CENTRAL BANK OF NIGERIA CASHLESS ECONOMIC POLICY (PROSPECTS AND CHALLENGES)
ABSTRACT
    The Study aimed at exposing the implications of the Central Bank of Nigeria (CBN) cashless economy policy with a view to also unearthing the possible prospects and challenges it poses to the Nigeria economy.
    Analytically, this thesis, employs descriptive statistical approach to highlight the effectiveness of cashless policy of the Central Bank of Nigeria (CBN) in Nigeria.
This project work was informed by the rising doubts as regard the effectiveness of various economic policies in achieving developmental goals in Nigeria. Again, the recent evolution of electronic money poses a lot of questions of policy makers all over the world. This study also seeks to evaluate the Central Bank of Nigeria (CBN) policies as well as proffering valuable recommendations on the execution of the CBN’s cashless economic policy in Nigeria. This significant recommendation may include amongst others: availability of sufficient and well functioning infrastructural facilities. Example: Electricity, harmonization of fiscal and monetary policy, regular assessment of the performance of cashless banking channels (individually and collectively), consideration of present state and structure of the economy, redesigning of monetary policy framework and concerted effort towards economic growth whilst managing inflation. The shift towards a cashless Nigeria seems to be beneficial but comes with high level of concerns over security and management of cost savings resulting from cashless policy implementation.
Keywords: Cashless economic policy, Central Bank of Nigeria, policy implications.
TABLE OF CONTENT
CHAPTER ONE: INTRODUCTION
1.1    Background of the Study                    
1.2    Statement of Research Problem                
1.3    Objective of the Study                        
1.4    Significance of the Study                    
1.5    Hypothesis of the Study                    
1.6    Limitation of the Study                        
CHAPTER TWO: LITERATURE REVIEW
2.1    Introduction
2.2    GENERAL OVERVIEW OF CASHLESS SYSTEM
2.3    TREND IN CASHLES SYSTEM IN THE WORLD
2.4    PROGRESS IN THE SELECTED COUNTRIES IN THE WORLD
2.5    CHALLENGES FACED BY THE USE OF CASHLESS SYSTEM
2.6    HOW CASHLESS SYSTEM HAS HELPED TO SOLVE PAYMENT PROBLEMS  
2.7    CASHLESS SYSTEM AS NIGERIA PAYMENT POLICY
2.8    CRITICAL CONSIDERATIONS IN NIGERIA
2.9    THE POTENTIAL CHALLENGES IN THE PAYMENT SYSTEM
2.10    THE WAY OUT
2.11    THE BENEFICIARIES OF THE NEW POLICY AND BENEFIT OF THE POLICY IN NIGERIA
CHAPTER THREE: METHODOLOGY OF THE STUDY
    3.1    RESEARCH DESIGN
    3.2    POPULATION, SAMPLE AND SAMPLING PROCEDURE
3.3    INSTRUMENTATION AND ADMINISTRATION OF INSTRUMENT
3.4    METHOD OF DATA ANALYSIS
            CHAPTER FOUR: EMPIRICAL ANALYSIS
4.1    Introduction     
4.2     BACKGROUND INFORMATION
4.3     EMPIRICAL ANALYSIS OF QUESTIONNAIRE
4.3     HYPOTHESES TESTING
 CHAPTER FIVE: SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
5.1     Summary of Findings                        
5.2     Recommendations                        
5.3     Conclusion                                
    Bibliography                            
    Appendix                                 
CHAPTER ONE
INTRODUCTION
1.1    BACKGROUND TO THE STUDY
    The world has witnessed an upsurge of electronic payment instruments meant to facilitate transaction and simplify payments. Before the introduction of electronic payment into Nigerian banking system, all customers had to queen up and spend more hours to talk to a teller to make their transactions. The inconveniences caused by long queen can discourage someone to make payment.
    For many years, bankers, technology specialists (providers), entrepreneurs and other have advocated for the replacement of physical cash and introduction of more flexible, efficient and effective payment solutions. (Bank for International Settlement, 1998).
    For Nigeria, the push for a cashless economy according to CBN, has become imperative owing to the continued dominance of cash with its implication. For cost of cash management to banking industry, security, money laundering, among others. This asserting is underpinned by a World Bank study which showed that cash transaction that moves between Cotonuo, Ghana, and Nigeria is in the region of $10 billion. These transactions have no records in any of Nigeria’s systems and government cannot even plan with thee figures in mind and this allows for tax evasion. Also CBN spends about N150 billion annually to produce, store, transport and destroy notes (naira) and this is expected to increase to the tune to N192 billion by the end of 2012 (Zenith Economic Quarterly 2011).
    Cashless system of payment has been designed to help individual customers, companies (banks and other corporate entities) and government organizations in eliminating or reducing some of the problems inherent in the settlement and payment process. (Federal Reserve Bank of New York, 1996). Customers can pay their bills without having to actually move to the banks premises. They may also have access to their account information and even transfer money to other accounts in the comfort of their homes.
    A cashless society is one in which physical cash as a transaction medium is reduced to the barest minimum. Substituted in the place of cash will be an electronic payments system in one form or another, (Zenith Economic Quarterly 2011). A cashless economy is simply at its prime when all means of payments are carried out without the use of physical cash. Payment will range from a list of options such as cheque, wire transfer, debit and credit cards, online transaction and mobile banking (CBN), transition to a cashless economy in Nigeria. May, (2011).
