THE IMPACT OF CASHLESS POLICY AND ECONOMIC GROWTH IN NIGERIAN

THE IMPACT OF CASHLESS POLICY AND ECONOMIC GROWTH IN NIGERIAN

The main purpose of this study is to evaluate the impact of cashless policy and Economic growth in Nigerian, while the specific objectives are:

1. To evaluate the influence of Automated Teller Machine on Real Gross Domestic Product in Nigeria
2. To investigate the influence of Point of Sale on Real Gross Domestic Product in Nigeria
3. To access the influence of Web Transactions on Real Gross Domestic Product in Nigeria
4. To determine the influence of Mobile Payment on Real Gross Domestic Product in Nigeria.

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CHAPTER ONE

1.1 Background of the Study

The increasing advancement in information and communication technology witnessed in the 21st-century world has transformed the landscape of the banking business in Nigeria. Modern banks now realize that only those that overhaul their payment services delivery and operations are likely to survive and prosper in the new millennium (Okoye, A. P. 2018). This is because of the generational phase we live in, where a child of five (5) years knows how to operate computers and surf the internet. This has metamorphosed to even the daily buying and selling that takes place, outlets such as; Amazon, Jumia, Alibaba e.tc have created a platform where buyers all over the world can order for the stock of their choice and get it within days (Ikpefan, et al. 2018).

Upon all the buying’s and selling transaction that takes place, there is a common bond that fosters the smooth transactions of these outlets. The common bond is the services of the bank that serves as the settlement and clearing agents for all these transactions. Consequently, Nigerian banks now transit from cash-based to the cashless banking system. Cashless banking does not refer to an outright absence of cash transactions in the banking sector, but one in which the amount of cash-based transactions are kept to the barest minimum (Okoye, A. P. 2018).

The world today is termed a global village because of the electronic clearances and settlements made by banks all over the world. Therefore, the importance of banks cannot be overemphasized because there are essential agents for the growth of an economy (Godswill, et al. 2018). Technological improvements have made the business environment of today witnessing rapid changes. Most businesses of today carry out their activities through electronic commerce. Electronic commerce is conducting business through the internet and this has also been adopted in the banking sector. The banking sector has changed phenomenally. Activities in the bank have transformed from the manual ways of providing services to electronic banking. In time past, every transaction would have to be carried out in a banking hall over the counter where customers will spend long hours on queues to make deposits or withdraw cash. But after the introduction of E-Banking in the country in 2003, the provision of services improved and the competition between banks increased dramatically.

A cashless economy does not mean the absence of cash in the economy, it only describes an economic system in which transactions occur without the physical carrying of cash from one person to another. According to Dugeri (2013), a cashless the economy is a society whereby credit cards, debit cards, charge cards, and direct transfer are used for making purchases.

The Central Bank of Nigeria (CBN) introduced a cashless policy in April 2011 with the objective of promoting the use of electronic payment channels instead of cash. The cashless policy started with pilot programs in Lagos, January 1st, 2012, and a rollout across the country was substituted with phased implementation in Port Harcourt, Kano, Aba, and the Federal capital territory (CBN 2012). The cashless policy of the CBN is designated to provide mobile payment services, breakdown the traditional barriers hindering the financial inclusion of millions of Nigerians, and bring low cost, secure convenient financial services to urban, semi-urban, and rural areas across the country. The CBN has gone ahead to license six Payments Terminal Service Providers to support and maintain Point of Sale (P.O.S) terminals. This step is a bold demonstration that the apex bank is determined to see the policy work which has been kick-started in Lagos early 2012 (Olajide, 2012). It is on this background that this study seeks to investigate the relationship between electronic banking and cashless policy and how the variables adopted for this study have affected the economy.

1.2 Statement of the Problem

Nigeria is largely a cash-based economy with a large percentage of funds residing outside the banking sector as against the developed world where the money in circulation is limited for example 4 percent in the US and 9 percent in the U.K. Whereas the cash-based economy is characterized by the psychology to physically hold and touch cash a culture informed by ignorance, illiteracy, and lack of security consciousness and appreciation of the merit of digital payment (Ovia 2002).

According to Bosupeng, (2017), the cashless system is not free from online attacks and fraud. This means high technological development is essential and developing economies often find it difficult to cover expenditures to create a safe, secure, reliable, and fast online payment system. According to the CBN, the cashless policy was introduced to drive the development and modernization of the Nigerian payment system in line with the nation’s vision 2020 goal of being among the top 20 economies in the year 2020 but the use of cash, according to Nwaolisa and Kasie (2012), as a means of carrying out transactions still remain very high in Nigeria. Poor network and connectivity which results most often into debiting customers’ accounts more than once, high transaction cost, as well as security and technical setback, are some of the factors still posing as challenges to the recent move.

Even though the Central Bank and Deposit Money Banks try to sensitize the nation about the benefits of the cashless model, there are citizens who are still deeply attached to physical cash particularly the low-income group. The low-income group generally deals with physical cash and avoids electronic transactions which means they are always left behind in terms of the technical knowledge of performing an electronic transaction. This means that even though sensitization about the cashless policy may be carried out, there will still be some individuals who are entrenched to physical cash only (Bosupeng, 2017). Thus, there are many difficulties associated with the actualization of the cashless economic policy among the Nigerian families especially the illiterate family members; those living mostly in rural areas, and the unemployed as well (Olele and NwalaUgwunna, 2014).

