CASHLESS POLICY IN NIGERIA, VISION 20; 2020: HOW FEASIBLE?

This paper tends to examine the cashless policy introduced by the apex bank of Nigeria in 2012 and placing it side by side with vision 20, 2020 of the country and then ascertaining the feasibility of actualizing this vision in the next five years.  

1.0      INTRODUCTION

In 2012, the Central Bank of Nigeria (CBN) introduced a new policy on cash-based transactions which stipulates a ‘cash handling charge’ on daily cash withdrawals that exceedN150,000 ( now N500, 000) for individuals and N1,000,000 ( now N3, 000,000) for corporate bodies. Third party cheques above N150, 000 shall not be eligible for encashment over the counter. Value for such cheques shall be received through the clearing house. The new policy on cash-based transactions (withdrawals) in banks, aims at reducing not eliminating the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.). The pilot (Phase 1) was run in Lagos State from January 1 2012( the Charges took effect on March 30^th, 2012) while Phase 2 of the policy took effect in Rivers, Anambra, Abia, Kano, Ogun and the Federal Capital Territory (FCT) on the 1st July, 2013 whereas the charges for these five states started to apply on October 1, 2013. The policy was implemented nationwide on July 1st, 2014, whereas the charges on withdrawals for both individual and corporate account holders, the regulator said, would only take effect in the 30 States from July 1, 2015. However, while the policy applies to all accounts, the exceptions are Government revenue generation account, Primary Mortgage Institutions, Microfinance Banks and Embassies.

Cashless economy is not the complete absence of cash, it is an economic setting in which goods and services are bought and paid for through electronic media. According to Woodford (2003), Cashless economy is defined as one in which there are assumed to be no transactions frictions that can be reduced through the use of money balances, and that accordingly provide a reason for holding such balances even when they earn rate of return. In a cashless economy, how much cash in your wallet is practically irrelevant. You can pay for your purchases by any one of a plethora of credit cards or bank transfer (Roth, 2010). Cashless economy is an economy where transaction can be done without necessarily carrying physical cash as a means of exchange of transaction but rather with the use of credit or debit card payment for goods and services. The cashless economy policy initiative of the Central Bank of Nigeria (CBN) is a move to improve the financial terrain but in the long run sustainability of the policy will be a function of endorsement and compliance by end-users (Ejiro, 2012).

The Nigerian economy is one of the most developed economies in Africa, however, outside the petroleum sector, the economy is underdeveloped and it suffers primarily due to the country’s deficiencies in basic infrastructure.  Widespread poverty, unskilled labor, and lack of industrial resources are also big challenges for Nigeria.

The government’s “Vision 20:2020” Plan seeks to position Nigeria as one of the top 20 economies in the world by the year 2020.  However ambitious the goal is in reaching a US$900 billion Gross Domestic Product (GDP) by 2020, the challenge remains to lay the foundation for industrial competitiveness through development of adequate infrastructure, economic models, technical training, and professional experience.  Sound fiscal management will be required to maintain low interest and inflation rates, enabling industries to prosper and hire workers which in turn will create taxable revenue for the government and contribute to the stability of the naira.

Vision 20:2020 Development Plan Focuses on Physical Infrastructure (i.e Power,  Transportation,  Oil & Gas Infrastructure,  Housing,  Water Resources), Productive Sector ( i.e   Agriculture & Food Security,  Oil & Gas, Manufacturing, Small & Medium Enterprises (SMEs), Solid Mineral & Steel Development, Culture & Tourism, Trade & Commerce, Human Capital and Social Development ( i.e Education, Health,  Labour, Employment & Productivity, Women Affairs & Social Development, Youth Development, Sports Development, Food & Nutrition, Social Protection & Safety Nets)and Developing a Knowledge-based Economy( i.e Information & Communications Technology Sectors, Postal Services Sub-Sector, Science, Technology & Innovation Sector). Vision 20:20 20 blueprint expresses Nigeria’s intent to improve the living standards of her citizens, taking cognizance of the enormous human and material resources in Nigeria and drive the economy to be among the top 20 economies in the World with a minimum GDP of $900 billion and a per capita income of no less than $4000 per annum. The economic blueprint intent is aptly captured in the vision statement: “By 2020 Nigeria will have a strong diversified, sustainable and competitive economy that effectively harnesses the talents and energies of its people and responsibly exploits its natural endowments to guarantee a high standard of living and quality of life to its citizens”

Among the various reasons that informed the introduction and implementation of cashless policy in Nigeria is, according to the apex bank, ‘‘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’’. Whilst holding constant every other focus of vision 20, 2020 development plan, this paper examines the feasibility of attaining a near-100% cashless economy in Nigeria in the next five years.

