Here in this post, we are going to discuss the Impact of Cashless Policy on Nigeria Economy. We hope you find this article informative and educating.
Nigeria, a West African country with 36 states and Abuja as the Federal Capital accounts for 47% of West Africa’s population.
Nigeria is a middle income and one of the fastest growing economy in Africa. Crude oil accounts for 15% of the country’s total exports and is ranked as the 8th most important oil exporter in the world.
The agriculture is another key sector of the Nigeria’s economy and ranks 6th worldwide and first in Africa, it employs over 60% of the country’s workforce.
However, Agriculture has failed to keep up with the rapid population growth of the country. Although efforts are being made to beat this record. Nigeria provides services which helps in our economy and is ranked 27th worldwide and first in Africa.
From 2003-2007, Nigeria attempted to implement an economic reform program called the National Economic Empowerment Development Strategy (NEEDS).
The reform program was to raise the country’s standard of living through a variety of reforms which includes macroeconomic stability, deregulation, liberalization, privatization, transparency and accountability.
Nigeria’s drive towards economic growth and development has birthed the cashless policy. A policy where the demand of physical cash is reduced.
A cashless policy is a policy where money is being spent and transactions are made without carrying cash physically from one place to another.
A developing country like Nigeria is heavily cash based thereby paving way for criminal activities. However, the cashless policy was established in the year 2012 by the Central Bank of Nigeria (CBN) and was initiated by its former Governor, Sanusi Lamido which aimed at achieving an environment where transactions are carried out through cheques and electronic payments and is also in line with the global trend.
It was established to also curb the negative influences associated with the high usage of physical cash in the economy.
This policy affects major areas in the country which includes crime, security, and computerization. This policy relies heavily on the use of electronic means, an extensive application of computer technology in the financial system. The cashless policy can help manage inflation and drive economic growth.
The cashless policy started in Lagos, the pilot state.it was later extended to Rivers, Abia, Ogun, Anambra, Kano and Abuja on the 1st of July, 2013.
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Its program to be spread nationwide started a year after on the 31st of July, 2014 after it was tested productive in these states. The CBN announced its plan to circulate this policy around the states by October, 2017.
It was to be effective from April, 2017. The cashless policy, however, did not go down well with most people and so it received lots of criticisms.
It stated a cash handling charge on daily cash withdrawals that exceed ₦500,000 for individuals and ₦3,000,000 for corporate bodies.
Cumulative Charge fees for withdrawals above the limits for individuals is 3% and 5% for corporate bodies. Ministries, departments, microfinance banks, agencies, embassies, diplomatic missions, multilateral and aid donor agencies were exempted from charges which started as a result of this policy.
A step towards the development of a nation’s economy is to encourage a payment system that is secure, convenient, and affordable (Ajayi and Ojo, 2006).
The cost of cash to the Nigerian financial system is high and increasing, the cost is very close to 50 million Naira in 2008 (CBN, 2012).
Money is used as a means of exchange for goods and services rendered. Therefore, a cashless economy is not an economy whereby the use of cash is totally eliminated but a policy whereby the use of physical cash is being alternated with various means in carrying out a transaction.
The use of Automated Teller Machines (ATM), Point Of Sale (POS), online transactions, cheques, bank drafts, electronic cards, mobile banking through the use of mobile phones for virtual top-ups (VTU), balance enquiries, fund transfer, bills payment and a whole lot of them were introduced as alternatives to physical cash.
However, most of these e-payment channels require you to have an ATM/Debit card (Oyetade and Ofoelue, 2012).
As it goes, whatever thing that has advantages is bound to also have disadvantages so it is not a doubt that the introduction of this cashless policy has had both negative and positive impacts on everyone in the society.
Advantages of Cashless Policy in the Society
- Convenient: It is a stress-free policy whereby you only need your electronic card and mobile phone to carry out transactions.
- Reduction in theft: this has no doubt reduced the rate of robbery in the society as money is no longer carried physically.
- Increased rate of transaction: the cashless policy has in every way contributed to the growth of the country’s economy whereby transactions are being made and settled immediately. Therefore delivering services rendered on time.
- This policy also helps customers keep track of their banking activities as it provides substantial evidence of transactions made.
- It has also reduced the frequent visits of customers to banks for one purpose or the other. They can now make use of the ATM for withdrawal and transfer or use their mobile phones to perform transactions.
- It helps to curb unnecessary expenses.
Disadvantages of Cashless Policy in The Society
- Illiteracy is a major problem in the implementation of the cashless policy.
- This policy may not be totally accepted by the public due to withdrawals not supported by cash, fraudulent withdrawals etc.
- High bank charges on the use of ATM’s.
- Limited access to a good network
- Poor power supply
- Limited staffing due to the employment of the use of machines for withdrawals and transfers.
- Fraudulent activities could be carried out in and around ATM stands due to inadequate securities.
However, several methods could be adopted to help curb the disadvantages, therefore, promoting the acceptance and use of cashless policy in Nigeria such as:
- Reduced rate of bank charges on the use of ATM’s, POS, mobile banking etc
- Public enlightenment campaigns should be conducted in rural areas to aid the acceptance and use of this policy.
- The power sector should be properly looked into and methods of ensuring constant power supply adopted.
- Proper security should be ensured in and around ATM stands for the safety of both customers and transaction.
- ATM machines should be constantly checked and accounts of customers monitored to avoid incessant debits.
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