13 Sep


In an attempt to control the volume of cash transactions and improve the payment system in the economy, the Central Bank of Nigeria came up with cashless policy. The policy was conceptualized to migrate Nigeria’s economy from cash-based economy to a cashless one through electronic payments, not only to enable Nigeria’s monetary system fall in line with international best practices or discourage movements of huge cash manually, but at the same time increase the proficiency of Nigeria’s payment systems which in turn improve the quality of service being offered to the banking public.

Lagos was taken to be the pilot state for the policy and the successes recorded in the pilot state (Lagos) necessitated the extension of its implementation to other six states of the federation including FCT, Abuja. The five other states are: Rivers, Kano, Abia, Ogun and Anambra. These states were chosen because of high concentration of cash transactions according to Apex bank. The policy became effective in these states on October 2, 2013 after the expiration of the grace period given to the banking public in these affected states.

Under the policy, which kick-started in Lagos, the Apex bank pegged withdrawal by individual and corporate accounts at N500,000 and N3 million respectively. Charges for withdrawal above the limits for individual customers is 3% while that of corporate bodies is 5%.

As from July 1, 2014, the cashless policy will be extended to the remaining 30 states of the federation. However, the cash withdrawal charges will not apply yet in these states. In all states of the federation, 3rd party cheques above N150,000 remain ineligible for encashment over the counter, value for such cheques shall be received through the clearing house or in-house transfer according to CBN directive on July 1, 2013.

The penal charges on withdrawal above the stipulated limits which is already applicable in 6 states and the FCT which will take effect from July 1, 2015.

New CBN governor, Godwin Emefiele made pronouncement on the removal of charges on cash deposits to bank which might increase cash deposits.

With the introduction of cashless policy, there will be reduction in inflation, helps to curtail the illicit act of money laundering, minimize the spate of arm-robbery, reduce the cost of printing new naira notes, reduction in overhead cost of commercial banks, assist Nigeria to save money etc.

Massive reduction in the movement of huge cash will checkmate the surge of inflation because whenever there is reduction in bulk cash transactions; definitely inflation rate is going to subside. The issue of money laundering will be discouraged as it will be easy to track every financial transaction.

There will be sharp fall in the billions of Naira being spent annually in reprinting naira notes, because whenever there is a drastic reduction in huge cash transactions the life span of Naira notes is usually prolonged.

The spate of arm-robbery will be reduced and curb the menace of insecurity in the county. Thieves cannot invade people’s apartments when you know that people are no longer keeping money at home thereby assist in solving socio-economic problems plaguing Nigerian nation.

We must realise that the policy may face many challenges especially in a country where about seventy million people out of its one hundred and sixty million are unbanked. There is need for sensitization in order to integrate the informal sector of business operations in Nigeria especially the illiterate market women and men.

Technicalities associated with this policy must be improved. For instance, Point of sales terminal obviously cannot work on its own, but with the availability of network waves. What happens when network gets bad as often the case in Nigeria? Does that mean businesses will be on hold until network decides to come on?

According to CBN, cashless policy is expected to reduce the usage of cash in the economy, minimize cost of cash management, extend banking to the informal sector of the economy, increase bank deposits, encourage the use of electronic payment channels such as: POS, Web, Mobile, Internet banking, Direct Debit etc, reduce the cost of doing business and improve security.

To effectively achieve these laudable objectives, government must put into consideration the following:

  • Improved power for smooth operations of financial activities
  • Adequate financial infrastructure to carry the load of cashless society, ATM’s, POS, Mobile banking to touch at least 40% of the whole economy.
  • Availability of real data of account holders.
  • CBN must be ready to invest heavily on the policy because technology is not cheap.

Security as relates to laws enforcing new methods of transaction and a changing culture. CBN must collaborate with EFCC and National Assembly to ensure proper legislation is being formulated because the scheme involved risk if the process is not properly implemented

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