This study titled” Central Bank of Nigeria Cashless Policy and Nigeria Economy (A study of CBN Enugu) intends to drive development and modernization our payment system in line with Nigeria’s vision 2020. The study also intends to investigate whether the efficient and modern payment system is positively correlated with economic development. The study also intends to ensure that the key for economic growth is conducive. The study also intends to investigate the reduce cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach. The research work also intends to improve the effectiveness of monetary policy in managing inflation and driving economic growth. The researcher made use of survey method for gathering information after which the following findings were derived; That the development and modernization of our payment system is in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. That the efficient and modern payment system is positively correlated with economies development that the key for economic growth is conducive that the reduction cost of banking services (including cost of credit) greater reach to Nigeria Economy that the effectiveness of monetary policy in managing inflation and driving economic growth of Nigeria is very active, others include Speedy processing, Accurate Information, On-line Real Time Services, Saving of Cost and Time. Therefore the researcher concludes with the following recommendations tat the Central Bank of Nigeria should develop and modernize our payments system is in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020. That there should be efficient and modern payment system is positively correlated with economies development that Central Bank of Nigeria should establish or makes policies about the key roles for economic growth is conducive. That there should be a reduction cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach to Nigeria Economy. Finally, that there should be very active effectiveness of monetary policy in managing inflation and driving growth of Nigeria.

TABLE OF CONTENT

Title page------------------------------------------------------------ i

Approval page ------------------------------------------------------ ii

Dedication ----------------------------------------------------------- iii

Acknowledgement ------------------------------------------------ iv

Abstract ------------------------------------------------------------ v

Table of content --------------------------------------------------- vi

Chapter One

Introduction ------------------------------------------------------ --- 1

1.1. Background of the study ----------------------------------- 1

1.2. Statement of the problem ---------------------------------- 5

1.3. Objectives of the study ------------------------------------- 9

1.4. Research questions ----------------------------------------- 10

1.5. Research hypotheses --------------------------------------- 11

1.6. Significant of the study -------------------------------------13

1.7. Delimitations, scope and limitations ----------------------15

1.8. Definition of terms ------------------------------------------ 20

References -------------------------------------------------- --- 22

Chapter Two

2.1. Review of Related Literature ---------------------------------- 23

2.2.

The Reason for the cashless policy ------------------------25

2.3. Content of the cashless policy ------------------------------ 27

2.4. Expected benefits of the new cash policy ------------------ 30

2.5. Theoretical foundations -------------------------------------- 31

2.6. Current awareness/engagement status -------------------32

2.7. Challenges of the policy an recommendation ------------- 37

2.8. Summary of literature ---------------------------------------40

References ----------------------------------------------------42

Chapter Three

Research design and methodology

3.1. An overview ---------------------------------------------------44

3.2. Research design ---------------------------------------------- 45

3.3. Sources of data ----------------------------------------------- 46

3.3.1. Primary Data ----------------------------------------------46

3.3.2. Secondary Data -------------------------------------------49

3.4. Population and sample seize determination --------------50

3.5. Method of Investigation ---------------------------------- 52

Chapter Four

4.0. Data presentation analysis interpretation ----------------54

4.1. Test of hypothesis -------------------------------------------68

4.2. First null hypothesis testing --------------------------------- 68

4.3. Second null hypothesis testing ------------------------------ 71

4.4. Third null hypothesis testing -------------------------------- 74

4.5.

vii

Fourth null hypothesis testing ------------------------------ 76

4.6. Discussion results -------------------------------------------- 79

Chapter Five

5.0. Research findings, recommendation and conclusion ---- 84

5.1. Findings ------------------------------------------------------- 84

5.2. Recommendation --------------------------------------------- 88

5.3. Conclusion ---------------------------------------------------- 90

Bibliography --------------------------------------------------92

Appendices ---------------------------------------------------- 94

Questionnaire ------------------------------------------------- 95

viii

CHAPTER ONE

INTRODUCTION

1.1. Background of the study

It is no longer news that the cashless policy introduced by the Central Bank of Nigeria (CBN) has formally taken effect nationwide on July 1, 2014. It is good to know that despite the challenges that characterized the preparation and test run of the scheme in a few selected states, the CBN has gone ahead to implement the policy nationwide. It is believed that the policy implementation will get better as time goes by as it is almost impossible to record a perfect launch anytime in Nigeria.