2.0 WHY GO CASHLESS

In 2012, the CBN had estimated that over N192 billion was being spent annually on cash handling and management in the country, an amount that the regulator, the banks and their customers had to pay for a cash-based economy.

The apex bank had in 2010 commissioned a study along with the bankers bank to identify possible ways to enhance service delivery in the financial sector by reducing the industry cost to serve as well as institutionalize operational efficiency amongst banks and the study revealed amongst others, high cash usage in the economy and the attendant high cost implication in the financial value chain.

As a cash-based economy, a rising volume and value of currency-in-circulation (CIC) will lead to a continuous increase in the cost of cash management and according to the CBN with retail and commercial payments primarily made in cash, the cash transactions represent over 99 per cent of customer activity in banks.

The statistics from the study revealed that about 86 per cent of in-branch bank cash withdrawals are less than N100,000 in value, while less than 10 per cent of transactions are more than N100,000. But only 10 per cent of branch cash transactions are above N150,000 and make up 86 per cent of the volume of cash handled.

This means that about 90 per cent of bank customers end up paying for servicing the cash of a minority 10 per cent who actually move the larger chunk of cash in the banking halls. It was also observed that high cost structures of banks were responsible for poor lending.

This huge amount involved in cash servicing had kept on growing year-by-year and this formed part of the basis for the cash-lite economy being initiated by the apex bank that took off with a pilot stage in Lagos in 2012 and extended to other states last year.

The cash policy aims 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.

3.0 HOW IT WORKS                                                                

With the cash-lite policy, individual customers are allowed to make cumulative withdrawal of N500,000 daily across the counters and the ATM, however withdrawal above this limit will attract the payment of a processing fee of three per cent for the amount above the limit. Also corporate customers are allowed to make cumulative withdrawal of N3 million daily while withdrawal above the limit will attract a processing fee of five per cent.

Although initially, deposits above the stated limits attracted similar charges, but the new CBN governor, Godwin Emefiele as part of efforts to further encourage the policy had recently scraped the charges on withdrawal.

Emefiele in his maiden speech where he unveiled his vision for the finance industry, had mentioned customers’s complaints on the charges on deposits which had made many devise means to avoid the charges such as opening multiple account, a move which he described as detrimental to the cashless policy.

Consequently, he had directed that all charges on deposits be stopped with immediate effect, while charges on withdrawals in view of their elimination will remain sustained at the current three per cent for individual transactions exceeding N500,000 and five per cent for corporate transactions exceeding N3 million.

Also, the CBN has suspended the charges on withdrawals in the 30 states which would be experiencing the cashless policy newly. This means that withdrawal charges will continue to apply to transactions above the specified limits in Abia, Anambra, Lagos, Ogun, Kano, Rivers States and the Federal Capital Territory (FCT). With this, charges on withdrawals for both individual and corporate account holders will only take effect in the 30 States from July 1, 2015, to allow residents in the 30 states get accustomed to the policy.

4.0 WHAT OTHER MEANS OF PAYMENT

Since the commencement of the pilot stage in Lagos in 2012, many Lagosians as well as residents of the six other states, the Federal Capital Territory, Abia, Anambra, Kano, Ogun and Rivers states where the second phase kicked off, have made use of other channels of payment with many more making less use of cash for transactions.

With the policy in place, mobile banking which allows individuals to send and receive money via their mobile phones have continued to gain popularity. Likewise many stores now possess point of sale (PoS) terminals which allows customers pay for goods and services using their ATM cards.

Other electronic means of payment which have started gaining prominence include:  cheques, the NIBSS- National Electronic Fund Transfer (NEFT), NIBSS instant payment, internet banking, standing order, direct debit, credit cards, bank draft and other banking instruments.

