The Effectiveness And Challenges Of The CBN Cashless Policy On Rural Business Development (A Case Study Of Zenith Bank Plc)
This study is on the effectiveness and challenges of CBN cashless policy on rural business development. 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
1.1 Background of the Study
The financial system of any economy is responsible for mobilizing savings for productive investments and ensuring efficient resource allocation. Banks have traditionally played an active role in this regard. A large volume of literatures such as those of Ajayi (2006), Adegbaju and Olokoyo (2008), and Babalola (2008) have documented the contribution of banks to socioeconomic development of nations. In recognition of this, various financial policy reforms targeting the banking sector have been pursued in Nigeria. The recent of such policies within the last decade are: the recapitalization of banks initiated by the Central Bank of Nigeria (CBN) in July, 2004 and concluded in December 31, 2005, formalisation of adoption of electronic banking, and transition from cash based to cash-less financial arrangement.
One of the prerequisite for the development of national economy according to Ajayi and Ojo (2006) is to encourage a payment system that is secure, convenient, and affordable. In this regard, developed countries of the world, to a large extent, are moving away from paper payment instruments toward electronic ones, especially payment cards (Humphrey, D. B. 2004). In these countries, for instance, it is possible to pay for a vending machine snack by simply dialing a number on one‘s phone bill. In recent times, the mobile phone is increasingly used to purchase digital contents (e.g. ringtones, music or games, tickets, parking fees and transport fees) just by flashing the mobile phone in front of the scanner at either ‗manned‘ or unmanned point of sales (POS). In Nigeria, as it is in many developing countries, cash is the main mode of payment and a large percentage of the populations are unbanked (Ajayi and Ojo (2006). This makes the country to be heavily cash-based economy.
Argument in favour of cash-based transactions abounds in the literature. A study conducted in UK in march 2010 (the future of cash in UK) argued that cash differs from other payment instruments in the following regards; it circulates, it is always valuable, it provides full and final settlement of a transaction, it allows for anonymity, once issued, the circulation of cash is uncontrolled, it is regarded as public good by its users. However, the cost of cash to Nigeria financial system is high and increasing; the cost was very close to fifty billion naira in 2008 (CBN, 2012). Recently, it has been revealed by the CBN that the direct cost of cash is estimated to reach a staggering sum of one hundred and ninety two billion naira in 2012. Other challenges resulting from high-cash usage among others include; robberies and cash-related crime, revenue leakage arising from too much of cash handling, inefficient treasury management due to nature of cash processing, high subsidy, high informal sector etc. Against these backdrops, the CBN introduced the cashless policy in April 2011 with the objective of promoting the use of electronic payment channels instead of cash . Presently, the CBN is conducting a pilot scheme of the cashless policy in Lagos, which commenced in January 1st 2012. So far, implementation of the policy in Lagos has not gained expected traction. Hence a rollout across the country has been substituted with phased implementation in Port Harcourt, Kano, Aba and the Federal capital territory (CBN 2012). This study therefore aims at two major objectives, first to look into the prospects of cashless policy in Nigeria and second its challenges. The study proceeds as follows. Section 2 offers an overview of cashless policy and some stylized facts on non-cash payment in Nigeria. In sections 3, a brief review of literature is undertaken. The study expatiated on the effectiveness and challenges of the CBN cashless policy on rural business development using Zenith bank as a point of reference.
1.2 Statement of the Problem
Cashless economy is an economy where transaction can be done without necessarily carrying physical cash as a means of exchange of transaction but rather with the use of credit or debit card payment for goods and services. One of the prerequisite for the development of national economy according to Ajayi and Ojo (2011) is to encourage a payment system that is secure, convenient, and affordable. In this regard, developed countries of the world, to a large extent, are moving away from paper payment instruments toward electronic ones, especially payment cards (Humphrey, 2013). In these countries, for instance, it is possible to pay for a vending machine snack by simply dialing a number on one’s phone bill. In Nigeria, as it is in many developing countries, cash is the main mode of payment and a large percentage of the populations are unbanked.
1.3 Objectives of the Study
- To examine the features of cashless policy of CBN
- To determine the effectiveness of cashless policy of CBN
- To find out the challenges of cashless policy of CBN to rural business development.
- To proffer a better way of implementing the cashless policy
1.4 Research Hypotheses
For the successful completion of the study, the following research hypotheses were formulated by the researcher;
- H0: there are no challenges of cashless policy of CBN to rural business development.
H1: there are challenges of cashless policy of CBN to rural business development.
- H02: there is no effectiveness of cashless policy of CBN
H2: there is effectiveness of cashless policy of CBN
1.5 Significance of the Study
This study, which is primarily aimed at explaining the effectiveness and challenges of CBN cashless policy on rural business development, will provide an insight into the problems associated with cashless policy on rural business development. This report would be of great benefit for CBN, to expose them to the effectiveness and challenges of CBN cashless policy on rural business development. The findings will be useful for researchers to further generate knowledge in the field.
1.6 Scope and Limitation of the Study
The scope of the study covers the effectiveness and challenges of CBN cashless policy on rural business development. 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
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.
c) Organizational Privacy:
Limited Access to the selected auditing firm makes it difficult to get all the necessary and required information concerning the activities
1.7 Definition of Terms
Effectiveness is the capability of producing a desired result or the ability to produce desired output. When something is deemed effective, it means it has an intended or expected outcome, or produces a deep, vivid impression.
A call to someone to participate in a competitive situation or fight to decide who is superior in terms of ability or strength.
Cashless policy is a policy established in the year 2012 by the Central Bank of Nigeria to curb excesses in the handling of cash in Nigeria. The policy was enforced not to eliminate the use of cash but to reduce the volume of cash in circulation.
Rural development is the process of improving the quality of life and economic well-being of people living in rural areas, often relatively isolated and sparsely populated areas
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
Summary, Conclusion and Recommendation
It is important to ascertain that the objective of this study was to ascertain the effectiveness and challenges of CBN cashless policy on rural business development
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 CBN cashless policy on rural development
This study was on the effectiveness and challenges of CBN cashless policy on rural business development. Four objectives were raised which included: To examine the features of cashless policy of CBN, to determine the effectiveness of cashless policy of CBN, to find out the challenges of cashless policy of CBN to rural business development, to proffer a better way of implementing the cashless policy.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 ofCBN 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
The introduction of electronic banking in Nigeria has impacted positively on the development of payment system in particular and the banking system in general. Electronic banking is the platform on which cash-less policy sails. This study has shown that cash-less policy will impact positively on the fortunes of banks even though some of the charges are not wholly their revenue. It was also discovered that some charges like COT, over-the- counter charges etc. which are associated with a cash-based economy will be a thing of the past. The unbanked will become banked, thereby increasing the customer base of banks. With reduction in the volume of cash in circulation, this will avail banks more deposits to do their businesses which will impact positively on their profits. Also, the cost of banks’ operations will considerably reduce
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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