi, Hio. (2018), have qualities comparable to traditional currencies but, unlike currencies with printed banknotes or minted coins, do not typically have a physical form. The lack of a tangible form enables for near-instantaneous transactions through the internet and eliminates the costs of transmitting notes and coins. As a result, digital currencies will continue to be helpful for inter-party transactions as long as both parties acknowledge the currency’s legitimacy, as they offer the benefit of quick settlement, particularly in online communities. Although cryptocurrency is the most popular form of digital currency, there are thousands of them in the modern world, each of which operates and enjoys security thanks to the respective encryption codes mutually adopted by the parties in such transactions, especially since most governments around the world have shied away from conferring any form of endorsement and legitimacy on transactions conducted through such channels.


1.2 Statement of the Problem

The goal of monetary policies among developing economies is to ensure the stabilization of their financial systems and currencies. The paper naira in Nigeria experienced a major foreign currency problem prior to the introduction of the electronic naira, and the naira’s rate of depreciation caused significant concern among residents, prompting the need to test an alternate legal tender (Uche, 2021).

Taking advantage of this rapid technological progress and financial market development, has led world economies into transiting from paper currency to digital currency of which Nigeria is not not left behind. Emmanuel (2021) in his study affirmed that central banks globally are working delicately on their digital currency by gradually weaning themselves off rapidly-declining cash payments, and this is the reason the Central Bank of Nigeria joined the fray so that Nigeria is not left in the lurch which gave rise to the launch of her e-Naira. Kalu (2021) further asserts through Daily Trust publication that the e-Naira is built on blockchain open-ledger technology. Which entails that the liability of the e-naira money is directly on CBN, and similar to physical cash. Thus, implies that Nigerians are given the opportunity to bank with the CBN (Kalu, 2021).

However deposit money banks have expressed concern about how this new innovation o would affect banking operations and customer thresholds owing to the fact that the psychology of an average individual towards banking services has been negatively affected. This is due to the stress attached to traditional banking system where long queues, tally numbering, loss of valuable work hours, and so on makes it challenging for people to assess their money. Hence, the invention of the eNaira appear to make things easier as it would to would save account holders lots of hitches witnessed in banks. Thus, should e-naira be widely accepted as a general legal tender for financial transactions, what implication would it pose for financial institution. It is upon this premise that this study seeks to examine the impact of e-Naira on Deposit Money Banks.


1.3 Objective of the Study

The broad objective of this study is to critically examine the impact of e-Naira on deposit money banks using Firstbank Nigeria Plc as a case study.

Specifically, the study seeks to:

  1. Examine if the e-Naira would enhance digital transactions.
  2. Investigate if the invention of e-Naira would reduce the customer threshold of deposit money banks.
  3. Ascertain if the invention of the e-Naira will have any significant impact on the survival of deposit money banks.

1.4 Research Hypothesis

The research is guided by the following tentative statement:

  • HO1: The invention of e-Naira would not reduce the customer threshold of deposit money banks.
  • HO2: The invention of the e-Naira will have a significant impact on the survival of deposit money banks.

1.5 Significance of the Study

The study has academic, political, social, and economic dimensions and is significant in these respects. It contributes to the ongoing debate within and among governments, civil society groups, scholars, development experts, and the banking sector. The study will assist commercial bank management in developing strategies for improving their services in light of changing monetary invention and financial transaction digitization.The study will also facilitate the financial inclusion of unbanked Nigerians. Finally, the study will add to the body of existing literature and serve as reference material for both scholars and students who wish to conduct further studies in related fields.


1.6 The Study’s Scope

The scope of this study borders on a critical analysis of the impact of e-Naira on deposit money banks. It will be ascertained if the invention of e-Naira will reduce the customer threshold of deposit money banks. The study is, however, limited to First Bank Nigeria Plc.


1.7 Limitation of the Study

Like in every human endeavour, the researchers encountered slight constraints while carrying out the study. Insufficient funds tend to impede the efficiency of the researcher in sourcing for the relevant materials, literature, or information and in the process of data collection, which is why the researcher resorted to a limited choice of sample size. More so, the researcher will simultaneously engage in this study with other academic work. As a result, the amount of time spent on research will be reduced. However inspite of the factors that posed to be a constrain the researcher downplayed them all to give in the best to make the research a success.


