BACKGROUND OF THE STUDY
The introduction of electronic banking,
online transactions and mobile banking in Nigeria has paved way for a new era
of development where the use and demand for physical cash is gradually
declining. These recent evolution of technology in the Nigerian financial
institutions posses interesting questions for economist, financial
institutions, business analyst and the government regarding the current
economical status, logistics, and availability of instruments to guarantee
economic growth and stability, efficiency and effectiveness of the cashless
Since the inception of humanity,
various payment methods have been used to purchase goods and services starting
with the trade by barter. The trade by barter method of transaction has been
the foundation for the introduction of money and coins to solve the problem of
double coincidence of wants and divisibility faced by trade by barter. The use
of money/coins was introduced after the use of trade by barter method, and it
has solved various challenges associated with trade by barter, but the use of
money as an exchange medium has its own challenges and dis-advantages and can
still be replaced with a better payment system-the cashless policy/banking.
Various advantages enjoyed by more
developed nations such as the US has prompted the Central Bank of Nigeria (CBN)
to adopt the cashless policy. At the end of the 1980s the use of cash for
purchasing consumption goods in the US has constantly dropped with inflation
(Humphrey, 2004). Nigeria’s aim to be among the biggest economy by 2020 has
driven her to gradually move from a pure cash economy to a cashless policy.
Since Nigeria gained her independence in1960, there have been different
constitutional reforms, change in economic and banking policies mainly aimed at
stabilizing the economy, enhancing social welfare and enhancing economic growth
In view of being one of the best and
biggest economies in 2020, the CBN has started implementing the cashless
policy/banking in some major states/cities in Nigeria such as Lagos, Kano,
Port-Harcourt and Onitsha. The CBN and Pro cashless policy activists have asserted
reduction in crime rates, minimized risk associated with carrying huge sums of
money, reduction in political corruption, reduction in banking cost,
improvement on monetary policy in management of inflation and the overall
growth and development of the economy of Nigeria as advantages associated with
the implementation of the cashless policy.
STATEMENT OF THE PROBLEM
Monetary policy as a technique of
economic management to bring about sustainable economic growth and development
through cashless policy and banking introduced by the Central bank of Nigeria
(CBN) is not fully operational due to high rate of illiteracy, in-adequate
sensitization/education of the benefits of the cashless policy, and in-adequate
logistics (such as the provision of internet connections in commercial areas,
computers and Point on Sale (POS) machines).
from the physical challenges, economic data and indicators are not fully
available and reliable. There is a great challenge in attempting to analyze the
true impact of the cashless policy on the economy of Nigeria as only few
monetary and macroeconomic indicators can be traced with relation to the
subject matter. Several scholars have attempted to analyze the cashless system
or e-banking. However, it becomes clear that few studies present a
comprehensive evaluation of cash-less banking implications in developing
countries. Most ignore its economic benefits of the equation while some do
incomplete examination of its negative implications. This is often due to
unreliable panel data for monetary and macroeconomic indicators. Although, this
study focuses on Nigeria, it is difficult to translate cashless studies from
one country to another. Even payments instruments that look similar across
countries on the surface may be different due to historical and legal
variations (Daniel et al, 2004).
1.3 OBJECTIVES OF THE STUDY
main objective of the study is to examine the impact of the cashless policy on
the economy of Nigeria and how it affects economic growth. Specific objectives
of the study include:
examine the impact of the cashless policy on economic growth of Nigeria.
2. To examine the various challenges
associated with the implementation of the cashless policy/banking.
3. To proffer suggestions on how cashless
policy and other monetary policies can be managed for better contribution to
the economic growth and development of Nigeria.
1. Ho: Cashless policy has no
significant impact on the reduction of inflation in Nigeria
Hi: Cashless policy has significant
impact on the reduction of inflation in Nigeria.
2. Ho: Cashless policy has no
significant impact on economic growth of Nigeria
Hi: Cashless policy has significant
impact on the economic growth of Nigeria.
