This study examines the
Impact of Cashless Policy on the Performance of Nigeria Financial Institutions. This study employs survey research
design. Analytically, the research adopted descriptive statistics to highlights
the effectiveness of the cash-less policy of the CBN in Nigeria.
were basically sourced from primary method through means of a well-structured
questionnaire. Access Bank Plc was selected from the twenty-four banks in
Nigeria and One hundred (100) respondents were sampled.
hypotheses were formulated and tested with the used of regression analysis and
T-test. The analysis resulted into rejecting the null hypotheses and concluding
that; there is significant relationship
between cashless policy and performance in the Financial Institutions; cashless
policy has significant impact on economic growth of Nigeria and that there is
significant relationship between cashless policy and money laundering and
The study proffered valuable
recommendations on the execution of cashless banking in Nigeria such as
availability of sufficient and well-functioning infrastructural facilities (notably
electricity), harmonization of fiscal and monetary policy, regular assessment
of the performance of cashless banking channels (individually and
collectively), consideration of the present state and structure of the economy,
redesign of monetary policy framework and greater efforts towards economic
growth whilst managing inflation. In
inclusion, the shift towards a cashless Nigeria seems to be beneficial though
it comes with high level of concerns over security and management of cost
savings resulting from its implementation.
TABLE OF CONTENTS
CHAPTER ONE –
1.2 Statement of
1.3 Objectives of
1.6 Significance of
1.7 Scope of the
1.9 Definition of
CHAPTER TWO - LITERATURE REVIEW
2.5 Gaps in the
CHAPTER THREE – RESEARCH
3.2 Research Design
3.3 Population of
3.4 Sample Size
3.6 Sources of Data
3.7 Methods of Data
3.10 Validity Test
CHAPTER FOUR – DATA
PRESENTATION AND ANALYSIS
Characteristics of the Respondents
4.3 Response of
Respondents to the Problem Areas
4.4 Testing and Interpretation
4.5 Presentation of
4.6 Discussion of
CHAPTER FIVE – SUMMARY,
CONCLUSION AND RECOMMENDATIONS
1.1 Background to
Bank of Nigeria (CBN) has in recent times engaged in series of reforms 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. Since Nigeria’s independence in 1960, the successive
reforms were channeled at enhancing social welfare and achieving developmental
goals but there has been no substantial positive change in Nigeria’s economic
of mobile banking, electronic banking and online transactions in Nigeria has
paved way for a new era of development where the use and demand for physical
cash is gradually declining. The
increase in emerging Information Technology has made banking services become
more and more automated and less paper work than in the past as averred in the
Central Bank of Nigeria (CBN) reports and statistical bulletins, annual reports
of most Nigerian banks. Banks in Nigeria have realized that they would soon go
out of corporate existence unless they keep with the pace at which Information
Technology (IT) has redefined the creation of value and worth for their
Also, these recent evolution of information technology in the Nigerian
financial institutions possess interesting questions for academician,
economist, financial institutions, financial analyst and the regulatory agents
of government such as Central Bank of Nigeria
(CBN) regarding the current
economic status, logistics, and availability of instruments to guarantee
economic growth and stability, efficiency and effectiveness of the cashless
observers (Humphrey 1996, Ohley 1999, Klee 2004, Swartz 2006) suggest that the
increased use of cashless payment system; (i.e. money or scrip which is
exchanged only electronically via computer networks) has led to the predictions
of a cashless society.
the cashless policy aims to curb some of the negative consequences associated
with the usage of physical cash in the economy, including high cost of cash,
high risk of using cash, high subsidy, informal economy and inefficiency and
corruption (CBN, Website, 2011).
Since the inception, 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 shortcomings and can still be
replaced with a better payment system ‘the cashless policy’.
Developed countries like US have
enjoyed various advantages which 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
and cheques are still prevalent in some parts of the world, electronic payment
mechanisms and especially, mobile payments are gaining consumer acceptance in
many economics due to the high penetration of mobile phone technology
In view of being one of the best
economies in 2020, the CBN started implementing the cashless policy in some
major cities in Nigeria since 2012 such as Lagos, Kano, Port-Harcourt and
Onitsha. The CBN asserted reduction in crime rates, minimized risk associated
with carrying huge sums of money, 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.
1.1.1 Organizational Profile of Access Bank Plc
Over the past 26 years, Access
Bank Plc. has evolved from an obscure Nigerian Bank into a world-class African financial
institution. Today, we are one of the five largest banks in Nigeria in terms of
assets, loans, deposits and branch network; a feat which has been achieved
through a robust long-term approach to client solutions – providing committed
and innovative advice.
Access Bank has built its
strength and success in corporate banking and is now applying that expertise to
the personal and business banking platforms it acquired from Nigeria’s
International Commercial bank in 2012. The next two years were spent integrating
the business, investing in infrastructure and strengthening the product offer.