1.8 Term Definitions

E-Naira:

eNaira is a central bank digital currency (CBDC) issued by the Central Bank of Nigeria as a legal tender. It is the digital form of the Naira and will be used just like cash.

Banks:

A bank is a financial institution licensed to receive deposits and make loans. Banks may also provide financial services such as wealth management, currency exchange, and safe deposit boxes. There are several different kinds of banks, including retail banks, commercial or corporate banks, and investment banks.

Digital Currency:

Digital money (or digital currency) refers to any means of payment that exists in a purely electronic form. Digital money is not physically tangible like a dollar bill or a coin. It is accounted for and transferred using online systems.


Chapter Five


Summary, Conclusion and Recommendation

5.1 Summary

The broad focus of this study is to critically examine the impact of e-Naira on deposit money banks using Firstbank Nigeria Plc in Lagos Metroplois as case s as a case study. Specifically, the study examined if the e-Naira would enhance digital transactions. It investigated if the invention of e-Naira would reduce the customer threshold of deposit money banks. It ascertained if the invention of the e-Naira will have any significant impact on the survival of deposit money banks.

Survey research design was employed for the study and with aid of convenient sampling sixty-six (66) staff of Firstbank Nigeria Plc in Lagos Metroplois was selected as the participant of the study. The sources of data collection was both primary and secondary with the application of questionnaires as an instrument to gather the necessary data. The questionnaires were properly completed as well returned by only 60 respondent after being administered and this was a basis by which the primary data were collected. Textbooks, journals, articles, law reports, newspapers publications, were collected as secondary data, and also limitations to the study were indicated. The hypothesis was tested using chi-square test statistical tool (SPSS v.2.3)and the result were similar to those of the responses drawn from the questionnaires.


5.2 Conclusion

Money lubricates economic activity. It is also a deeply sensitive social and cultural issue for society, organizations, and individuals. Changes in the way money is created and used cannot be separated from its economic, technological, social, political, cultural, historical, religious, and ethical contexts. Digital money is in its early stages of development, and these complex and interrelated contextual factors will influence its future direction and adoption, adding to the unpredictability of its trajectory of adoption and influence. Nonetheless, a combination of globalization, urbanization, and digitalization has seen an irreversible shift in the way money flows in economic systems. These changes appear to be reshaping traditional financial markets, such as consumer or retail banking and commercial banking, and financial services such as foreign exchange. They invite a significant management research agenda, and, while there is still much to be discovered, it is possible to speculate on some of the factors that will affect its progress.

Findings of the study reveals that the interaction between Nigeria’s Electronic Niara and Deposit Money bank may not be negative as envisaged by Central Bank of Nigeria. Thus the following conclusions were derived from the study:

  1. The invention of e-Naira would not reduce the customer threshold of deposit money banks.
  2. The invention of the e-Naira will have a significant impact on the survival of deposit money banks.
  3. E-Naira would enhance digital transactions and is unlikely to completely replace existing forms of money .
  4. There will be competition but coexistence between existing and new institutions, business strategies and models, platforms and technologies, and the study of the dynamics in those relation-ships offer rich research potential.
  5. It is possible to speculate that competitive advantage in digital money ecosystems will depend on the judicious balancing of proprietary positions and openness. Partnerships will be a core competitive tool, with

5.3 Recommendation

The following recommendations are made from the conclusion of this study:

  1. Banks and financial institutions should develop strategies to respond to the opportunities and threats of digital money.
  2. Governments should continue to try to develop effective regulations that preempt rather than respond to financial challenges.
  3. The digital money ecosystem will require new talent in management, science, and technology, and, as with most emerging innovations, hence organizations should employ multidisciplinary staff, that are market facing in orientation, and operate with a collaborative and open approach are likely to be favored.
  4. There will be an enormous challenge for regulators, hence Central Bank Of Nigeria should be proactive to protect societal interests while encouraging entrepreneurship and experimentation.
  5. The CBN needs to continue to deepen its knowledge and familiarity with new technologies that support digital currency, engage with stakeholders in the technology ecosystem and prepare the necessary infrastructure for the commencement of the use of eNaira.

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