5.0 BENEFITS OF THE CASHLESS ECONOMY

However, experts and government officials have continued to paint the system in very colorful tones. For instance, the World Bank says that “operating a cashless society in Nigeria was strategy for fast-tracking growth in the nations’ financial sector”. If the World Bank says so, one expects that to be true. Experts have pointed out specific areas in which the cashless economy will enhance the quality of life. This includes:

1. Faster transactions – reducing queues at point of sales.

2. Improving hygiene on site – eliminating the bacterial spread through handling notes and coins.

3. Increased sales

4. Cash collection made simple – time spent on collecting; counting and sorting cash is eliminated.

5. Managing staff entitlements (http://www.wmcltd.com.co.uk/cashlesssystem?2011)

It is also noted that:

It reduces transfer/processing fees, increases processing/transaction time, offers multiple payment options and gives immediate notification on all transactions on customers’ account. It is also beneficial to the banks and merchants; there are large customer coverage, international products and services, promotion and branding, increase in customer satisfaction and personalized relationship with customers and easier documentation and transaction tracking (Ashike, 2011).

E-payments have several advantages, which were never available through the traditional modes of payment, some of which are; privacy, integrity, compatibility, good transaction efficiency, acceptability, convenience, mobility, low financial risk, anonymity (Keck, 2012).

E-payment tends to benefit businesses by extending customers base, boosting cash flow, reducing costs, enhancing customer service and improving competitive advantage (www.electronic-payments.co.uk).

The government will benefit from the cashless economy in the area of adequate budgeting and taxation, improved regulatory services, improved administrative processes (automation), and reduced cost of currency administration and management (Ashike, 2011).

A variety of benefits are expected to be derived by various stakeholders from an increased utilization of e payment systems. This includes;

· For Consumers; increased convenience, more service options, reduced risk of cash-related crimes,cheaper access to (out-of-branch) banking services and access to credit.

· 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.

· For Banks; efficiency through electronic payment processing, reduced cost of operations and increased banking penetration. (Oyetade and Ofoelue, 2012).

Other expected benefits include:

 It will reduce the cost of minting and transporting of cash around the country.

It would create more employment opportunity for financial sectors and ensure growth in the real sector of the economy because of the increase in velocity. This would not only ensure that credit is available to investors but also provide banks with more liquidity for lending to the needy sectors of the economy at attractive rates.

6.0 CASHLESS SUCCESS SO FAR

Within two years of implementing the cashless policy of the CBN, it gladdens the heart to note that the value of interbank transfers, captured through the Nigerian Inter-Bank Settlement System (NIBSS), jumped from N51 billion monthly in January 2012 to over N1.5 trillion as at June 2014. In volume, NIBSS transfers rose from 87,000 transactions a month in January 2012 to 3.1 million transactions a month as at June 2014.

According to recent figures NIBSS, volume of Point of Sale (PoS) transactions increased astronomically from less than 2000 monthly as at January 2012 to 2,637,000 in December 2014, while transactions in value moved up from N38 million per month in 2012 to N39 Trillion in  December 2014. Licensed payment terminal service providers authorised to increase POS terminal penetration increased from 5 to 10 with over 150,000 POS terminals across the country as at June 2014. The CBN has a target to increase the POS terminals to at least 350,000 by 2015.

In an update report on the cashless policy, the CBN indicated that at the moment, mobile money transactions value went up to N819 million monthly while over 18 Mobile Money Service Providers have already secured licenses and more payment terminal service providers (PTSPs) have been licensed to facilitate the positioning of POS’s for merchants who have indicated interest to their banks.

Likewise, the volume and value of cheques transactions increased to 1.2 Million and N645 Trillion in December 2014 from, 940 Thousand and N584 trillion as at January 2013, reflecting increases of 27.66 and 10.45 percent respectively.

More so, the Nigeria Interbank Settlement System Instant Payment (NIP) transactions recorded an increase in volume and value to 40.8 Million and N19.922 trillion as at December 2014 from 16.1 Million and N10.845 Trillion as at December 2013, indicating increase of 153.42 and 83.70 percent respectively.

Mobile payments (Inter-scheme Transfer) transactions recorded a whopping increase in volume and value to 419,480 and N12, 958.25 Trillion as at December 2014 from 56,720 and N1, 389.5 Trillion as at December 2013 reflecting increases of 639.56 and 832.58 percent respectively.

