Cashless policy initiative in Nigeria: outline of crucial socio-economic and regulatory considerations (2024)

FAQs

Cashless policy initiative in Nigeria: outline of crucial socio-economic and regulatory considerations? ›

The Central Bank of Nigeria (CBN) recently relaunched Nigeria's cashless policy initiative which seeks to reduce financial crime and tax avoidance, decrease cash dependency, advance the adoption of digital financial services (DFS), decrease the risks to the payment system and foster financial inclusion.

These benefits are as highlighted below:

For Consumers: Increased convenience; more service options; reduced risk of cash related crimes; cheaper access to (out-of-branch) banking services and access to credit. For Corporations: Faster access to capital; reduced revenue leakage; and reduced cash handling costs.

One of the key challenges cashless policy faces is lack of enabling environment especially power infrastructure. It was therefore recommended that attention should be paid to stabilizing power supply in the country.

Point of Sale (POS) has a positive but insignificant effect on return on equity, while Mobile Banking (MB has a negative and statistically significant effect on ROE, The study thus concludes that cashless policy has positively affected the performance of money deposit banks in Nigeria.

In October 2022, Nigeria's Central Bank announced the country would be pursuing a cashless society, introducing measures such as limits on cash withdrawals, and new banknotes abruptly replacing those already in circulation.

Crucially, this substitution has significant consequences for social inequality: while people with higher incomes typically benefit from cashless payments through easy and frictionless payments and access to short-term credit, people with lower incomes become increasingly dependent on financial services for which they ...

On one hand, transitioning to a cashless system can reduce crime rates, streamline financial transactions, and simplify international payments. On the other hand, it raises concerns about privacy, cybersecurity risks, technological dependency, economic inequality, and the potential for increased overspending.

They include unemployment and urban poverty, social exclusion and crimes, poor housing and slum, inadequate provision of public services and proliferation of the informal sector. Notwithstanding, Nigeria can exploit these urbanization challenges and turn them into opportunities for socioeconomic development.

The implication is that ease of digital financial transactions; reduced visits to banking halls aided by cashless payment mediums; and nearness of financial service outlets to rural settlement are more likely to enhance financial inclusion in Nigeria.

Nigeria's digital and financial infrastructure is inadequate to support a swift transition to a cashless economy, the World Bank has pointed out. The bank stated that this was one of the reasons the Central Bank of Nigeria's naira redesign policy failed.

What are the negative effect of monetary policy in Nigeria? ›

The results showed that increase in monetary policy rate, depreciation of nominal exchange rate and rising inflation rate negatively affected the banking system stability. However, similar increase in cash reserve requirement and banking reforms improved the banking system stability.

While cashless transactions offer clear benefits, significant barriers exist to achieving a completely cashless society. Infrastructure limitations, inadequate digital literacy, and disparities in access to technology hinder the widespread adoption of digital payments in many Asian countries.

The findings showed that monetary policy has significant effect on the performance of listed deposit money banks in Nigeria. The study concluded that liquidity ratio and loan to deposit are significant on net profit margin, likewise interest rate and cash reserve ratio were insignificant on net profit margin.

A policy that discourages the use of huge raw cash for transactions but encourages the use of bank transfer, ATM card, POS, and other financial instruments for transferring cash in transactions. Investigating Cybercrime in Nigeria.

The key notes of the policy

Withdrawal above N150,000.00 on all third party cheques can only receive value through a clearing house and not across the counter. Under this policy a bank is no longer permitted to pick up cash services from merchants, while only the licensed cash in transit companies are permitted.

Nigeria is currently experiencing a cash crisis, which the central bank said was brought on by efforts to remove excess cash from circulation in order to speed up the country's transition to a cashless economy. Data from the Central Bank of Nigeria (CBN) show that between October 2022 and February 2023, N2.

Supporters of cashless transactions also point to greater ease in the everyday management of money, for individuals and businesses. The need to store, protect, withdraw and deposit physical money disappears. International travel would also be more convenient without the exchange of paper currencies.

Ultimately, a cashless society will help a developing economy grow because more transactions can be made within the country and financial services would be available to more people.

For the purpose of the database, socio-economic benefits refer to benefits offered to a community as a whole through the use of GM crops, and can include long-term impacts on the prevailing economic conditions, on levels of education, on the family unit or on employment levels.