SIGNIFICANCE OF THE STUDY
The study will give various insights
into the various implications the introduction of the cashless policy will have
on the economy of Nigeria. Through examining various economic indicators such
as the gross domestic product (GDP) and inflation, the study will examine and
compare growth trends and changes to determine whether the cashless policy
introduced by the CBN has a negative or positive effect on the economy of
Various challenges and prospects
identified in the study will also enable various stakeholders to tackle these
challenges effectively by making policies that will address them and boost the
economy of Nigeria.
SCOPE OF THE STUDY
In pursuance of the objective of the
study; attention shall be focused on electronic banking among other electronic
commerce implementation. In order to conduct an empirical investigation into
the adoption of Electronic banking in Nigeria and will also examine the nature
of electronic banking operations from the CBN bulletin from2010-2012.
DEFINITION OF TERMS
Access Products – Products that allow consumers to access
traditional payment instrument electronically, generally from remote locations.
ATM Card – An
ATM card (also known as a bank card, client card, key card,
or cash card) is a payment card
provided by a financial institution to its
customers which enables the customer to use an automated teller machine
(ATM) for transactions such as: deposits, cash withdrawals, obtaining account
information, and other types of banking transactions, often through interbank networks.
CBN - Central Bank
Chip Card – Also known as an integrated circuit
(IC) Card. A card containing one or more computers chips or integrated circuits
for identification, data storage or special purpose processing used to validate
personal identification numbers, authorize purchases, verify account balances
and store personal records.
Electronic Data Interchange (EDI) – The transfer of information between
organizations in machine readable form.
Electronic Money – Monetary value measured in currency
units stored in electronic form on an electronic device in the consumer’s possession. This electronic value can
be purchased and held on the device until reduced through purchase or transfer.
Internet Banking- This is a product that enables the Bank
leverage on the Internet
Banking System Module in-built on the
new Banking Application (BANKS) implemented by the Bank to serve the Internet
Banking needs of the Bank’s customers.
Mobile Banking - This is a product that offers Customers
of a Bank to access services as you go. Customer can make their transactions
anywhere such as account balance, transaction enquiries, stop checks, and other
customer’s service instructions, Balance Inquiry, Account Verification, Bill
Payment, Electronic fund transfer, Account Balances, updates and history,
Customer service via mobile, Transfer between accounts etc.
Payment System – A financial system that establishes
that means for transferring money between suppliers and of fund, usually by
exchanging debits or Credits between financial institutions.
Point Of Sale (POS) Machine - A Point-of-Sale machine is the payment
device that allows credit/debit cardholders make payments at sales/purchase
outlets. It allowed customers to perform the following services Retail
Payments, Cashless Payments, Cash Back Balance Inquiry, Airtime Vending,
Loyalty Redemption, Printing mini statement etc.
Smart Card – A Card with a computer chip embedded,
on which financial health, educational, and security information can be stored
Transaction Alert - Our customers carry out debit/credit
transactions on their accounts and the need to keep track of these transactions
prompted the creation of the alert system by the Bank to notify customers of
those transactions. The alert system also serves as notification system to
reach out to customers when necessary information need to be communicated.
Western Union Money Transfer (WUMT) - Western union Money transfer is a
product that allowed people with relatives in Diaspora who may be remitting
money home for family up-keep, Project financing, School fees etc. Nigerian
Communities known for having their siblings gainfully employed in other parts
of the world are idle markets for Western Union Money Transfer.
Daniel, D. G., R. W. Swartz, and A. L.
Fermar, (2004): ?Economics of a Cashless Society: An Analysis of Costs and
Benefits of Payment Instruments?, AEI-Brookings Joint
Humphrey, D. B. (2004): ?Replacement
of cash by cards in U.S. Consumer Payments, Journal of Economics and Business,
Humphrey, D. B. and A. N. Berger
(1990): ?Market Failure and Resource Use: Economic `Incentives to Use Different
Payment Instruments?., New York,
Monograph Series in Finance and Economics.