The web-based/Internet Payment platform introduced by NIBSS in 2012 has continued to record tremendous growth. As at December, 2014, web/internet payment (E-Bills Pay) transactions stood in volume and value at 112,060 and N9, 156.86 Trillion respectively.

Whilst the number of ATMs stood at 11,702 at end-June 2013 as against the revised figure of 10,727 at end-December 2012, reflecting an increase of 9.09 percent, the volume of ATM transactions decreased by 30.6 per cent to 136.663 million during the first half of 2013, from 196.995 million in the second half of 2012. Also, the value of transactions rose to N1.286 trillion at end-June 2013, from N1.046 trillion in the second half of 2012, showing an increase of 22.9 per cent.

7.0 A LOOK AT COUNTRIES OF THE WORLD THAT ARE CLOSE TO 100% CASHLESS

The journey towards a cashless world is like a gradual trek toward electronic payments shaped by local factors even as cash accounts for about 85% of global consumer transactions. This remains true even as much of the world’s population is gaining access to a multitude of non-cash options for making payments.

MasterCard Advisors introduced a new global report, “The Cashless Journey,” that reveals how major economies are progressing from cash-based to cashless societies. The cashless journey explores the evolution of consumer payment patterns in 33 countries from five regions, representing more than 85% of global GDP, taking in both developed and developing nations, using a single methodology.

The study focuses on the value of all consumer payments ($63 trillion in total spend), including those that happen beyond retail point-of-sale. In 2011, 34% ($21 trillion) of total global consumer spend was done with cash, with cashless payments accounting for 66% ($42 trillion).

In examining consumer payment patterns around the world, researchers find that nations fall into one of four stages in their cashless journey. They are:

• Nearly Cashless: Countries at this final stage of the journey have moved the vast majority of the value of consumer payments to cashless methods. Many countries at this stage are seeing growth of use of cashless solutions for low value payments, such as PayPass. They include: Belgium (93%), France (92%), Canada (90%), Sweden (89%), the UK (89%), Netherlands (85%), Australia (86%).
• Tipping Point: Countries at this stage of the journey have moved most large consumer payments to cashless methods, but significant use of cash may still persist at retail point of sale. They are at the point where consumer preferences will drive future share shift. They include: the United States (80%), Germany (76%), South Korea (70%), Singapore (69%), Japan (62%).
• Transitioning: Countries at this stage have created the requisite infrastructure to go cashless, and are shifting share of consumer payments, often quite rapidly. These countries are underway on their cashless journey.  Countries like Brazil (57%), China (55%), Spain (54%), Mexico (53%), Malaysia (45%), Greece (44%), Italy (44%),  South Africa (43%),  Taiwan (43%), Poland (41%), Thailand (41%).
• Inception: Countries just beginning their cashless journey. Many of these countries are still building the infrastructure necessary to move away from cash. In these places cash still accounts for the large majority of the value of all consumer payments. They Include: India (where 32% of the value of consumer spend is cashless), Russia, Indonesia (both 31%), Kenya (27%), United Arab Emirates (26%), Colombia (24% ), Peru (23%), Saudi Arabia (19%), Nigeria (10%), Egypt (7%).  

Each of the countries at the first stage above is an illustration that a true cashless society is indeed possible and that once the relative barriers are eliminated, any country can rapidly switch to cashless payment methodologies. A brief description of them will shed more lights on how they attained their respective heights.

Belgium

Noncash payments’ share of total value of consumer payments: 93%

Percent of population with a debit card: 86%

Belgium has clearly become one of the most advanced countries in the cashless world. The nation’s government has given a high priority to making payment systems more efficient. A majority of the population in the country is urban and has a high level of access to financial services, modern infrastructure and latest technologies. An interesting fact to be noted is that the Belgian government has imposed a limit on cash payments limiting it to 3000 euros. There are many instances of revolutionary payment propositions in Belgium. A new mobile payments venture was recently launched in Belgium dubbed as “Sixdots”. Available as a mobile app for iOS and Android users, it allows users to set up digital payments wallets. These wallets are supported by Belgian banks and the mobile operator Proximus.