The scheme which was initially introduced in Lagos in 2011, soon spread and cashless transaction became effective in Abuja and the five states of Abia, Anambra, Kano, Ogun and Rivers in October 2013. On the back of the successes of the scheme observed in these states and the federal capital territory, the Apex bank decided to implements the policy in the remaining thirty states in the country.

Under the policy, CBN pegged withdrawal by individual and corporate accounts at N500,000 and N3million respectively. Charge fees for withdrawal above the limits of individuals and corporate accounts are pegged at 2% and 3% respectively. However ministries, departments and agencies, (MDA), diplomatic missions, embassies, multilateral, aid donor agencies and specialized banks are exempted from the policy penalties and charges are to continue in the seven states where the scheme was earlier launched, the CBN has decided to grant a one year waiver on the applications of withdraw charges in the thirty states set to roll out the policy.

For the proponents of the scheme, the cashless policy if properly implemented should reduce inflation and curtail the illicit act of money laundering in the country. Over time monetary watchers have been of the opinion that a reduction in the huge cash manually transacted in the country could lead to a reduction in inflation rate. Besides, there is the need for the country’s monetary system to fall in line with standard practices obtained across the world which the cashless policy exemplifies.

However, many Nigerians are still doubt over the success of the scheme. For some financial analyst and even laymen, a lot of issues have to be put in place before the much talked about cashless scheme can success in Nigeria.

For some Nigeria, the nationwide launch of the cashless scheme is good its timing is wrong. Some argument that for this policy to be successful, the apex bank needs to embark on a massive enlightenment programme. This is because key business, especially the small scale enterprises seem not to understand yet what the cashless policy is all about.

Indeed, the banks need to organize forums where key stakeholder especially customers would be educated and their fears on the new policy allayed. Enlightenment cannot be overlooked if this scheme must succeed. Though the objectives seemed good, inadequate enlightenment hindered the success of its launch and the actions of those who had not fully understood the benefits of the policy brought this nation to its knees.

In a recent parley with journalists in Lagos, EPPAN’s Chief Executive Officer, Mrs. Onajite Regha did reveal some of the drawbacks to the launch of the cashless scheme ranging from education to infrastructure among others. She said, “a lot of people have heard about the policy but many believe it does not affect them. The people concerned felt very upset about the policy saying it’s a punishment. Like the Timber Association in Sapele, Delta State. This was because they didn’t associate themselves with the merit of operating cash-less which involves inconveniences and safety for the users.

According to Onajite Regha (2013.30) on the challenges faced by the people at the grassroots level, which include, armed robbery, theft, loss of market to sea pirates amongst others, stressing that majority of the people in the hinterland still lack bank accounts because they have apathy towards banks.

Okonkwo M.G (201:56) said that others challenges are the fear of fraud, fear of loosing their phones, fear of ATM scam. During the awareness campaign, it was discovered that many share their Personal Identification Numbers (PIN) with friends, relatives and office assistants with the ignorance of fraud. People were also informed on the new improvement of the CBN to provide a consumer Protection Department, exclusively dedicated to the ash-less policy. The department operates 24 hours per day for complaints and problems regarding the cashless policy.

1.2. Statement of the problem

Indeed, the CBN, which initiated the policy about two years ago, informed that it will take the initiative across the country by July 1, with the hope of reducing cash handling by Nigerians and subsequently drive financial inclusion.

This apex bank initiative is expected to enhance the integration of the country’s economy as presently 78.8 per cent of the nation’s rural population is largely unbanked.

The CBN is optimistic that the cash- less policy, when fully implemented will help the financial services industry capture Nigerian`s huge informal economy, which is driven by small scale farmers, traders, craftsmen and other types of small and medium sized business and consequently integrate it into formal economy.

Another major area of concern to many Nigerians is the telecommunications angle. The telecommunication network infrastructure seems not to have capacity to accommodate the envisaged increase in electronic transactions.

About 130millions active subscribers in the country currently grapple with increased drop quality of services, as exemplified by the incessant drop alls, poor voice clarity, network congestion, inconsistency of the billing system, high tariffs, among others, which persist on the networks.