    The Central Bank of Nigeria (CBN) is seeking to balance the objective of meeting genuine customer transaction needs and combating speculative market behavior that may have negative effects on the economy. the apex bank also believes that new cash withdrawal policy (which will encourage E-payment) will ensure that a large proportion of currency in circulation will be captured within the banking system and as a result develop the efficacy of monetary policy operations and economic stabilization measures. This drive will help the CBN and the bankers committee to keep in line with global trends. (Zenith Economic Quarterly, 2011).
    Attention to the possibility of a cashless society has increased and enthusiasts of the prospect of eliminating cash as a transaction medium believe that the immediate benefit would be profound and fundamental. These benefits go to the three main stakeholders: the government, the banks and the merchant and the customer (Zenith Economic Quarterly 2011).
    With the recent central bank of Nigeria (CBN) policy and guidelines on Nigeria’s transaction from a cash – based economy to a cashless society, the stage is set for a new phase of banking in the country. The CBN, lead by its governor, Sanusi Lamido Sanusi, has put forward a policy requiring that all cash withdrawals and deposit bet set at a daily limit of a maximum of N150,000 while pegging that of corporate entities at N1,000,000, with penalty fees of N100 per extra N1000 and N200 per N1000 imposed on individual and corporate defaulters. Respectively (CBN, Transition to a cashless economy in Nigeria in May 2011).
    Against this background, the study examines Central Bank of Nigeria Cashless Economic Policy: Prospect and challenges.
1.2    STATEMENT OF RESEARCH PROBLEM
    Payment for goods and services in Nigeria is characterized by long queues, long distance travelling and time wasting that negatively affect business activities and ultimately economic development. Settling utility bills, payment for goods and services, and money transfer have been the major headache for individuals and firms in Nigeria resulting in declined business activities and huge debt to most of the utility service providers.
    Infact, the country has not yet realized the full benefits of the technological advances in cashless payment such as the use of cards, Automated Teller Machine (ATM), the internet, mobile phone, etc, also payments and clearing system in Nigeria is underdeveloped, because of this, may people do not have bank account, therefore, they  hold large sums of money outside the banking system. Despite all these problems cash still remains the most popular transaction payment instrument, even when the cashless system is being contemplated.
1.3    RESEARCH QUESTIONS
    With the new payment system (cashless) it is important that the key futures of thy system are clearly explained to users and ensuring that the system actually works as described. Users who fail to understand how the system works and the benefits to be derived from its use may take inadequate precaution in using the system.
For this study, the following are the research questions:
1.    How can cashless system in effect, meet customer’s transaction needs in Nigeria?
2.    What are the constraints bedeviling the implementation of the system in Nigeria?
3.    What are the solutions to the constraints so identified?
1.4    OBJECTIVES OF THE STUDY
    This study attempts to tackled issues and describes the different electronic payment schemers available in Nigeria, discuss patronage and to ascertain how it will contribute to the elimination of reduction in problems inherent in the payment process in Nigeria. The following objectives are outlined.
1.    To analyse the effect of cashless system in meeting genuine customers’ transaction needs in Nigeria.
2.    To identify the constraints in the implementation of cashless system in Nigeria.
3.    To examine the solutions to the identified constraints in the implementation of the system in Nigeria.  
1.5    SCOPE OF THE STUDY
    This study will concentrate on cashless system of payment in Nigeria, focusing particularly on the needs of customers. Special emphasis will be given to payment methods that utilize the service of banks such as ATM, the internet, mobile phone, debit and credit cards and also other payment methods for utility bills (PHCN) and transpiration ticket.
    It is not possible to capture all the important details about an entire payment application; however, an insight into a selection of these payment (cashless system) can be valuable in helping people understand different payment system in relation to the ones that they may already be familiar with. Due to mass of different payment schemes, it is necessary to limit our scope in  this study.
    To fully understand the situation, discussion will be made on the following factors such as, the Nigerian culture, the role of its government, the state of infrastructure, the level of general education, the availability of real data, the amount of investment made and needed, security as it relates to laws, confidence in the system, and insurance and piracy issues. (CBN, transition to a cashless economy in Nigeria, 2001).
    This study also will limit its focus to schemes available in Nigeria and sometimes comparisons will be made with schemes pertaining to other parts of the world.
    The study is not intended as an exhaustive survey of all developments in the field of electronic payments (cashless) system nor intended to cover all the issues relevant to these development. Rather, the study aims to put the recent policy on cashless system into a broader context, to describe, classify and analyze some challenges that will be encountered, and the necessary strategies that will be put in place to ensure its success in Nigeria.   
1.6    SIGNIFICANCE OF THE STUDY
    Nigeria has experienced a lot of problems in cash of transaction, such as money laundry and illicit activity, inflation, cost of maintaining an economy predominantly cash base, etc. All these problems affect the Nigerian financial system. The cashless policy has been put in place to correct these errors and to make the country better society.
    This study is designed to examine the implication of the new policy on cashless economy in Nigeria. This study reveals that the cashless economy can simply be at its prime when all means of payments are carried out without the use of physical cash. Payments will range from a list of option such as cheques, wire transfer, debit and credit card, online transactions and mobile banking.
    Also, this study will serve as a means of awareness creation about cashless system to the members of the public. This will properly elaborate on the co-transaction external success factors and other critical consideration for Nigeria.
    The conclusion and recommendation of this research work will be useful for corporate bodies, technology provides, the government, in proper understanding of the concept, cashless economy and their roles in bringing this policy to a success. This work will serve  as a reference materials for scholars who may wish to carry out research on this topic or a similar one.