France

Noncash payments’ share of total value of consumer payments: 92%

Percent of population with a debit card: 69%

France’s success in moving away from cash comes in part from its high level of banked population (97%) and also from a long-standing government focus on the efficiency and financial inclusion aspects of payments. France has been actively focused on payments innovation, bringing to market new solutions such as mobile payments, contactless cards, and m-POS to meet the diverse payment needs of French consumers. On February 13th, 2014, Visa Europe and Orange announced the commercial launch of Orange Cash in Strasbourg and Caen. These two cities are considered to have the highest usage of contactless payments in France. This launch made Orange the first mobile network operator in France to offer contactless mobile payments to its customers.

Canada

Noncash payments’ share of total value of consumer payments: 90%

Percent of population with a debit card: 88%

Canada has shown a high level of progress as highlighted by its nearly comprehensive financial inclusion (96% of Canadians aged 15 and over have a bank account) and a long-standing government focus on optimizing national payments systems. Much of the nation’s success in cashless initiatives can be attributed to early adoption of debit card POS usage, and the early, rapid uptake of MasterCard PayPass, which has opened up the category for other networks’ NFC-enabled low value payment solutions. In Canada, 78.1% merchants have adopted POS systems, and there are about 2.13 POS per merchant store in the country. The market size of mobile POS and contactless POS are growing at rates of 9.2% and 16.4% respectively.

United Kingdom

Noncash payments’ share of total value of consumer payments: 89%

Percent of population with a debit card: 88%

UK is typically seeing cash used for low value retail purchases, and even these are being targeted with new solutions like PayPass. Very few locations in UK remain where cash is the only means of payment, and new access points are coming up where consumers can use contactless cards, like on toll roads and transport, as there is greater consumer interest in such solutions. In UK, there are 1,326,333 POS terminals, and within that base, the mPOS and contactless POS markets are growing at rates of 14.3% and 26.7% respectively. UK’s popular mobile payment system. Paym. has crossed 26 million pounds in transaction volume. Two thirds (66%) of the UK population is aware of mobile payments, with more than half (52%) of those with knowledge of mobile payments aware of Paym.

Sweden

Noncash payments’ share of total value of consumer payments: 89%

Percent of population with a debit card: 96%

The country has witnessed broad usage of debit cards for retail payments. Further movement away from cash continues to come slowly through erosion of cash share of low value payments, through uptake of products like PayPass and emerging solutions for transit payments using smartphone applications. As Sweden has long set out to reduce cash usage, Swedish governments have strived to make electronic payments available, affordable and ubiquitous. Contactless payments represent a €9.5 billion opportunity in Sweden. Top Swedish mobile operators such as Telia, Tele2, Telenor and Three had launched WyWallet, a mobile payments offering that provides mobile wallet services to 97% of Swedish mobile phone users and includes support for NFC.

Australia

Noncash payments’ share of total value of consumer payments: 86%

Percent of population with a debit card: 79%

In Australia, efforts are being taken to reduce the share of cash for low value transactions. Payments networks in Australia including MasterCard and EFTPOS have recently introduced new pricing regimes designed to capture a greater number of low value payments, and efforts are now being made to improve acceptance of low value payment solutions across the country. Australians are favoring contactless payments day-by-day, ditching traditional payment methods. Even merchants are seeing a high demand and are rolling out specialized terminals to cope up with the trend. More than 58 million Visa PayWave payments were made in July alone last year. In Australia, mobile-based contactless payments have accounted for 60% of all debit-card transactions in a 12 month period starting November 2013.

The Netherlands

Noncash payments’ share of total value of consumer payments: 85%

Percent of population with a debit card: 98%

The number of cashless or ‘cards only’ registers in Dutch supermarkets have increased significantly over the past few years. In part, this growth came as a result of the national Hotspot Project that began in early 2012 by the Foundation for Promoting Efficient Payments (SBEB). The goal of the initiative was to increase safety and convenience for consumers in stores that accept debit cards. Last year, shoppers used direct debit cards to buy goods and services over 2.9 billion times. Scan-only payments are also witnessing considerable growth and accounted for 8.3 million sales last year. (Source: MasterCard Advisors’ “Cashless Journey”, CNBC)

7.1 WHERE IS NIGERIA STANDING?

Based on the research findings above, it is evident that Nigeria is still at the inception stage on her journey to cashless economy. This, if considered on the surface, may suggest that Nigeria is still backward, but then, considering the fact that Nigeria just joined the cashless journey in January, 2012, this result can be excused, as other countries have put in many years to the journey, hence their heights!.

