An efficient and modern payment system is positively correlated with economic development and is a key enabler for economic growth. It is with this understanding that the Central Bank of Nigeria (CBN), in conjunction with the Bankers Committee, introduced the cashless policy in 2012.
The policy aims to introduce modern payment systems and thereby reduce high usage of physical cash in the economy. As such, it places limitation on daily cash withdrawals on all accounts owned by individual and corporate customers. The policy specifies that individuals and corporate organisations that make cash withdrawals above the limits of N500,000 and N3 million, respectively, will be charged a service fee for amounts above the cumulative limits. Furthermore, third party cheques above N150,000 are not eligible for payment over the counter.
Since its introduction, analysts believe the cashless policy has had positive impact on the economy. For one, it has contributed to driving development and modernisation of the payment system in line with the nation’s aspiration of being amongst the top 20 economies of the world by the year 2020. It has transformed the banking habits of the public, engendered financial inclusion, increased tax collections to the coffers of government, and, ultimately, increased economic development.
Furthermore, there has been the provision of more service options as well as cheaper access to out-of-branch banking services. There has been, for instance, an increase in the deployment of Point-of-Sale terminals, multi-functional ATMs, mobile payments, internet banking, electronic funds transfer and direct debits, among others. Indeed, the mobile payment system allows for point-of-sale payments to be made through a mobile device, such as a cellular phone or a smartphone or a personal digital assistant (PDA).
As a result, a variety of benefits have continued to be derived by various stakeholders from an increased utilisation of e-payment systems to increase convenience for consumers. For corporations, the policy has been able to fast-track their access to capital and reduced revenue leakages.
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It is also instructive to note that the policy has to a large extent curbed some of the negative consequences associated with the high usage of physical cash in the economy, which include, but not limited to, high cost of cash even along the value chain – from the CBN and the banks to corporations and traders; robbery and other cash-related crimes; and financial losses in the case of fire or flooding incidents.
More importantly, the informal economy has been largely incorporated as hitherto high cash usage resulted in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth. High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.
In spite of these achievements, however, the policy is bedevilled by the lack of proper understanding amongst both the banked and unbanked, resistance due to prevailing cash culture, technophobia, illiteracy (Literacy vs Numeracy), entrenched poverty, infrastructure lag, distrust in banking system and lack of clarity in communicating content of policy. Currently, there seems not to be a coordinated approach by the banks, which is sending wrong signals to the market.
We, therefore, urge the CBN to expedite action in tackling the challenges listed above. As for the banks, there is need for them to be clearer and more vigorous in communicating to the public the relevance of the policy. It is only by carrying everybody along that the nation can reap the full benefits of the cashless policy.
