The Central Bank of Nigeria (CBN) has in recent times engaged in series of reformations aimed at both making the Nigerian financial system formidable and enhancing the overall economic performance of Nigeria so as to place it on the right path in tune with global trends. There was the capitalization (to the tune of minimum of N25billion) agenda (Ajayi, 2006). There was also the aborted move at redenomination of the Naira. Recently, the CBN came out with two purportedly laudable agenda – the Islamic banking (non-interest banking) and the cashless economy (e-payment system). (Babalola, 2008).
Some of these policy measures came with tremendous success despite the initial skepticisms of Nigerians. For instance, when the CBN in July 2004 set December 31st ,2005 deadline for N25billion minimum capitalization, it was greeted with considerable cry and criticism, when the programme was completed, the banking landscape was transformed out of a system dominated mainly by “fringe banks to one made up of largely “mega banks” (Adeyemi, 2006). The product of the exercise was to “ensure a diversified, strong and reliable banking industry where there is safety of depositors’ money, and reposition the banks to play active developmental roles in the Nigerian economy” (Adegbaju and Olokoyo, 2008). This remark sums up the assessment of analysts about the outcome of the reform agenda.
In recent years, Nigeria has been experiencing a growth turnaround and conditions seem right for launching onto a path of sustained and rapid growth, justifying its ranking amongst the N11 countries as identified by Goldman Sachs to have the potential for attaining global competitiveness based on their economic and demographic settings and the foundation for reform’s already laid. Constraints to the achievement of Nigeria’s ambition to be amongst the top 20 economies of the world by year 2020 is the fact that the Nigerian economy is too heavily cash oriented in transactions of goods and services which is not in line with global trends (http://www.nv2020bsg.org/aboutus.php).
In its efforts to rescue the Nigerian economy from the brinks of total collapse, the CBN in collaboration with the Bankers Committee the cashless economy policy designed to provide mobile payment services, breakdown the traditional barriers hindering the financial inclusion of millions of Nigerians and bring low-cost, secure and convenient financial services to urban, semi-urban and rural areas across the country (www.cenbank.org/out/speeches/2012/g…).
The cashless economy policy initiated by the CBN led by its Governor; Sanusi Lamido Sanusi was introduced first in Lagos state, the country’s economic hub with the aim of achieving an environment where a higher and increasing proportion of transactions are carried out through cheques and electronic payments in line with the global trend (Obodo, 2012).
Upon this background, this study is poised to investigate and appraise to the best of the researchers ability the impact of the cashless economy policy on Nigerian citizens and the economy at large.
Some other policy agenda did not enjoy as much acceptance as did the recapitalization agenda. For instance, the redenomination proposal was snubbed and judged to be counter-productive. In the same vein, the non-interest, Islamic banking concept has been greeted with a lot of skepticism, and the initiators are accused of masking under some hidden agenda.
The same may be said of the proposal on the introduction of “cashless economy”. The reaction of one Gibson sums up the skepticism in certain quarters about the “cashless economy”, he remarks that “I am foreseeing the ANTI-CHRIST stepping in and the fulfillment of Biblical prophecy that a time for cashless society will come and nobody will buy or sell except you have a number, be wise” (magill, 2010). This may mean that not enough has been done to address the genuine concerns of the citizenry about the cashless economy.
So much may have been said about the anticipated gains attendant to the adoption of e-payment and cashless economy (or cashless banking), but in concrete terms, people have not been convinced that the agenda is for the good of all.
While we may point to such economies as the Japanese or U.S, we must be very ready to accept the fact that these are economies with functional institutional basis which cannot also be said about Nigeria with much conviction. Apart from the institutions, one fear that has been expressed is the state of Nigerian infrastructural decay. Have we witnessed the impact of infrastructure on the implementation of ‘cashless economy’ or is it an assumption that the infrastructural platform needed for the cashless economy to perform will simply come with the cashless economy?
All things being equal, there are still a few downsides to a cashless economy. Money by its nature is abstract. The less cash that flows through our hands, the more intangible it becomes and the more we lose our sense of its real value. Our banked assets are now on an electronic apparition, and the fear of not having cash at hand is a downturn (www.reinventrebuild.com/nigerione.php.).
Furthermore, the drive towards a cashless economy; a recent key policy of the CBN which has imposed on the financial sector calls for a leaner staff roll in many of the banks which has led to the mass retrenchment of workers, leaving many Nigerians without a source of income Considering also that the sustainability of the policy will be a function of endorsement and compliance by the end users, the researcher deemed it fit to effectively gauge the level of the policy’s endorsement by means of this research with respect to the end users.
