ASCERTAINING THE IMPACTS OF 2019 CBN CASHLESS POLICY DIRECTIVE ON MARKET
1.1 BACKGROUND OF THE STUDY
The Central Bank of Nigeria (CBN) in 2019 implemented its 2014 intended policy on cash-based transactions
which stipulates a cash handling charge on daily cash withdrawals that exceed N500, 000 for Individuals and N3,
000,000 for corporate bodies. 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.)
Money performs a number of roles in economic activity; it is a unit of account, store of value, medium of exchange
and means of deferred payment. Also, money has evolved over the centuries to minimize the friction of
transaction costs that are involved in mediating exchange. In fact, the process can be observed from the
development of the very first monetary products. For instance, conducting economic transactions in barter
economies involved high transaction costs as considerable time and effort was required in finding suitable partner.
Subsequently, another facet in the evolution of money was the need for fungibility and divisibility. Hence, the
advent of study money (notes and coins) made the process less costly by allowing people specialize in production
based on their strengths and by enabling the monetary authorities to mint coins in convenient denominations,
thereby creating divisibility (Baddeley, 2004).
However, there has been drift towards electronic money, which is quite difficult to define because it blends
technological and economic characteristics (Basel Committee, 1998; BIS, 1996). According to ECB (1998),
electronic money is broadly defined as an electronic store of monetary value on a technical device that may be
widely used for making payments to undertakings other than the issuer without necessarily involving bank
accounts in the transactions, but acting as a prepaid bearer instrument. Analogous to this definition is that of
cashless economy wherein there exist no notes and coins issued by central banks but by private financial
institutions (Costa and De Grauwe, 2001). The central bank of Nigeria introduced the new cash policy for a
number of key reasons, which includes:
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 reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more
efficient transaction options and greater reach.
To improve the effectiveness of monetary policy in managing inflation and driving economic growth.
In addition, 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.
1.2 STATEMENT OF THE PROBLEM
The Nigeria bankers’ bank and financial apex institution announced the strict implementation of the cashless
policy across six states which includes Lagos, Ogun, Kano, Abia, Anambra, Rivers states. The federal capital
territory was not left out. This policy directive was in line with the institution’s vision to drive development and
modernization of Nigeria’s payment system in line with the country’s vision 2020 goal of being amongst the top 20
economies by the year 2020. The Central Bank of Nigeria believes that an efficient and modern payment system
is positively correlated with economic development, and it is a key enabler for economic growth. The envisioned
card dominated society in place of cash is also considered to reduce crime and eliminate huge cost that comes
with cash. However, despite the brilliance of this policy and the intention of the Bankers’ bank; the outburst from
the several regions of the nations has been with an ill perception. This is evident in the call by the House of
Representatives to the central bank of Nigeria to suspend the cashless policy until after due consultation. The
policy however have been implemented and several groups have perceived the implementation as uncalled for. It
is on this premise that the researcher embarked on this study to establish with facts the impacts of the 2019
cashless policy on market Organizations.
1.3 OBJECTIVES OF THE STUDY
The primary objective of the study is to examine the impacts of 2019 CBN cashless policy directive on Market
organizations. Specifically, the objectives are:
To determine how the Cashless policy have affected transactions in the market place.
To determine the constraints to effective cashless policy in the market place.
To recommend methods for effective implementation of cashless policy in market places.
1.4 RESEARCH QUESTIONS
The study seeks to provide answers to the following research questions
How has cashless policy affected the transactions in the market place?
What are the constraints to effective cashless policy in the market place?
What methods will enhance effective implementation of cashless policy in market places?
1.5 SIGNIFICANCE OF THE STUDY
This study will provide insights on how the 2019 cashless policy has affected transactions in market places. This
insight would serve as useful data for policy makers in adopting effective implementation strategies or modify the
policy to suit the common good. This study in essence is an appraisal guide.
1.6 SCOPE AND LIMITATION
The study is focused on the impacts of 2019 CBN Cashless policy directive. The impact of this directive is limited
to Market places with special consideration for Onitsha main market, Anambra state.
1.7 DEFINITION OF TERMS
Cashless: A situation of transaction where cash is absent.
Policy: a course or principle of action adopted or proposed by an organization or individual.
Organization: This refers to any system, body or group of people working together to achieve common goals and
objectives of the business.
ASCERTAINING THE IMPACTS OF 2019 CBN CASHLESS POLICY DIRECTIVE ON MARKET