1.1       Background to the Study

            Before the introduction of cashless economic policy by Lamido Sanusi led administration in 2014, the Nigerian economy then was being described as cash based and paper based economy with significant part of the narrow capital stock in the form of currency outside the financial or banking system (Kama & Adigun, 2013). With this trend in global economy where the conventional use of physical cash in business transactions is now in vogue as a result of several factors that can be adduced which include the costs of printing currency and its maintenance as well as the life span of such currencies that always need reprinting at other times. To reduce that element of cost and in a bid to be relevant in the global market an electronic cash system of transactions was enacted in Nigeria by the Apex bank (CBN) to drive national development and modernization of payment system in line with Nigeria Vision 2020 goal of been amongst the top 20 economies by the year 2020. Furthermore, the policy helps to reduce the cost of banking services and to improve the effectiveness of monetary policy in managing inflation and achieving economic growth. Nigeria as an economic nation is traditionally characterized by all forms of economic atrocities which include money laundering, illegal financial activities and uncontrollable types of inflation and leakages as regard to the stock of money issued in its totality. Nigeria must operate an economy that is less dependent on cash, and more fluid with its payment systems in order for her to claim her status of being the economic giant of Africa in this 21st century. The Nigeria cashless policy aims to drive improvement and modernization of payment processes, minimizing the charges for banking and credit services and driving financial inclusion by offering a more effective transaction system and better reach where the disequilibrium arising from surplus spending units and the deficit- spending units can be bridged by aggregating the scattered masses of society and then disaggregating among economic units.

A cashless economy provides an avenue for money to be spent without physically carrying it from one place to another (Adu, 2016). As for Muyiwa, Tunmibi & Afaha (2013) a cashless society is an environment in which one does not need to use cash for all purchases as are they are made by credit cards, cheques, or transfers from one account to another through mobile banking and internet services. He further opined that the cashless society projected in this regard refers to the application of computer technology for financial purposes. Rufus and Elechi, (2016) explained a cashless economy to mean an economy where transaction can be made without the use of physical as a means of exchange of transaction but rather with the use of credit or debit card or other electronic media of payment for goods and services. Assessing the Nigeria’s cashless policy it could be concluded that the country has successfully moved toward a cashless economy where significant portion of the citizens perform payment without the use of physical cash, rather payments are made via mobile banking, internet banking, credit and debit cards, wire transfer, and cheques (CBN 2017).

However, since the introduction of cashless policy in Nigeria, there have been several controversies among scholars and social scientists on the effects of this policy on national growth and development. Some scholars believe its benefits are more than its challenges while others are of the view that its challenges are more than the benefits and cannot stand the test of time in our kind of financial and economic environment. Based on this therefore, this study seeks to evaluate Central Bank of Nigeria’s strategies in transforming a cash based economy to a cashless economy.


1.2       Statement of the Problem

There is no doubt on the ability of the introduction of the cashless economic policy since it is aimed at transforming the lives of Nigerians and the Nigerian economy by easing them of the stress of having to carry physical cash around for one transaction or the other. However, there has been a challenge of sustenance of this development in the history of our economy. Inadequate infrastructural developments like stable electricity supply and provision of internet facilities to the rural dwellers are considered as some of these challenges that needed to be properly addressed. There has been constant power failure and inadequate provision of internet services in the urban areas in Nigeria even though the government has been persistent in their promise that it will soon be a thing of the past. According to Ezumba (2011) the ratio of bank locations to their esteem customers has been estimated to be 1: 20,000 people.  Fatokun (2012) on the other hand, revealed that out of 150 million population, only 22 million individuals in Nigeria had bank accounts. This implies that only 15% of Nigerians operate bank account. There are also concerns of marginalizing technologically-deprived individuals in Nigeria. Other challenging needs for transforming a cash based economy to a cashless economy include; the reduction of the illiteracy number among Nigerians, inefficiency of Information Technology platforms, low level of consumer enlightenment on product stability, lack of understanding of security implications of divulging personal information, access to customers’ information by fraudsters, weak information technology controls, slow reversal of POS and ATM errors by financial institutions.




1.3       Research Objectives

The general objective or main objective of this study is to evaluate Central Bank of Nigeria’s strategies in transforming a cash based economy to a cashless economy. The specific objectives are:

  1. To study the impact of cashless policy on the economy of Nigeria
  2. To understand the reasons for the introduction of cashless policy by the Central Bank of Nigeria.
  3. To identify the various banking channels that promote cashless policy in Nigeria
  4. To find out the challenges facing cashless economy in Nigeria.

1.4       Research Questions

The following are some of the questions which this study intends to give answer to:

  1. Is there any the impact of cashless policy on the economy of Nigeria?
  2. What the reasons for the introduction of cashless policy by the Central Bank of Nigeria?
  3. What are the various banking channels that promote cashless policy in Nigeria?
  4. What are the challenges facing cashless economy in Nigeria?

1.5       Research Hypotheses

            The followings are the research hypotheses that will be tested for this study:

  1. There is a significant relationship between cashless policy and the economy of Nigeria
  2. There is no significant correlation between various banking channels and the promotion of cashless policy in Nigeria

1.6       Significance of the Study

This study will contribute to the understanding of the challenges faced with cashless policy and its adoption by Nigerians. The study also contributes to theory by providing information on various theories on economic development through the banking industry as well as the business sector as a whole which adds more value. The information contained in this report will also be of use in providing empirical evidence on the impact of cashless policy and economic growth. It will be of use to other studies within the banking sector.

1.7       Scope of the Study

This research is to evaluate Central Bank of Nigeria’s strategies in transforming a cash based economy to a cashless economy by using Central Bank of Nigeria Federal Capital Territory, Abuja as a case study. This study will therefore be carried out among bankers, business owners and individuals who use electronic banking in Nigeria.

1.8       Limitation of the Study

This study entailed investigation into a variety of issues to be able to achieve a comprehensive study of the problems; a lot of constraint were encountered in form of data collection, lack of adequate information from the respondents. The main limitation of this survey was the difficulty in getting accurate information from the bank employees as most of them were busy with their work schedules ad were unwilling to give adequate information about their job.

1.9       Definition of Terms

The following terms were used in the course of this study:

Cashless economy: an economic state whereby financial transactions are not conducted with money in the form of physical banknotes or coins, but rather through the transfer of digital information (usually an electronic representation of money) between the transacting parties.

Electronic banking: it means 24-hour access to cash through an automated teller machine (ATM) or Direct Deposit of paychecks into checking or savings accounts. But electronic banking involves many different types of transactions, rights, responsibilities and sometimes, fees.

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