Perception Of Central Bank Of Nigeria Cash-less Policy By Bank Customers In Enugu Metropolis

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This study title “Perception of Central Bank of Nigeria cashless Policy by bank customers” aims at identifying commercial banks customers’ perception about the adequacy of daily amount of   withdrawable cash approved by CBN finding out customers perception about the major challenges of the cashless policy in Nigeria and the extent of customers’ knowledge about CBN e-payment plan. To achieve these aims, the researcher adopted the survey research method and collected data directly from bank’s customers structured questionnaire as the major instrument for data collection. The data were presented in tables as frequency distribution. In the analysis, the simple analytical tools of frequency and percentage where applied. The sample proportion (Z) test was applied in testing the hypothesis postulated in the study. The major findings of the study were that the cashless policy was perceived to be a strategy for development and modernization of Nigeria’s payment system; its positive effects were reduction in liquidity and inflation levels while its negative effect include/high bank charges, e-fraud and excess withdrawals. The advantages of the policy includes increased convenience of handling cash, easer and cheaper access to banking services. The perceived major challenges included inadequate electricity, poor network, low level of computer literacy and inadequate ATM and POS machines. The major recommendations are that there should be adequate infrastructural facilities, electricity and network; sensitization of the public and intensification of computer education, adequacy of ATM and POS machines and reduction in banking charges. In conclusion, the shift towards cashless in Nigeria seem to be of benefit even though there are doubts on the level of security and possibility for financing the services required for its implementation.




Title   -        -        -        -        -        -        -        -        -        -        -        - i

Certification-        -        -        -        -        -        -        -        -        -ii

Approval -              -        -        -        -        -        -        -        -        -        -iii

Dedication   -        -        -        -        -        -        -        -        -        -iv

Acknowledgements-        -        -        -        -        -        -        -        -v

Abstract       -        -        --       -        -        -        -        -        -        -vii


INTRODUCTION    -        -        -        -        -        -        -        -        -1

1.1     Background of the Study  -        -        -        -        -        -        -1

1.2     Statement of the Problem-        -        -        -        -        -        -5

1.3     Objectives of the Study    -        -        -        -        -        -        -6

1.4     Research Questions         -        -        -        -        -        -        -        -6

1.5     Research Hypotheses       -        -        -        -        -        -        -7

1.6     Significance of the Study-        -        -        -        -        -        -7

1.7     Scope of the Study-        -        -        -        -                  -        -8

1.8     Limitations of the Study  -        -        -        -        -        -        -9

1.9     Profile of CBN        -        -        -        -        -        -        -        -        -10

References   -        -        -        -        -        -        -        -        -        -16


REVIEW OF RELATED LITERATURE REVIEW      -         -         -17

2.1     Conceptual Framework -  -        -        -        -        -        -        -17

2.2 Theoretical Framework-       -        --       -        -        -        -        -23

2.3 Empirical Review -     -        -        -        -        -        -        -        -24    

2.4 The Participating Management      -        -        -        -        -        -25

2.5     Stakeholders Benefit       -        -        -        -        -        -        -        -26

2.6     Available Alternative Channels  -        -        -        -        -        -29

2.7     Enablers      -        -        -        -        -        -        -        -        -        -31

2.8     Consequences of Heavy Cash Usage    -        -        -        --       -34

2.9     Challenges to Cashless Policy    -        -        -        -        --       -34

References   -        -        -        -        -        -        -        -        -        -37


RESEARCH METHODOLOGY   -         -         -         -         -         -         -39

3.1     Research Design    -        -        -        -        -        -        --       -39

3.2     Sources of Data     -        -        -        -        -        -        --       -39

3.2.1  Primary Sources    -        -        -        -        -        -        -        -40

3.2.2  Secondary Sources-        -        -        -        -        -        -        -40

3.3     Population of the Study    -        -        -        -        -        -        -40

3.4     Sample Size Determination       -        -        -        -        -        -41

3.5     Sampling Techniques      -        -        -        -        -        -        -42

3.6     Data Collection Instrument       -        -        -        -        -        -42

3.7     Questionnaires Instrument       -        -        -        -        -        -42

3.8     Validity of the Instrument Used-        -        -        -        -        -43

3.9 Reliability of the instrument used -         -        -        -        -        -43


DATA PRESENTATION ANALYSIS AND DISCUSSION OF FINDINGS----        -         -         -         -          -         -         -         -         -44