Finally, anxiety still persists amongst Nigerians from every sector about how the introduction of the cashless economy policy in Nigeria will affect businesses, prices and economic stabilization.
These among other reasons led the researcher to carry out this study not only to examine and appraise the impact and effects of the cashless economy policy on the Nigerian economy, but to determine whether it will serve as a viable alternative cash transaction method in our society.
With respect to the above, one way of proffering solution to the problem would be to find out as well as determine among other things the extent to which the adoption of the cashless economy policy will enhance the growth of financial stability in the country. The extent to which Nigerians will significantly benefits from the cashless economy initiative, how the policy will ease business for them and its level of acceptance.
Statement of the Problem
As more payment systems have been introduced, pundits have been predicting the emergence of a ‘cash less society’. Today, we still pay with cash and checks, but several other payment instruments, such as credit and debit cards, are widely used. The use of paper money is more declining, but at a rather slow pace. As it were, Nigeria is a country heavily dominated by cash and there are some factors that negatively affect the choice of cash over non-cash instruments, some of these include time spent in counting and verifying cash, susceptibility to loss, time spent in the banking halls, amongst others (Nnanwobu et al, 2011).
A cash-based economy is one which is characterized by the psychology to physically hold and touch cash a culture informed by ignorance, illiteracy, and lack of security consciousness and appreciation of the merit of digital payment (Ovia, 2002). Cash, as a payment system, attracts lots of negative consequences such as high cost of handling cash, risks of using cash and keeping them in houses which eventually lead to high rate robbery, financial loss in the case of fire and flooding incidents. High cash usage results in lots of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth. Also high cash usage enables corruption, leakages, money laundering, counterfeiting, mis-management, mutilation and depreciation in value if not invested. Some or most of these factors are one which exists in the Nigerian economy today thus creating gap for this current study.
In Nigeria today, infrastructure is a major problem that hinders the money deposit banks from attaining full potential in terms of certain policy implementations and its impact on financial transactions in the banking industry. The infrastructure in Nigeria over the years hasnt been reputable and thus has given way to ineffectiveness to the sincerity in financial transactions in the banks. The level of technology in the nation is rather poor and increasing at a slow pace and as such hasn’t given room for major development and policy implementations that may have risen. The technology available for carrying out banking transactions are not as effective as they ought to be therefore leaving people with no other choice than to keep cash in their houses in order to avoid having to spend lots of time in the banking halls due to low servers, interrupted power supply, bad internet services. Illiteracy and the low level of education of people does nothing else than leave people in the dark and therefore results into the inability of the people to understand when developments are being put into place. Many people do not see the need to keep their money in the banks or invest them due to the lack of understanding they have and also insufficient publicity and awareness measures are what have being in existence which if dealt with would at least reduce the lack of understanding of many and make them see viable reasons why they should keep their money in the banks and invest them other than keep them in their houses as a route to the safety of many lives and better growth of the economy and as such increase the standard of living. This of course, is the motivation behind this study.
As a matter of fact, the demand for money is being taken in terms of demand deposits in banks and liquid assets outside the banks that is the average willingness of people to either hold money in cash or keep it as demand deposits in the banks effects the activities of commercial banks in controlling the amount of money in circulation, which in turn determines the hold of the CBN on the economy in terms of monetary policy implementations. The analysis of banking innovations and the response of the public towards them would help determine the hold of the Central Bank of Nigeria (CBN) on the extent to which they have been able to foster financial transactions in money deposit banks across the nation.
The introduction of E-commerce has made room for various tools in transacting business, although not all of these tools have been fully utilised. The new policy adopted is such that has been made to affect the whole economy and to put in full use all of these tools which include the monetary and fiscal policies, and in turn will maximise the effort of the e-commerce innovation.
