Cashless Policy and the Nigerian Payment System

Nwani Jemima John,Chinonso Karen Eke,Nwaimo Chilaka Emmanuel,Kanu Success Ikechi

doi:10.18775/ijied.1849-7551-7020.2015.56.2001

Abstract

Before the introduction of the cashless policy by the Central Bank of Nigeria in 2011, the Nigerian economy was heavily cash-oriented in its transaction of goods and services contrary to the global trends. With the aid of paired data samples between 2007 and 2017, this study evaluates the impact of cashless policy on the Nigerian payment system. The operations of a cashless economy were assessed based on the use of Cheques, funds transfer channels and Automated Teller Machines (ATMs). Analysis of data showed that the volume and usage of cheques as a means of financial settlement has failed and was partially replaced by electronic payment systems. Banks are getting more involved in the use of interbank fund transfers rather than a cash settlement. It was also ascertained that the use of ATM’s as a means of financial intermediation is increasing. It is anticipated that the use of ATMs will become even more popular in Nigeria in the near future. To some extent, the outcome of the study has justified the implementation of the cashless policy initiative in Nigeria. However, the innovation and operations of the policy are not without its related limitations. There are various challenges associated with its practice, ranging from poor infrastructural facilities and difficulty in imbibing the e-payment culture due to illiteracy. Other socio-cultural factors that constitute an impediment include celebrations like weddings, birthdays and festivals. On such occasions, Nigerians prefer to ”display or spray raw cash’’ rather than issuing cheques. Thus, more effort needs to be put in place by the regulatory authority to re-orientate the masses and to encourage the use of E–payments channels, cheques, funds transfer options and, owning/ operating of bank accounts. This will give a further boost to the development of the Nigerian payment system.

Highlights

A cashless economy displays an economic situation whereby transactions are carried out without the need to move physical cash; and this is done with the use of credit card or debit card payments (Taiwo et al, 2016).Money is often described based on its three functions; as a unit of account, a medium-ofexchange and a store-of-value
With the aid of paired data samples between 2007 and 2017, this study evaluates the impact of cashless policy on the Nigerian payment system
1.2 Aim of the Study The major aim of this study is to identify the contributions of a cashless economy to the Nigerian payment system

Summary

Introduction

A cashless economy displays an economic situation whereby transactions are carried out without the need to move physical cash; and this is done with the use of credit card or debit card payments (Taiwo et al, 2016).Money is often described based on its three functions; as a unit of account, a medium-ofexchange and a store-of-value. The cashless economy does not mean a complete absence of cash transactions, rather it refers to cash transactions being kept at the barest minimum It is an economic system where transactions are not predominantly characterized as an exchange for actual cash (Swartz, and Fermar, 2004).). The Central Bank of Nigeria (CBN) adopted the cashless economy policy initiative that was already in use globally for a number of key reasons. This includes the need to: Increase the development and modernization of the Nigerian payment systems in line with the vision’s 2020 goal to become one of the top 20 economies in the world by the year 2020

Objectives

Findings

Methods

Conclusion