This paper studied the impact of cashless policy in Nigeria. The policy was introduced by Central Bank of Nigeria CBN in December 2011 and was kickstarted in Lagos in January 2012. Survey research was adopted with questionnaire as data collection instrument. Responses from the respondents show that cashless policy will increase employment; reduce cash related robbery thereby reducing risk of carrying cash; cashless policy will also reduce cash related corruption and attract more foreign investors to the country. The study, therefore, shows that the introduction of cashless economy in Nigeria can be seen as a step in the right direction. It is expected that its impact will be felt in modernization of Nigeria payment system, reduction in the cost of banking services, reduction in high security and safety risks and also curb banking related corruptions.
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 policy.
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 disadvantages and can still be replaced with a better payment systemthe 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. Nigerias 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 development.
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, PortHarcourt 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.
1.2 BACKGROUND OF THE STUDY
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. The cashless economy policy initiative of the Central Bank of Nigeria CBN is a move to improve the financial terrain but in the long run sustainability of the policy will be a function of endorsement and compliance by endusers Ejiro, 2012. The CBN cash policy stipulates a daily cumulative limit of N150, 000 and N1, 000,000 on free cash withdrawals and lodgments by individual and corporate customers respectively in the Lagos State with effect from March 30, 2012. Individuals and corporate organizations that make cash transactions above the limits will be charged a service fee for amounts above the cumulative limits. Furthermore, 3rd party cheques above N150, 000 shall not be eligible for encashment over the counter with effect from January 1, 2012. Value for such cheques shall be received through the clearing house. All Nigerian banks were expected to cease cash in transit lodgment services rendered to merchant customers from January 1, 2012.
The policy through the advanced use of information technology facilitates fund transfer, thereby reducing time wasted in Banks. Wizzit, a fast growing mobile banking company in South Africa has over three hundred thousand customers across South Africa. Likewise, MPESA was introduced in Kenya as a small value electronic system that is accessible from ordinary mobile phones. It has experienced exceptional growth since its introduction by mobile phone operator Safaricom in Kenya in March, 2007 and has already been adopted by nine million customers, which is about 40 of Kenyas adult population. Wizzit and other mobile financial services including MPESA in Kenya are helping low income Africans make financial transaction across long distance with their cellphones, thereby reducing their travel cost and eliminating the risks of carrying cash and also avoiding most banking charges Akintaro, 2012. It is assumed that the proper implementation of mobile phones and other technologies can aid the implementation of cashless policy and hence, the growth of cashless economy in Nigeria.
The introduction of the implementation of cashless policy policy is program of actions adopted by government began in Lagos State, Nigeria. Why Lagos According to Central Bank of Nigeria CBN, 2011 Lagos state accounted for 85 of POS and 66 of cheques transaction in Nigeria. Cashless economy aims at reducing the amount of physical cash circulating in the Nigeria economy and thereby encouraging more electronicbased transaction. According to Central Bank of Nigeria CBN, 2011 the policy is expected to reduce cost incurred in maintaining cashbased economy by 90 upon its full implementation in Nigeria. This study aims to look at the impact of cashless economy in Nigeria.
1.3 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, inadequate sensitization/education of the benefits of the cashless policy, and inadequate logistics such as the provision of internet connections in commercial areas, computers and Point on Sale POS machines.
Apart from the physical challenges, economic data and indicators are not fully available and reliable. There is a great challenge in attempting to analyse 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 ebanking. However, it becomes clear that few studies present a comprehensive evaluation of cashless 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.