As part of its continued growth strategy, Access Bank is focused on
mainstreaming sustainable business practices into its operations. The Bank
strives to deliver sustainable economic growth that is profitable,
environmentally responsible, and socially relevant.
of the Problem
The aim of any economy policies (fiscal
or monetary policy) is to improve the purchasing
power of every individual and the society at large.
Before the introduction of cashless policy by
the Central Bank of Nigeria (CBN) in 2012, Our financial institutions has been
characterized with so many issues, ranging from poor handling of physical cash,
high usage of cash in doing business which affect the cost of banking
operation, leakages, money laundering and other financial related offence due
to high cash usage within our various economic sector (private and government).
Cashless policy as a technique of
economic management is to bring about sustainable economic growth and
development as introduced by the Central bank of Nigeria (CBN) has not been
fully operational in the country due to; i) high rate of illiteracy, ii)
in-adequate sensitization/education of the benefits of the cashless policy, and
iii) in-adequate infrastructure (such as the provision of internet connections
in commercial areas, computers and Point on Sale (POS) machines) in some part of
Apart 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 macro-economic 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 the 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 macro-economic
indicators. Although, this study focuses on Nigeria Financial institutions, 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).
This study therefore examines the
impact of cashless policy on performance of financial institutions.
of the Study
The main objective of the study is
to examine the impact of the cashless policy on performance of Financial
Institutions in Nigeria and how it affects economic growth. Specific objectives
of the study include:
examine the impact of the cashless policy on performance of Access Bank Plc.
assess the impact of the cashless policy on economic growth of Nigeria.
determine the impact of cashless policy on money laundering and corruption
using Access Bank as a case study.
This study tends to provide answer
to the following research questions;
what extent does cashless policy impact performance of Access Bank Plc?
what extent does cashless policy impact the economic growth of Nigeria?
what extent does cashless policy impact money laundering and corruption in
Access Bank Plc?
The following hypotheses are
formulated tentatively and for be tested during the course of the research.
is no significant relationship between cashless policy and performance in the
Ho Cashless policy has no significant impact
on economic growth of Nigeria
is no significant relationship between cashless policy and money laundering and
of the Study
The study will give various insights
into the various implications the introduction of the cashless policy will have
on financial institutions and 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 Nigeria.
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.
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 from 2010-2014. The research
scope covers Access Bank Plc for gathering of data related to cashless policy.
1.8 Operationalization of Variables
Y = f(X)
X = (x1, x2, x3, x4) - Proxies for
Y = βo+β1x1+β2x2
+ β3x3 + β4x4+U
Y = Cashless
X = Cashless
x1 = ATM
x2 = WEB
x3 = POS
x4 = MOBILE
βo = Intercept of the line
β1 = Coefficient of x1
β2 = Coefficient of x2
β3 = Coefficient
β4 = Coefficient
Stochastic Variable/error term
Operational Definition of Terms
designating of financial transactions handled by means of credit cards, bank transfers, and cheques, with no money handed
from person to person
A system allowing individuals to perform banking activities at
home, via the internet.
Increase in a country's
capacity, as measured by comparing gross
national product (GNP) in a year with the GNP in the
POS (Point of Sale): Point of sale is
a computerized network operated by a
main computer and linked to several checkout terminals
Automated Clearing House Transfers
(ACH): is an electronic network for
financial transactions that processes large volumes of credit and debit
transactions in batches. ACH
credit transfers include direct
deposit, payroll and vendor payments
An abbreviation for automated
teller machine, an electronic banking outlet,
which allows customers to complete basic transactions without the aid of a
branch representative or teller
Check issued by a financial institution which functions as cash
but is protected against loss or theft
A wire transfer is the direct
transfer of funds from the payer's account at one bank to the payee's account
at another bank
NIBSS Funds Transfers:
The Nigerian Interbank Settlement Scheme is an online platform where banks
exchange value thereby enabling the performance of interbank transfers such as
NEFT and NIBSS instant transferring funds between banks for single or multiple
beneficiaries for individual amounts not exceeding N10million.
once effected works with the next available clearing session of CBN and is
received in the beneficiary’s account the same day or next working day, but
NIBSS instant payments are immediate.
Real Time Gross Settlements is used to transfer sums above N10million in favor
of a single beneficiary. It is used for big ticket transactions which must have
been effected before noon for most banks if the funds are to reach the
recipient bank the same day.
this is a product that enables users to conduct funds transfers, make payments
or receive balance enquiries on their mobile phones.
refers to electronic transfers which can be effected via the internet on PCs,
laptops and other devices. Bank customers who have subscribed to internet
banking can do basic banking transactions via the web.