Also, the use of these payment mechanisms is not totally free from problems often, customers experience delay in having access to the services provided through these electronic channels (Olakah, 2012). One principal challenge in the use of an Electronic payment system is a power outage. The power problem is a monster threatening every business in Nigeria. It may fluctuate for hours and sometimes not available. These payment systems may experience failure at any time or malfunction and as a result, frustrate transactions which may be urgent. A common ache in the use of one of the electronic payment devices known as Automated Teller Machine (ATM) is the trapping of cards for days by the terminals thus preventing customers from making transactions until he or she is able to retrieve his card from the machine.

Occasionally, the Automated Teller Machine (ATM) may debit a customer’s account without dispensing cash to him or her, such a case has to be reported or the customer accepts liability. Generally, in every electronic card-based payment mechanism, “server down” is a usual slang, meaning that there is a network failure. When this occurs, the machine is temporarily unable to function properly or obey instructions given by the customers at the payment terminals. It is against this background that this study is conceived to empirically evaluate the impact of cashless policy on the Nigerian economy in other to achieve the objective of becoming one of the leading world economies by the year 2020, efforts must be made to embrace electronic payment system in its entirety.

1.3 Purpose of the study

The main purpose of this study is to evaluate the impact of cashless policy and Economic growth in Nigerian, while the specific objectives are:

1. To evaluate the influence of Automated Teller Machine on Real Gross Domestic Product in Nigeria
2. To investigate the influence of Point of Sale on Real Gross Domestic Product in Nigeria
3. To access the influence of Web Transactions on Real Gross Domestic Product in Nigeria
4. To determine the influence of Mobile Payment on Real Gross Domestic Product in Nigeria.

1.4 Research Question:

The following research questions would be resolved by the study;

1. To what extent does Automated Teller Machine influence Real Gross Domestic Product in Nigeria?
2. To what extent does Point of Sale influence Real Gross Domestic Product in Nigeria?
3. To what extent do Web Transactions influence Real Gross Domestic Product in Nigeria?
4. To what extent does Mobile Payment influence Real Gross Domestic Product in Nigeria?

1.5 Research Hypothesis:

This study is guided by the following Null hypothesis, denoted by H₀;

Ho₁: There is no significant relationship between Automated Teller Machine and Real Gross Domestic Product in Nigeria.

Ho₂: There is no significant relationship between Point of Sale and Real Gross Domestic Product in Nigeria.

Ho₃: There is no significant relationship between Web Transactions and Real Gross Domestic Product in Nigeria.

Ho₄: There is no significant relationship between Mobile Payment and Real Gross Domestic Product in Nigeria.

1.6 Significance of the Study

This study is significant in the following ways;

To practitioners: 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 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.

To scholars: Electronic banking in our economy today is a welcome development and also its impacts in the society are overwhelming, so this research is significant in so many ways. It will expose the strength and weaknesses of electronic banking. It will motivate banks and other economic agents to computerize their services. Knowledge in the area of electronic banking will be advanced. Apart from contributing to the knowledge of electronic banking, it forms a reference for future research in this area.

1.7 Scope of the Study

Content Scope: This study is based on cashless policy and economic growth in Nigeria over the time period from 2009 to 2017, In pursuance of the objective of the study; attention shall be focused In order to conduct an empirical investigation into the adoption of cashless policy and economic growth in Nigeria and will also examine the nature of electronic banking operations from the CBN bulletin 2014.

Geographical Scope: This study dwells on cashless policy activities and economic output activities within the Nigerian Economy.

1.8 Limitations of the study

All the challenges that were faced when carrying out this project will not be fully discussed. However, some of the limitations encountered during the course of this study stems from the gathering of relevant and sufficient data to this study, the high cost of downloading and printing of materials from the internet and the office for too much permission, typographical errors of typist, and also the duration that was giving to the research is considered too short coupled with other academic challenges.

1.9 Organization of the study

This study comprises of five chapters.  Chapter one concerns itself with the introductory aspect of the study which gives an insight into the subject matter of the study. This chapter provides the intended direction of the study and under it are such issues as the overview, statement of problem, objectives, hypotheses, significance, scope, limitations, organization, and the definition of terms.  Chapter two reviews related literature on cashless policy and economic growth.  Chapter three describes the methodology; chapter four forms the core part of the study which deals with the presentation and analysis of data collected from the study. Chapter five is devoted to the discussion of findings, conclusion, and recommendation.

1.10 Definition of Terms

Access Products: Products that allow consumers to access traditional payment instruments electronically, generally from remote locations.

Cash-based Economy: This can be defined as an economic policy that involves the use of cash to transact business on a daily basis in a country.

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 for transactions such as deposits, cash withdrawals, obtaining account information, and other types of banking transactions and often through interbank networks.

Chip Card: Also known as an integrated circuit (IC) Card. A card containing one or more computer 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 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 inquiries, 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 the 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 to 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 and processed.

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 a notification system to reach out to customers when necessary information needs 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.