4.1 Presentation of Data -          -        -        -        -        --       -        -        -44

4.2 Test of Hypotheses     -        -        -        -        -        -        -        -68

4.3 Discussion of Fin dings       -        -        -        -        -        -        -75



5.1     Summary of Findings      -        -        -        -        -        -        -82

5.2     Conclusion   -        -        -        -        -        -        -        -        -86

5.3     Recommendations  -        -        -        -        -        -        -        -86

5.4 Contribution to Knowledge --        -        -        -        -                  -87

5.5 Suggestion for further study -        -        -        -        -        -        -88

Bibliography          -        -        -        -        -        -        -        -        -        -89

Appendix      -        -        -        -        -        -        -        -        -        -92

Questionnaire        -        -        -        -        -        -        -        -        93














1.1   Background of the Study

     The trend of electronic payment began in United States of America many years ago, followed by other developed Countries like United Kingdom, France, Sweden, and Canada among others. It has become necessary to lots of African Countries including Nigeria to join this system of electronic payments while dealing with less of cash.

Cash (money) is anything generally accepted as a means of payment for goods and services. In the past various things have been used as money for the settlement of debt which includes – gold, cowry, shells, coins, pepper money and lately electronic payment cards. Within the 20th century cash was the dominant means of payment but was replaced by electronic payment including ATMs, POS, internet and mobile phones etc in emerging and developed countries like USA, UK, Canada, Sweden etc. While in Nigeria Central Bank of Nigeria introduced it as cashless banking policy in April, 2011 flagged off in Lagos – the pilot centre six months later. It is pertinent to know that the Bankers Committee of Nigeria, Commissioned a study to identify cost drivers to proffer a sustainable solution. Amongst the result of the study are – high cash intensity in the economy and its impact on high cost structure in the financial value chain. It was observed that the total cash management costs in 2012 was projected to exceed N192 billion excluding cost of production, distribution, processing and destruction by Central Bank of Nigeria. It showed that 10% of customers carry out cash transaction above N150, 000 daily in banks, meaning that 95% mass public is subsidizing the cash transaction cost on that 10% of bank customers. This brought about the policy – cash-based which stipulates a cash service charge on daily cash withdrawal or deposit that exceeds N500,000 for individual and N3,000,000 for corporate bodies. This aims at reducing cash circulation in the economy but not eliminating amount of physical cash circulation in the economy. It will also reduce the high cost of cash to the financial system. (Umeano, 2012)

        The relevance of customers in the cash and banking transaction of any Nation cannot be overemphasized. They are the cornerstones, the linchpin of the banking and financial system of a country. The economy of all market – oriented nations depends on the efficient operation of complex and delicately balanced system of money and credit.  Customers are indispensible element of this system. Customers provide the bulk of the money supply as well as the primary means of facilitating the flow of credit. “Consequently it is submitted that the economic well being of any nation is a function of advancement and development of its banking industry with customer as the “king”.

The cash-less policy introduced by Central Bank of Nigeria in 2011, have attracted comments, criticism and commendations from several quarters. To some people, it appears there is no advantage of electronic payment system (cash-less system) over cash dominated system economy. The issue at hand is the method and time frame adopted to influence Nigeria to embrace electronic payment referred to as cash-less policy by Central Bank of Nigeria.  Another major problem CBN and other bankers have to contend with is the issue of armed rubbery, lack of understanding of cash policy amongst banked and unbanked, infrastructure lag, distrust in banking system etc on the part of banks. While on the part of customers, the fear of technology based on literacy level for the use of Electronic payment product, fear of exorbitant bank charges on Electronic payment product, security on ATM fraud level and level of awareness to the general public especially none wage earners and people in rural areas who have no access to banking and even the Electronic payment (e-payment). Above all is the availability and accessibility of e-payment enablers summarized as – Infrastructure, Payment Terminal Service providers (PTSP), Point-of-Sale (POS) terminals, Automated Teller Machine (ATM) Bank coordinators, Fraud management, Customer protection and dispute resolution to mention but a few.

