Contrary to global trends, the Nigerian economy was primarily cash-oriented in its transaction of goods and services before the Central Bank of Nigeria implemented a cashless policy in 2011.
This study examines the influence of cashless policies on the Nigerian payment system using paired data sets from 2007 to 2017. Cheques, financial transfer channels, and Automated Teller Machines were used to evaluate the operations of a cashless economy (ATMs).
According to data analysis, the number and use of cheques as a financial settlement have failed, and electronic payment systems have partially replaced them. Interbank financial transfers are becoming more popular among banks as an alternative to a cash settlement. It was also discovered that ATMs are becoming more popular as a tool of financial intermediation in Nigeria.
Implementation Of the Nigerian Cashless Policy
ATMs are expected to grow even more popular in Nigeria in the not-too-distant future. The study’s findings have helped to justify the implementation of Nigeria’s cashless policy initiative to some extent. However, the policy’s originality and implementation are not without their drawbacks.
Due to illiteracy, there are several obstacles to its implementation, including a lack of infrastructure and difficulty in instilling the e-payment culture.
Celebrations such as weddings, birthdays, and festivals are examples of socio-cultural aspects that can be a barrier. Nigerians like to “show or spray raw cash” rather than issue cheques on such occasions.
As a result, the regulatory body must make a more significant effort to reorient the masses and encourage the use of E–payments channels, checks, funds transfer choices and owning/operating bank accounts. This will aid in accelerating the growth of Nigeria’s payment system.
Avoiding Expenses with Cashless Policy
In an interview with the Nigerian Tribune, Mustapha Chike-Obi, the former Managing Director of Asset Management Corporation of Nigeria (AMCON), claimed that the CBN’s arguments for re-introducing the cashless policy were adequate. He said that if a person deposits N600,000, just N100,000 will be subject to the penalties.
According to the finance expert, Nigerians can avoid costs by using less expensive electronic channels or making piecemeal contributions of up to N500,000 per person every day.
“If you have N2 million, you can deposit N500,000 every day for five days and avoid the penalty,” he explained. So I’m not sure why folks are yelling and leaping up and down.
“Many of us have three bank accounts,” says one participant. So, for example, you might go to Fidelity and deposit N500,000. Then, you go to GTBank next door and deposit N500,000. Then, on the same day, go to Zenith and deposit another one. If that’s what you want, you can sit down and transfer all of them to the primary account. “Our problem is that we have lost faith in ourselves.”
Other analysts and bankers have offered different techniques to minimize fees on deposits and withdrawals at various times. The banking public can pay for/receive money for goods/services through POS machines, online (internet banking) transfers, and other cashless means to avoid deposit charges.
Individuals are also encouraged to plan their expenses properly to substantially decrease the number of withdrawals they make every month to avoid paying unneeded withdrawal costs. Furthermore, financial experts have advised that checking account fees be included.
Banks typically impose fees for checking account balances via SMS or ATMs (Automated Teller Machines) (ATMs). A bank user can monitor account balance and avoid excessive charges by using the phone’s notepad, diary, or the banks’ mobile apps to keep track of account balance.
Banks can also be contacted to see if they offer other free ways to check account balances.
Banking customers are also encouraged only to use ATMs linked with their banks. “When you use ATMs belonging to other banks, you will be charged additional fees in addition to the fees charged by your bank.”
“The hack here is to make sure you’re banking with a financial institution that has a large presence and ATMs in crucial places,” a top banker who asked to remain anonymous told the Nigerian Tribune.
Other Reasons Why Cashless Policy Is Best for Nigerians
Money is frequently characterized by its three functions: accounting unit, means of exchange, and store of value. The store-of-value description and the medium of exchange description are no longer appropriate in a cashless economy.
The term “cashless economy” does not imply that cash transactions are eliminated; instead, it refers to cash transactions being reduced to a bare minimum.
It is an economic system in which transactions are not primarily described as exchanges for actual cash. For various reasons, the Central Bank of Nigeria (CBN) endorsed the cashless economy policy proposal that was already in use globally. This necessitates the following:
- Increase the development and modernization of Nigeria’s payment systems to achieve the vision’s 2020 goal of being one of the world’s top 20 economies by 2020.
- Create opportunities for economic growth and lower banking service costs (including the cost of credit)
- Increase financial inclusion by making transactions more efficient, resulting in a wider reach.
- Improve the efficiency of monetary policy in promoting economic growth and controlling inflation.