This has become the practice because fraud thrives a great deal in transactions involving cash, but the situation is well checked if the electronic platforms are used. Investigation, however, showed that a lot of store attendants, who try to lure customers to pay cash, do so with the intention to make personal profit from such transactions.

Another issue that must be thoroughly addressed to ensure the success of the scheme is the issue of infrastructure. Infrastructure, no doubt, is a huge challenge for the system already; the human factor is another problem staring the policy and the CBN, in the face.

According to Mr. Femi Adeoti (2014:23) at a recent forum in Lagos, the Chief Executive Officer of Inlaks Computer, revealed that there are only 13,000 Automated Teller Machines (ATMs) spread across the country. This figure according to the financial expert is still very low and could also stand as roadblock for the expansion of the programme. He stressed that poor ATM and PoS terminal penetration, slow mobile money growth, and poor internet connectivity are some of the sore points that have since inception of the initiative reinforced earlier claims by industry stakeholders that the nation is not ripe for a nationwide implementation.

Meanwhile, over 70 percent of the total PoS terminal deployed and connected in Nigeria to drive the cash-less policy in the country are currently inactive. The figure was arrived at following a nationwide audit by the NIBSS of the PoS terminals so far deployed in the country as at the end of October last year.

On the human angle, investigations have revealed that the non-working state of most PoS terminals is predominately caused by the people who man the terminals.

Investigations have shown that some of these terminals are functional, but for dubious reasons, potential users are discouraged from using them, under the false pretence that they are bad. A good number of stores in the country have these terminals as payment options for customers, but most times people who want to use their electronic cards for payment are discouraged to do so: but are rather advised to pay cash.

1.3. Objectives of the study

The purpose of this study is to examine the cashless policy, These includes the following;

1. To drive development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020.

2. To investigate whether the efficient and modern payment is positively correlated with economic development.

3. To ensure that the key for economic growth is conducive.

4. To investigate the reduce cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction option and greater reach

5. To improve the effectiveness of monetary policy in managing inflation and driving economic growth and finally, the study will makes some recommendations on how to improve the cashless policy in the Nigeria economy.

1.4. Research question

The research questions include the following:

1. Do the development and modernization of our payment system in line with Nigeria’s vision 2020 goal of being amongst the top 20 economics by the year 2020?

2. Do the efficient and modern payment system positively correlated with economic development?

3. Do the key for economic growth conducive?

4. Do the reduction cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transactions options and greater reach of Nigeria Economy?

5. Do the effectiveness of monetary policy in managing inflation and driving economic growth of Nigeria active?

1.5. Research hypotheses

A) Ho: The development and modernization of our payment system is not in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020.

Hi: The development and modernization of our payment system is in line with Nigeria’s vision 2020 goal of being amongst the top 20 economies by the year 2020.

B) Ho: The efficient and modern payment system is not positively correlated with economic development.

Hi: The efficient and modern payment system is positively correlated with economic development.

C) Ho: The key for economic growth is conducive

Hi: The key for economic growth is not conducive

D)Ho: The reduction cost of banking services (including cost of credit) and drive financial inclusion by providing is not more efficient transaction options and greater reach to Nigeria Economy.

Hi: The reduction cost of banking services (including cost of credit) and drive financial inclusion by providing is not more efficient transaction options and greater reach to Nigeria Economy.

Ho: The effectiveness of monetary policy in managing inflation and driving economic growth of Nigeria is not active

Hi: The effectiveness of monetary policy in managing inflation and driving economic growth of Nigeria is active.

1.6. Significance of the study

The cashless policy which aims at reducing the dominance of cash in the Nigerian economy specifies charges for individuals and corporate organization that want to withdraw or lodge cash above prescribed threshold just as it encourages the use of electronics payment channels.

Under the policy, the cumulative cash withdrawal or deposit limit for individual accounts was pegged at N500, 000 per day and N3 million per day for corporate accounts.

The policy which commenced in Lagos in 2012 was last July extended to the Federal Capital Territory, Kano, River, Ogun, Abia and Anambra states.

According to the Head, shared Services CBN, Mr. Chidi Umeano, the decision by eth bankers committee to extend the policy was as a result of the success recorded in states where the policy had been implemented. Umeano explained: “From the success we have recorded in those areas” we have decided as an industry to move it to other states in the country.