All these factors have combined to create challenging and precarious cash-less policy for the customers. Consequence of this new cash-less policy has been rapidly increasing especially with ATM card issued since inception. The pace at which Nigerians embrace e-payment system rests on the successful implementation of the cash-less policy – which does not rest squally on the Central Bank of Nigeria (CBN) and Deposit Money Banks (DMBs) alone, but with other social institutions and forces e.g. Media, Traditional rulers, Churches etc to create awareness. To position this cash-less policy to effectively withstand its challenges and avert failure, the regulators have found a way around it to make headway. Optimists of the new system have waved off what appeared to be the major impediments in terms of infrastructure, and there is slow but steady adoption of the system by Nigerians.

1.2   Statement of the Problem

        Globally, many developed and developing countries have embarked on e-payment and they were not free from challenges emanating from it. Cashless economy is a situation where there is little or very low use of cash in a given society, thus every other purchase and transaction will be made by  electronic channels such as electronic fund transfer, direct debit, mobile payments, ATMs, Internet Banking, POS etc. Generally, cash is required to support business and in fact in every financial transaction, but the importance of e-payment (cash-less) system cannot be overemphasized. It is an essential element which enhances confidence, reduces robberies and cash related crimes as well as reducing high cost of cash handling and processing. However, the facilities to support these advantages were problems envisaged with regard to security, constant provision of power for the e-payment usage, constant accessibility of e-payment materials etc.

1.3   Objectives of the Study

The broad objective of this research work is to examine the perception of the CNB cashless policy by commercial banks’ customers in Enugu metropolis. 

         The specific objectives of the study are as follows:

1.     To identify the bank customers’ perception about the adequacy of the daily amount of withdrawable cash approved by CBN.    

2.     To find out customers’ perception about the major challenges of the cashless policy in Nigeria.  

3.     To find out the extent of customers’ knowledge about CBN e-payment plans.

1.4   Research Questions

        The following formulated research questions prompted the researcher to write this project. 

1.     What is the bank customers’ perception about adequacy of the daily amount of cash withdrawable approved by CBN?  

2.     What are the customers’ perceptions about the major challenges to cashless policy in Nigeria? 

3.     What is the extent of customers’ knowledge of CBN e- payment plans?

1.5    Research Hypotheses

For the purposes of this study, the following hypotheses are formulated:

Ho: The daily amount of cash for withdrawal or deposits for individual and corporate bodies approved by CBN are significantly inadequate for their daily problem solving.                        

H1: The daily amount of cash for withdrawal or deposits for individual and corporate bodies approved by CBN are considered adequate for daily problem solving.

Ho: There are no challenges facing cashless policy implementation in Nigeria.  

H1: There are so many challenges facing cashless policy implementation in Nigeria.  

Ho: The customers’ knowledge about CBN e-payment plans were very low.

H1: The customers’ knowledge about CBN e-payment plans were very high.

1.6   Significance of the Study                     

        The researcher is optimistic that at the end of this research, the findings of the perception by customers, if accepted would be offered for the benefits of all those (participating management) involved in the cash-less policy implementation in Nigeria.

Furthermore, the research will intimate customers, general public and Banking industry in Nigeria the challenges and achievements of the electronic payments. Also, the study will be of tremendous benefit to the policy makers, board and administrators, managements and staff of the financial market, security bodies in handling this issue to prevent corruptions, mismanagement and failure of this system of payment.

The researcher also hoped to provide information for those who would want to conduct a similar study. The information provided would be of a great value to them. It would also serve as a point of reference for further research.

1.7           Scope of the Study

The study is basically on the perception of Central Bank of Nigeria cash-less policy by customers in Enugu metropolis.

1.8           Limitations of the Study

    The researcher encountered the following limitations;

1.     Financial constraints – The researcher being self sponsored is faced with problem of paying school fees, paying for every necessary thing required by the school, transportation to school and to CBN for data collection and other logistics.

2.     Time constraints –Apart from being a student attending lectures, I am also working to sponsor myself and carry out this research.

