Problems and Prospects of Cashless Economy in a Less Developed Society Such as Nigeria; A Study of Ebonyi State Public Service 2017-2022
Chapter One
Research Objective
The main objective of this study is to investigate the problems and prospects of a cashless economy in a less developed society such as Nigeria, a study of Ebonyi state public service 2017-2022. Specific objectives include to:
- Investigate whether the cashless policy initiative is beneficial to the Ebonyi State Public Service.
- Determine whether the adoption of a cashless policy can enhance the growth of financial stability in the Ebonyi State Public Service.
- Investigate the impact of the cashless policy initiative on its acceptance level in the Ebonyi State Public Service.
CHAPTER TWO
LITERATURE REVIEW
Conceptual Review
Cashless Economy
Contrary to what is suggestive of the term, a cashless economy does not refer to an outright absence of cash transactions in the economic setting but one in which the amount of cash-based transactions is kept to the barest minimum. It is an economic system in which transactions are not done predominantly in exchange for actual cash. It is not also an economic system where goods and services are exchanged for goods and services (the barter system). It is an economic setting in which goods and services are bought and paid for through electronic media. It 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” (Woodford, 2019).
A cashless economy does not mean the total elimination of cash as money will continue to be a means of exchange for goods and services in the foreseeable future. It is a financial environment that minimizes the use of physical cash by providing alternative channels for making payments (Azeez, 2019).
The CBN’s cashless economy programme aims to expand mobile payment options, remove long-standing obstacles to financial inclusion for millions of Nigerians, and offer low-cost, easy financial services to urban, semi-urban, and rural areas nationwide. However, for some elites, the underprivileged, the ignorant, and traders, this has turned into a burden (Andabai & Bina, 2019). The definition of a cashless society by Valentine Obi, Managing Director/CEO of e-Tranzact International Plc, a leading provider of mobile transaction services, is one in which no one uses cash and instead makes all of their purchases using credit cards, charge cards, checks, and direct transfers between accounts. In other words, it alludes to the banking system’s extensive use of computer technology. He claims that over 97% of transactions in the western world today take place without the actual exchange of money, which has significantly reduced costs, corruption, and money laundering. Today, the situation is the opposite in Nigeria, where the bulk of transactions is made with cash. How much money you have in your safe is essentially meaningless in a cashless society. There are many different credit cards and bank transfers you can use to pay for your purchases (Andabai & Bina, 2019). E-finance, e-money, e-brokering, and e-exchange all improve some aspects of how the cashless economy operates. These all speak to how payments and transactions are impacted by a cashless society (Ashike, 2021).
The objective of the cashless economy concept in Nigeria is to minimise cash transactions. For individuals, the CBN has imposed daily cumulative withdrawal and deposit restrictions of N150,000, and for corporations, N1,000,000 (now reviewed to N500,000 and N3 million respectively). Per an additional N1000, penalty fines of N100 and N200 will be imposed (now lowered to 3% and 5%, respectively) (Ezumba, 2021). It should be mentioned that some types of cashless transactions are already occurring in Nigeria as of right now. The following electronic payment methods are currently available in Nigeria: automated teller machines (ATM), point of sale (POS) terminals, mobile voice, web, inter-bank branches, and kiosks. Local businesses in Nigeria have started e-payment initiatives, which have been encouraged by advancements in technology and infrastructure (Babalola, 2018).
As previously said, the term “cashless economy” refers to the operation of a financial system with the fewest possible cash transactions rather than the absolute elimination of the circulation of cash (or money) in the economy. For individuals, the CBN has established daily limitations of cumulative withdraws and deposits of N150,000, and for corporate customers, N1,000,000 (now N500,000 and N3 million respectively). The operation of the system does not mean the individual/corporations cannot hold cash above N150,000/N1million (now N500,000 and N3million respectively) respectively at any single point in time but that their cumulative cash transactions with the bank must not exceed these limits for one day. The system does not intend to discourage cash holdings; rather, it is designed to promote the use of electronic payment methods. According to this limit policy, a person is allowed to keep N5 million (more than N150,000 now N500,000) under his pillow at home and use it to make purchases, but he or she is not allowed to deposit more than N500,000 into their bank account in a single day without incurring a 3% per N1000 fine for the excess(Babalola, 2018).
This policy anticipates that rather than making significant withdrawals to pay for goods and services, such funds will be maintained in the banking system and used in “credit card-like ways.” Users of this system receive electronic cards that can be inserted into specialised electronic equipment to process payments. The Point of Sales (POS) terminals are at the heart of such a payment system (Azeez, 2019). These are to be placed in all major business areas of the nation. These deployed POS terminals will function similarly to automatic teller machines (ATM). In this scenario, after a transaction is completed and the value is determined, the money is entered into a POS terminal that has already been equipped to accept electronic cards. Automatically, the sum is transferred from the payer’s account to the payee’s account in cash equivalent (Olaegbe, 2019).