1. What is Cashless economy initiative will be of significant benefits to Nigerians.
2. How can cashless economy policy can enhance the growth of financial stability in the country
3. What is the relationship between Cashless policy and accessibility to customers’ accounts?
4. To what extent does the Cashless policy affect queue-ups in banking halls?
5. What relationship exists between Cashless policy and cash-related robbery in money deposit banks?
6. What is the relationship between Cashless policy and the promptness of bank-related transactions?
Objectives of the Study
The broad objective of this study is to establish the relationship between CBN’s Cashless policy and the development of the financial sector and the Nigerian economy. This broad objective is broken down to the following specific objectives which are;
1. To analyse the adoption of the cashless economy policy can enhance the growth of financial stability in the country
2. To ascertain cashless economy initiative will be of significant benefits to Nigerians.
3. To ascertain the relationship between Cashless policy and accessibility to customers’ accounts.
4. To investigate the relationship between Cashless policy and queue-ups in banking halls.
5. Ascertain the relationship between Cashless policy and the promptness of bank-related transactions.
Hypotheses of the Study
H0: Cashless economy initiative will not be of significant benefits to banking sector.
Hi: Cashless economy initiative will be of significant benefits to banking sector.
H0: The adoption of the cashless economy policy cannot enhance the growth of financial stability in the country.
Hi: The adoption of the cashless economy policy can enhance the growth of financial stability in the country.
Justification for the Study
Nigeria can be regarded as a cash-based economy because majority of retail and commercial payments are made in cash. According to a recent CBN survey, cash-related transactions account for 99 percent of customer activity in Nigerian banks today. In addition, it discovered that cash transactions above N150,000 was largest in terms of value (N1469billion) and second smallest in terms of number or volume (10 percent). However, some other policy agenda did not enjoy as much acceptance as did the recapitalization agenda; for instance, the redenomination proposal was snubbed and judged to be counterproductive. In the same vein, the non-interest, Islamic banking concept has been greeted with a lot of skepticism, and the initiators are accused of masking under some hidden agenda. The same may be said of the proposal on the introduction of “cashless economy”. The reaction of one Gibson sums up the skepticism in certain quarters about the “cashless economy,” he remarks that “I am foreseeing the ANTI-CHRIST stepping in and the fulfillment of Biblical prophecy that a time for cashless society will come and nobody will buy or sell except you have a number, be wise”. This may mean that not enough has been done to address the genuine concerns of the citizenry about the cashless economy. So much may have been said about the anticipated gains attendant to the adoption of e-payment and cashless economy (or cashless banking), but in concrete terms people have not been convinced that the agenda is for the good of all. While we may point to such economies as the Japanese or U.S, we must be very ready to accept the fact that these are economies with functional institutional basis which cannot also be said about Nigeria with much conviction. Apart from the institutions, one fear that has been expressed is the state of Nigerian infrastructural decay. Have we assessed the impact of infrastructure on the implementation of ‘cashless economy’ or is it an assumption that the infrastructural platform needed for the cashless economy to perform will simply come with the cashless economy? From the foregoing problems, The significance of this study can in no form be overemphasized as it aims to aid in improvement of the policy which would raise it chances of being implemented successfully. This study would therefore aid in pin-pointing the problems in the policy, the benefits of the policy and its application and how it affects money deposit bank transactions in Nigeria respectively. Therefore, exploring intense understanding of the whole cashless policy process and its implementation is that of grave importance to this study at the moment.
Existing studies on the topic was examined and thus more light was thrown to the topic in question by this study following this regard. This study is one of the recent works addressing the effectiveness and impact of the cashless policy on money deposit bank trasactions in Nigeria although previous studies have shown that works have been done on it in other countries and this anticipated will help bridge the gap between current perceptions about the cashless economy and the actual operations of the system.
Scope of the Study
This study examined CBN cashless policy by exploring its impact on the Nigerian economy. Since cashless policy is a recent economic policy with no previous data and more so, the study seek the opinion of the people by examining the impact analysis of the policy. Basically, for this study, both primary and secondary sources of data was used in carrying out this research. For the primary data, a survey would be carried out within the Lagos State metropolis as it is the only state where the policy is being implemented for now, while the secondary data focuses on every available from the Central Bank of Nigeria (CBN) within reach and various paper publications.
This study would be presented in five (5) chapters. The first chapter is the introduction which includes the background to the study, statement of the problem, research questions, research hypothesis, objectives of the study, justification of the study, scope of the study, and the study plan.
Chapter two focuses on the conceptual and theoretical review, the analytical review and review of related literature on the cashless policy. It will also provide an overview of what the policy is about, the aims, objectives, merits, shortfalls, application and the implementation and how it affects money deposit bank-based transactions. This chapter will also discuss few experiences of other countries with the cashless economy.
Chapter three includes the research methodology that is data specification, method of data collection, method of analysis and sources of data.
Chapter four is basically data presentation and analysis
Chapter five is the summary, conclusions and recommendations.