3.     Bureaucracy constraints – some restrictions on getting certain classified information because of their professional secrecy was encountered.

4.     Respondents’ constraints – The respondents’ attitudes towards the questionnaire was another constraint. Despite its clarity some respondents were skeptical about the purpose of the questionnaires. This affected the number of questionnaires completed and returned. However, any further investigation or research may have less of these factors to enhance improvement.

1.9   Profile of CBN

A Central Bank is a major institution in any modern economy and it is quite important to the functioning of both the private sector and fiscal operations of the government. The pattern of development of central banks in developing countries is, however, quit different from that experienced in Western Europe. Central banks in virtually every developing country were consciously set up by its government to perform, at least those roles generally associated with central banks.

The central bank of Nigeria is no exception to this pattern of development as it is a relatively young institution. Nevertheless, its role in the Nigerian economy is fairly wide indeed. While like other central banks, the bank is bestowed with some traditional central banking functions that relatively underdeveloped characteristic of the Nigerian economy has made the bank to be actively involved in the promotion of rapid economic development through its various developmental roles. By looking at the origin, functions and organizational set up of the central bank of Nigeria, this paper will be able to show that the central bank of Nigeria is indeed a pivotal institution in our economy.

        The Central Bank of Nigeria was established in 1958 under an Act of Parliament known as the Central Bank of Nigeria’s Act. For many years before the establishment of the bank, a rudimentary system had already begun the process of transforming the Nigerian economy from a barter economy to a monetary one. The media of exchange then were, however, multifarious and therefore, not really regard Nigeria as having a monetary system, at least in terms of orderliness, until the establishment of the West African Currency Board (WACB) and the introduction of a single currency system for West African Currency Board essentially prepared the way for the emerging modern financial system in Nigeria. However, the WACB itself, as designed, could hardly be described as a monetary authority in terms of using any discretionary power to control the growth of credit and money supply in the economy. Thus, the WACB has been described as “simply a passing money changer”.

        The first formal move towards the establishment of a Central Bank in Nigeria was, however, in April 1952 when a private member motion was proposed in the then House of Representatives calling for the establishment of a central bank in Nigeria to perform essentially those functions generally associated with central banks. The House did not pass this motion because the then colonial government considered the establishment of a central bank of Nigeria premature in view of the relative underdevelopment of the local financial system. The house however, passed an amended motion asking the government to examine and report back to it on the possibility of establishing a central bank in   Nigeria. An adviser to the Bank of England, Mr. J.L. Fish with his several reports did not favor the establishment of central bank of Nigeria. It was Mr. J.B. Loynes who is also an adviser to the Bank of England that wrote a report that favored the establishment to central bank of Nigeria by an Act of parliament know as the Central Bank Act. With the establishment of the Bank, therefore, the WACB operations in Nigeria were phased out and taken over and refined by the Bank. The principal objectives of the Bank as embodied in the CBN Act include;

1.     Issue of legal tender currency.

2.     Management of external reserves.

3.     Banker and financial adviser to the government.        4.  Promotion of monetary stability.  

5.     Relationship of the CBN with the Commercial Banks. Section 38 of Central Bank Act 1958 specifically states that the CBN “may act as banker to other banks in Nigeria and abroad”. The Act further enjoin the Bank to  seek the co-operation of and co-operate with other banks in Nigeria to promote and maintain adequate banking services for the public as well as endure high standard of conduct and management throughout the banking system.The Act also direct that CBN, with the consultation with the Minister of Finance, to prescribe a minimum ratio of total loans and advances to be granted to indigenous persons as well as the proportion of a commercial bank’s total deposit liabilities that must be held as cash reserves as the Central Bank and as liquid asset reserves. To this end, the banks are required to submit monthly returns to the CBN and these allow the Bank to effectively monitor the activities of these banks, particularly with respect to compliance with specific CBN’s guidelines. In addition to the traditional functions described above, the Central Bank of Nigeria performs.

6. Developmental functions on local money and capital markets and helps establish several development finance institutions. This gave them the power of establishing cash-less banking known as e-payment (CBN Bullion vol.362012).

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Perception Of Central Bank Of Nigeria Cash-less Policy By Bank Customers In Enugu Metropolis