No one uses cash in a cashless economy; instead, payments are performed with checks, credit or debit cards, charge cards, or by moving funds between bank accounts using mobile banking. The cashless policy was designed to reduce the number of detrimental impacts associated with the use of physical currency in the economy, such as the high cost of cash, increased risk associated with using cash, high subsidy, theft, ineptitude, and fraud (Ehiedu, Odita, & Kifordu, 2020). A cashless economy is a financial system where transactions can be completed using credit or debit cards rather than actual currency as the primary medium of exchange for goods and services. The Central Bank of Nigeria’s (CBN) cashless economy policy plan is an effort to expand the financial landscape, but its long-term viability will depend on end users’ adoption and compliance (Ehiedu, Onuorah & Chigbo, 2022).
CHAPTER THREE
RESEARCH METHODOLOGY
Research Design
The research design is the general plan selected to integrate the several study components logically and coherently. It serves as a guide for data collecting, measurement, and analysis (Kamangar & Islami,2017). A descriptive survey research design will be adopted for this study. In other words, information will be collected from a host of respondents. This will be done to analyse the qualitative and quantitative information that will be obtained.
Population of the Study
This is the summation of the characteristics that are of interest in a statistical investigation. It comprises every unit that can be used to apply research findings. In other words, a population is a grouping of all the units that have the variable attribute that is the subject of the study and for which general conclusions can be drawn(Shukla, 2020). A target population size of 182 respondents who are customers and staff of commercial banks were surveyed in this study.
CHAPTER FOUR
DATA PRESENTATION, ANALYSIS, AND DISCUSSION
Data Presentation
CHAPTER FIVE
SUMMARY OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
Summary of Findings
According to the findings of this study, 88% of the administered questionnaires were completed and returned, whereas 12% were either not completed or not returned. This analysis shows that a sizable portion of the administered research instrument was returned with all of the required fields filled in. This demonstrates that the majority of the distributed questionnaires were completed by the study’s participants. The empirical evaluation made in this study revealed the breakdown of respondents by age, 69.3% of respondents were men and 30.7% were women. This distribution demonstrates that men made up a sizable portion of the study’s respondents. According to this data, men respondents were more interested in this study than female respondents.
According to the respondents’ age distribution, which is depicted in Table 4.3, 20.5% were between the ages of 20 and 29 years, 61.4% were between the ages of 30-39 years, 9.1% were between the ages of 40 and 49 years, and 9.1% were age 50 or more. According to this data, the majority of the study’s respondents were between the ages of 30 and 39. As a result, a sizable portion of the respondents in this study were adults who were mature and had a greater comprehension of the study’s topic. According to based on the analysis made on the distribution of respondents’ highest degrees, 21.6% of respondents had an OND or NCE, 54.5% had an HND or B.Sc., 14.8% had an M.Sc. or MBA, and 9.1% had other degrees. This study reveals that a significant portion of the research subjects held HND or B.SC degrees. This research shows that graduates of higher schools who are well-educated about the topic of this study filled out the majority of the questionnaires that were provided.
According to the respondents’ occupational breakdown, 23.9% worked in businesses, 54.5% were government employees, 11.4% were teachers, and 10.2% had other occupations. This analysis reveals that a significant portion of the study’s research participants were civil servants. As a result, respondents to this study’s research questions were primarily employed by the Ebonyi State Public Service, which is severely at odds with the study’s focus. According to the data in Table 4.6, 89.8% of the research participants acknowledged that they were aware of Nigeria’s initiatives to implement a cashless society, while 10.2% denied such knowledge. According to this analysis, a significant portion of the respondents to this study was aware of initiatives to adopt a cashless system in the Ebonyi State Public Service.
According to the data in Table 4.7, 42% of the respondents sent and received money by ATM, 33% via POS, 10.2% via internet banking, 10.2% via mobile banking, and 4.5% via other cashless banking options. According to this data, the majority of the study’s respondents used ATMs to transfer and withdraw cash. As a result, the majority of the respondents included in the study’s sample of respondents were aware of its purpose. According to the analysis done for this study, 77.3% of the respondents who were surveyed agreed and strongly agreed that they withdraw and transfer money using an ATM or POS, while 11.4% said they were unsure of their preferred method for doing so and 11.3% disagreed and strongly disagreed with this statement. According to this data, the majority of the study’s respondents send and withdraw money using POS and ATM.
According to Table 4.9, 68.2% of respondents strongly agreed that they use mobile or internet banking to send and receive money, whereas 10.3% disagreed and strongly disagreed with this claim. Of the respondents, 29.6% were unsure of this claim. This analysis reveals that a significant part of the respondents sampled for this study sends and receive money through mobile or internet banking. According to the research in Table 4.10, 63.6% of respondents agreed and strongly agreed that they send and receive money by check, 19.3% were unsure of this idea, and 17.1% disagreed and severely disagreed with this assertion. This analysis reveals that a significant part of the respondents to the study’s survey sends and receive money via cheque.