However, Nigeria’s journey to becoming one of the top 20 countries in 2020 has been a remarkable one. In terms of GDP, Nigeria has moved up 11 steps to number 26th largest economy globally ahead of South Africa, following the outcome of the April 2014 reclassification of the based year of the Gross Domestic Product (GDP) from 1990 to 2010.
The country’s GDP increased by 75.58 per cent from $258.55 billion before the rebasing to $453.96 billion. The new GDP places Nigeria ahead of countries like Austria with $394.7 billion; Venezuela with $381.26 billion as well as Columbia, Thailand, Denmark, Malaysia and Singapore among others which has $369.6 billion, $$365.96 billion, $$314.88 billion, $274.7 billion and $269.86 billion respectively. On the continent, Nigeria now ranks number one ahead of South Africa which currently has a GDP of $384.3.

Even in the midst of this encouraging result, greater percentage of Nigerians have expressed mixed feelings regarding the real-life positive impact of this hypothetical rebasing. Majority opined that this rebasing has not added food on their table, that ‘Nigerians cannot eat GDP’, that it has not added one kobo in their bank account. It is not yet time to rejoice since this result has not made poverty, unemployment among others, to disappear.

The reasons why Nigeria’s journey to cashless economy has not been so smooth cannot be far-fetched. First on the list is the issue of security. As electronic banking continues to gain popularity on the back of the cashless policy, electronic fraud has also upped its tempo with many unsuspecting bank customers falling victim to the fraudsters. Unauthorized withdrawals from ATM have continued to be on the increase, even as fraudsters hack into the online banking platform to dupe bank customers.

Aside this is the infrastructural challenges which apply to many of the channels as well as the charges that customers incur. Not all ATMs in the country function optimally and some are mostly without network frustrating bank customers who want to make withdrawals. Most customers after having stayed on the queue for so long and it gets to their turn to make withdrawal, the message such as ‘Your financial institution is not available’ or ‘The ATM machine is out of service’, unfortunately crowns their efforts, leaving them frustrated.

Incidences where customers are debited without being paid by the machine and instances when customers are debited twice in course of transaction while using the ATM’s machine are still rampant. This issue will have to be tackled too.

Similarly, the problem of poor network connectivity has not been addressed as expected. Due to vast number of people using the cell-phones, telecommunications companies pay more attention to voice clarity services rather than network connectivity because they make more money on voice than data. Therefore, network availability is still inconsistent. This is also a hindrance to mobile money transactions.

Besides, experience has shown that many banks are still in the habit of charging high rates on transactions especially when one needs to transfer money from his bank account to another bank account either within same bank or to another bank.

Other challenges include:

Literacy Levels (“Numeracy” versus literacy): As noted in any developing country, the literacy rate in Nigeria is still very low especially in the Northern part of the country. Hence, the business men there prefer to keep their money in their own vault while there are banks scattered all over the country.

v. Religious beliefs: Recently there has been psychological war in the country over the proposed Islamic bank by the CBN. The Muslims believe that the conventional banks are guilty of sinning against God by their interest charges. This has been one of the reasons why the achievement of the cashless Nigerian society is doubted.

8.0 ESSENTIALS OF A CASHLESS ECONOMY

For a cashless economy to work certain factors must be present, not just present but in the right quantity and quality. It is for this reason that many analysts question the readiness of Nigeria for a cashless system, amongst others. Very vital among these factors is infrastructure. The following factors below are essential for Cashless economy to be seamlessly achieved:

·         Power ; power must be improved dramatically to accommodate for smooth operations of financial activities.

·         The state of infrastructures ; the financial infrastructure in Nigeria is not adequate to carry the load of a cashless society, ATMs, point of sales system, mobile banking and other mediums have to dramatically expand to touch at least 40% of the whole economy before any meaningful effect can be achieved.

·         Availability of real data ; proper and accurate identification of account holders must be maintained and shared when necessary by all financial institutions; also CBN must collaborate with all other government and private agency responsible for collection of identification of individuals in Nigeria for reconciliation of any identification.

·         Investments ; CBN must be ready to invest heavily to make these transition possible. Technology is not cheap and ever changing at a very fast pace. Investments in billions of dollars made in infrastructure, training, marketing, security, maintaining its networks and so on will be on a yearly basis for the years to come and should be a collaboration of efforts by all invested parties.