“In other words, by the July 1, we are going live in all the states of the federation. As you well know, this is a critical part of the payment system modernization and the success registered so far has been very impressive”.

He states that statistics have shown that there had been a significant improvement in electronics banking channels.

Some of the alternatives channels being offered by banks and services providers include; Internet banking, mobile money transfer, Point of sale Terminals (PoS) and the use of Automated Teller Machines (ATMs). In a 2013 Banking Industry Customer Satisfaction Survey, conducted by KPMG professional services Nigeria, which covers more than N14,000 retail customers in 18 states, indicates an increase in ATM usage in the country.

The survey however revealed that amidst the proliferation of channel options, customers wanted banks to remember that convenience should remain a key focus. It also pointed out that cash availability at ATMs was the most important issue for retail customers in 14 of the 18 locations covered. It showed that 93 per cent of retail customers rated quality of services at the ATM as their most important services measure.

1.7. Delimitation, scope and limitation of the study

It is a widely held view that the pilot phase of the cashless policy of the Central Bank of Nigeria failed due to the several number of challenges facing the policy in Nigeria. But the apex bank has dispelled such opinion, saying the policy recorded successes even as it was suspended. According to the then CBN Governor, Mallam Sanusi Lamido Sanusi, the policy led to a general behavioral change in the way business is conducted in the country.

However, Nigeria’s cashless policy faces several challenges including poor network connectivity and debiting customers’ account twice, high transaction charges, PoS machine malfunctioning and other technical issues. These challenges have discouraged customers and resulted in as low adoption of the cashless policy. Today we shall look into these challenges one after the other either to agree or disagree in one accord in respect to our previous article stated “Cashless Policy in Nigeria – To be or Not to be”.

Challenges of the Policy Recommendations

1. Poor Network connectivity and communications Due to vast number of people using the cell-phones Telecos (Telecommunication company) pay more attention to voice clarity services rather than network connectivity. Thus network availability is inconsistent. This makes for slow access to the internet through all mediums other than cell phones. This is because the Telecos make more money on voice than data. People make use of their phone in making calls than in browsing, hence the Telecos put more in creating an adequate platform for clarity of voices services contrary to data usage and connectivity.

Recommendation: The Telecos (Electronics and Computer Science Telecommunication Company) should guarantee network availability and quality at all times. The Federal Government should make a policy that will determine the Telecos to always endeavour to ensure proper and quality availability of Network Services both in Voice and Data Usages.

2. Infrastructure deficit The financial infrastructure in Nigeria is not adequate to carry the load of a cashless society, ATMs, point of Sales system, kiosks, mobile, web and other mediums have to dramatically expand to touch at least 40% of the whole economy before any meaningful effect can be achieved.

Recommendation: Adequate and well-functioning infrastructure facilities must be in place. More specifically, issue of electricity should be tackled by the government to facilitate the usage of electronic money, individual and collective analysis should be made of the various e-banking channels to determine relative impact on the economy.

3. Security Recommendation

To prevent theft, armed robbery and miscellaneous habits by Bankers, CBN should work hand in hand with legislatures As its relates to laws that are needed to enforce new methods of transactions and changing culture, the CBN must partner and work with the National Assembly to ensure proper legislation is been formulated. Enforcements of new legislation would be carried by the CBN and all other executive arms that are empowered such as the EFCC. They must commit to training of personnel and the judiciary must be prudent and up to the task.

4. PoS machine malfunctions and other technical issues

The manufacturer of the PoS machine or the distributions should ensure with adequate hands in the field to make provision for replacement of the Pos machine when necessaries and always available in tacking several technical issues that may result in the machine in course of usage, again fair competition should be allowed in order to prevent monopoly – like behaviour by the licensed PoS manufacturers.

5. Debiting customers account twice and high transaction charges

Customer may be debited twice in course of transaction while using the ATM’s machine or likely the Pos software malfunctioning caused due to poor communication or signals in the ATM’s machine or likely the PoS software malfunctions.

1.8. Definitions of terms

CBN:

CBN means Central Bank of Nigeria

This is the central financial body that is charged the responsibility of managing Nigeria money and ensuring economic development