According to Table 4.11, 62.5% of respondents agreed and strongly agreed that they should go to the bank to take money from the counter. Only 15.9% objected and strongly disagreed with this idea, while 21.6% were unsure. According to this data, a sizable portion of the respondents included in the study’s sample went to the bank to get cash from the counter.
According to the data in Table 4.12, 42% agreed and strongly agreed that cashless techniques have shortened transaction times, 40.9% were uncertain, and 16.1% disagreed and strongly disagreed. According to this report, cashless policies and procedures have sped up the process of completing financial transactions. According to Table 4.13, 63.6% of respondents agreed and strongly agreed that cashless transactions are becoming more common for day-to-day transactions, 19.3% were unsure of this idea, and 17.1% opposed and strongly disagreed. This investigation shows that cashless transactions are increasingly common in Nigeria and the Ebonyi State Public Service in particular.
According to Table 4.14, 62.5% of respondents agreed and strongly agreed that having cashless methods in place means they are no longer dependent on banks and other financial institutions for the availability of money. However, 15.9% disagreed and strongly disagreed with this idea, while 21.6% were unsure. This analysis suggests that financial institutions are no longer dependent on the availability of money as a result of the availability of cashless methods of conducting financial transactions.
According to Table 4.15, 47.7% of respondents agreed and strongly agreed that cashless transactions may be done from anywhere without the person conducting the transaction being physically present, 35.2% were unsure, and 17.1% disagreed and strongly disagreed. According to this investigation, transactions can be carried out using the cashless technique even when the person making the transaction is not physically present.
According to Table 4.16, 80.7% of research participants agreed and strongly agreed that they liked the implementation of the cashless policy, 11.4% were unsure, and 8% strongly disapproved. According to this analysis, a significant percentage of the respondents who participated in the study’s sample liked the implementation of the cashless policy.
According to Table 4.17, 63.6% of respondents strongly agreed or agreed that they preferred to conduct their financial activities using an ATM, POS, or mobile banking; 19.3% were unsure of this statement; and 17.1% disagreed or severely disagreed. This analysis suggests that the majority of the study’s respondents prefer to conduct their financial transactions using an ATM, a point of sale, or mobile banking. According to Table 4.18, 52.3% of respondents agreed and strongly agreed that it is not safe to withdraw money using POS, ATM, or mobile banking, while 19.3% disagreed and strongly disagreed. Only 28.4% of respondents were unsure. This analysis shows that it is not entirely safe to withdraw money through the use of ATM, POS and mobile banking.
According to Table 4.19, 39.8% of respondents disagreed and strongly disagreed with the statement that using POS, ATM, or mobile banking did not enable savings, while 21.6% were unsure and 38.6% agreed and strongly agreed with it. According to this report, using POS, ATM, and mobile banking can result in savings.
Conclusion
Based on the empirical and statistical analysis conducted for this study, it was determined that the cashless policy initiative had a sizable positive impact on the Ebonyi State Public Service. This study also showed that the development of financial stability in the Ebonyi State Public Service was greatly boosted by the introduction of a cashless policy. Therefore, this research project showed that the cashless policy initiative’s level of adoption in the Ebonyi State Public Service is significantly impacted.
Recommendations
The following recommendations were made in this study:
- Since the cashless system will affect everyone, it is necessary to step up the public education campaign about it so that everyone is aware of it before it is implemented.
- The government should create special enlightenment programmes for non-literates, employing possibly signs and symbols to educate this section on how to use the cashless system, given the high percentage of illiteracy and the need to include everyone in the system.
- Nigeria should work diligently to create an internet security framework to prevent online fraud so that the public can be ensured and safeguarded from cyberattacks and fraud.
- To avoid unneeded friction in the system, a thorough analysis of the system is required to identify the number of POS terminals that would ensure its smooth operation in Nigeria.
- To fully protect both the system’s operators and the general public, there should be adequate regulation covering every aspect of the operation of the cashless system.
References
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- Ajayi M.(2019). Banking Sector Reforms and Banking Consolidation: Conceptual Framework”, Bullion, Vol. 29, No. 2,
- Andabai, P. W., & Bina, P. A. (2019). Impact of cashless policy on deposit money bank performance in Nigeria. Global Journal of Education, Humanities and Management Sciences (GOJEHMS), 1(2), 1-10.
- Ashike, H. (2021), Cashless Economy can Reduce Risk of Carrying Huge Cash. Available : http://www.businessdayonline.com/…/22217.
- Azeez K, (2019). Cyber Insecurity Threatens Nigeria Cashless Economy Drive. Available : http://www.nationalmirroronline.net/…/22594.htm.
- Babalola R., (2018). E-payment: Towards a Cashless Economy. A keynote address of the Finance Minister of State at the Card Expo Africa Conference. Available: http://www.nigeriavillagesquare.com.