·         Security ; as it relates to laws, there are needs to enforce new methods of transactions and a 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 (www.reinventrebuild.com/nigerione.php). Also, the security of the proposed and existing systems of payment must be enhanced to protect the users from malware, hackers, fraudsters, viruses and identity theft.

·         Sensitization ; there is still need for the greater populace to get acquainted with this policy thrust, appraise them of its merits, address their concerns and enlist their commitment.

·         Technical Know-how/ Expertise

The production of POS machines should be awarded to companies that have the technical expertise. Sufficient Quality and durable POS Machines should be available and deployed accordingly. Experienced and skillful repairers should be handy to handle breakdown cases. 

·         Network Service Providers: Information technology security experts in Nigeria have warned that, except the Central Bank of Nigeria and other regulatory agencies in the financial sector ensures that service providers adhere to minimum security standards on their web-based platform, the current move by the country towards a cashless economy may end up being a fruitless exercise

9.0 HOW FAR, HOW WELL?

The road to cashless economy in Nigeria has not been a smooth one. Granted, there have been lots of detours, potholes, gallops and gullies on the road. Nevertheless, the apex bank has not been resting on its oars: so many policies, decisions, programs have been initiated towards achieving the cashless economy cum 2020 vision. Permit the writer to enumerate some of them below:

·         Communication/ Sensitisation: Extensive stakeholder sessions were held in Lagos ans other states to get feedback from the users of the Cash policy. Mass communication on TV and Radio (multi-language); Social media (Facebook, Twitter, cashless website), billboards, public transport, etc has been on full swing and is ongoing. The sensitization of CBN staff bank-wide began with the Bank’s Knowledge Sharing Session in May 2012. Collaborating with Branch Controllers for seamless rollout to other states. There has been various interviews on radio and TV in different states, while engagement of groups, associations, etc. is ongoing on invitation basis.

·         POS Deployment Status: In August 2011, CBN Issued POS Guidelines, Negotiated discounts with POS manufacturers, Licensed Payment Terminal Service Providers (PTSPs) and Payment Terminal Service Aggregators ( PTSA), Encouraged banks to order and deploy POS Monitor performances of banks, PTSA, PTSPs in respect of POS deployment. POS deployment has been on the increase since December 2011. The cumulative number of POS deployed /connected to NIBSS CTMS stood at over 150,000 as at June 2014. The target of purchasing at least 10,000 POS terminals per vendor has been met for three vendors. Just recently, the CBN has granted approval of 3GEE Pay Ltd as a new PTSP to pioneer biometric Point of Sale (POS) system. Registered merchants reached an all-time high at 151,717 as at July 2012. The gap between registered vs deployed, is mostly due to lack of capacity on the part of the PTSPs to meet the demand.

·         Fraud management on the electronic payments landscape: Nigeria achieved changeover from magnetic stripe based payment tokens and channels to CHIP +PIN compliant channel and tokens in 2010 in a bid to stem fraud in electronic payments thereby recording over 90% drop in card related fraud incidences. The CBN instituted an industry ATM Anti-Fraud Committee which has been recently up scaled to E-Payment Fraud Forum. This group ensures that CBN anti-fraud mechanism is kept abreast of new challenges for proactive response. Credit/ Settlement Risk has been reduced by shorter clearing cycle. The CBN now has a Payments System Policy and Oversight Office which is saddled with the effective monitoring and regulation of the payments system. Just recently, the CBN has introduced Bank Verification Number (BVN) Initiative to strengthen the security of banking transactions and to ensure that fraudulent transactions are minimized, if not totally eliminated.

·         Consumer Protection and Dispute Resolution: The CBN Created The Nigerian Electronic Fraud Forum (NEFF) to formulate cohesive and effective fraud risk management strategies. Additionally banks were made to publicise their complaint desk contacts as CBN leads the way in equally informing the public to contact our desks when there are deviations from the guidelines in the resolutions of their issues as promptly as stipulated. While the process of establishing the Office of the Ombudsman for financial services is ongoing, the CBN has created a Consumer and Financial Protection Department to strengthen users’ confidence and promote adoption.

