We were reading through the website of the Central Bank of Nigeria, especially its policy statement with respect to the “Cashless Nigeria” policy and we found some really interesting pieces of information. Please note that the information below was lifted from the website of the Central bank of Nigeria.
The cash policy was introduced in 2012 for a number of key reasons, including:
- 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. An efficient and modern payment system is positively correlated with economic development, and is a key enabler for economic growth.
- To improve the effectiveness of monetary policy in managing inflation and driving economic growth.
- To reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach.
In addition, the cash policy aimed to curb some of the negative consequences associated with the high usage of physical cash in the economy, including:
- High cost of cash: There is a high cost of cash along the value chain – from the CBN & the banks, to corporations and traders; everyone bears the high costs associated with volume cash handling.
- High risk of using cash: Cash encourages robberies and other cash-related crimes. It also can lead to financial loss in the case of fire and flooding incidents.
- High subsidy: CBN analysis showed that only 10percent of daily banking transactions are above 150k, but the 10percent account for majority of the high value transactions. This suggests that the entire banking population subsidizes the costs that the tiny minority 10percent incur in terms of high cash usage.
- Informal Economy: High cash usage results in a lot of money outside the formal economy, thus limiting the effectiveness of monetary policy in managing inflation and encouraging economic growth.
- Inefficiency & Corruption: High cash usage enables corruption, leakages and money laundering, amongst other cash-related fraudulent activities.
Expected Benefits of the New Cash Policy
A variety of benefits are expected to be derived by various stakeholders from an increased utilization of e-payment systems. These include:
- For Consumers: Increased convenience; more service options; reduced risk of cash-related crimes; cheaper access to (out-of-branch) banking services, access to credit and financial inclusion.
- For Corporations: Faster access to capital; reduced revenue leakage; and reduced cash handling costs.
- For Government:Increased tax collections; greater financial inclusion; increased economic development. Increased tax collections; greater financial inclusion; increased economic development.