10.0 CONCLUSION

This paper has examined the cashless policy introduced in Nigeria vis-à-vis the vision 20: 2020. Whereas it has been noted that Nigeria is still at the inception stage when compared to other countries of the world, and whereas it is also evident that so many challenges militate against the success of the policy in Nigeria, and whereas the apex bank has not rested on its oars with respect to addressing the challenges; it is the submission of the writer that “all hands must be on deck” for the policy to scale through and the vision to be actualized.

Granted, it is barely five (5) years to year 2020. But with the right system(s)/ institution(s) in place, there will be a positive turnaround. The secrets behind the success stories of countries like Belgium, France, Canada, UK, Sweden, to mention but few, can be copied and pasted in Nigeria.

In the meantime, as an individual reading this paper, all you need to do is simple:

·         Sign-up for a Debit Card with your bank today! (Various types, many benefits)

·         Use your card for payments –ask merchants for their card options

·         Sign-up for electronic products (Internet Banking, Mobile Banking, etc)

·         Inform and educate your circle of influence –spread the word!

Also, as an Organisation/Institution/Corperation:

·         Report positive of the Cash policy and e-payment drive. As well as users-industries, stores, churches, etc.

·         Use Electronic payment Methods for Salaries

·         Provide customers with electronic options for payments to you (discourage use of cash payments –e.g. cash limits)

·         Pay your contractors/3rdparties electronically

With this in place, the road to cashless economy in Nigeria will be smoother and by 2020, Nigeria would have migrated from the Inception Stage to an advanced stage, while still actualizing her vision of being among the top 20 economies of the World. Don’t forget, Nigeria at present is the 26^th economy of the world. It is feasible!

REFERENCES:

1.      Abiodun, E. & Chima, O. (2012, April 25). “Cashless Policy: A Burden or Relief?” Thisday Live. Retrieved from http://www.thisdaylive.com/articles/114483/

2.      Bukola Idowu(2014, July 6). “Thrills, Challenges As Nigeria Goes Cashless”. Retrieved from http://leadership.ng/business/376973/

3.      Central Bank of Nigeria (2012). “Towards a Cashless Nigeria: Tools and Strategies.” CBN Presentation at the 24th National Conference of Nigeria Computer Society Held at Uyo, Nigeria. From Wednesday 25th –Friday 27th July. Retrieved from http://www.NCS.org/presentations/

4.      Central Bank of Nigeria (2011). “Further Clarification on Cashless Lagos Project.”. Retrieved from http://www.cenbank.org/cashless/

5.      Central Bank of Nigeria (2011).”Guidelines On Point Of Sale (POS) Card Acceptance Services” Retrieved from  http://www.cenbank.org

6.      Ejiro, O. (2012): What Nigerians Think of the Cashless Economy Policy. Nigerian Journal of Economy. 4(6), 97 –102.

7.      Hugh Thomas et al (2013, September). “Mastercard Advisors’ Cashless Journey, The Global Journey from Cash to Cashless” Retrieved from www.insight.mastercard.com and www.mastercardadvisors.com

8.      http://letstalkpayments.com/which-countries-are-close-to-a-cashless-world

9.      http://www.nibss-plc.com.ng/reports/

10.  Nigeria Vision 20: 20 20 (2009). “Economic Transformation Blueprint”. Nigeria: National Planning Commission.

11.  Nse Anthony-Uko (2014,April 6). “Nigeria Now 26th Largest Economy Globally With US$453bn GDP”. Retrieved from http://leadership.ng/news/363616/

12.  P.V.C Okoye and Raymond Ezejiofor(2013). “An Appraisal of Cashless Economy Policy in Development of Nigerian Economy”. Retrieved from Research Journal of Finance and Accounting, Vol. 4, No. 7, 2013(www.iiste.org)

13.  Roth, B. L. (2010). “The Future of Money: The Cashless Economy – Part 1”. Retrieved from  https://www.x.com/.../

14.  Sola Alabadan(2014, August 3). “Ensuring the success of cashless policy in Nigeria”. Retrieved from http://dailyindependentnig.com/2014/08/

15.  Tope Aladenusi and Amaka Azike(2011, December 19) “Cashless Society: Is Nigeria ready for the information security challenges?”. Retrieved from http://www.vanguardngr.com/2011/12/

*Nwaokocha, Courage C. is an Associate member of the Institute of Chartered Accountants of Nigeria (ICAN).