Tales of the Nigerian Cashless Society

Tales of the Nigerian Cashless Society

 

In Nigeria, where network connection in most places move at a snail’s speed, millionaires store their wealth in cash, banks take 8-10 days to restore a debited transaction that never got to its destination, the citizens crowned cash as the king, ATMs swallow debit cards like ‘semo’ and bank officials appear indifferent towards hacked accounts sweeping away the sweat of hardworking people, the Central Bank has decided to push relentlessly towards the creation of a cashless society.

 

Actually, they started in 2012. Approximately, 11 years now.

 

But the weight of the recent naira redesign policy and the subsequent cashless policy looks like the Central Bank suddenly woke up one morning to do this. The past two months have seen Nigerians struggling to exchange the old 200, 500, and 1000 notes they have with them, rejecting old notes and making transactions with their bank app or card. POS operators all over the country are currently ‘selling’ the new naira notes, but in real terms, they are only trying to meet up to earn the daily bread they need to survive. Cash stay scarce and it is now valued more than ever. Surely, Nigerians are being forced to adapt to the cashless society with or without their will.

 

The Cashless Society: Understand It Better

As indicated in the term, A cashless society or economy refers to one without the use of cash to make transactions. A cashless society typically makes use of other means like bank apps, debit/credit cards, e.t.c to make transactions instead of physical cash. Britannica defines it better by stating a cashless society “as one in which cash, in the form of physical banknotes and coins, is not accepted in any financial transaction.” However, the “elimination of cash” these definitions sing sounds scary as much as it looks good. Contextually (and in more realistic terms), a cashless society should be one in which cash transactions are reduced to the barest minimum. At this stage of development around the world, cash transactions have not been completely eliminated even by Sweden, the first country on the chronological list of cashless economies. This argument is supported by the need for low-value transactions to seamlessly take place in the economy. Examples of these low-value transactions include the purchase of sweets and biscuits by little children. Obviously, cash would be the preferable option for this scenario. Hence, cash might still exist within a cashless economy, but only at the barest minimum.

 

However, cash or paper money is just a form of money. Money, in its own right, as stated by Investopedia refers to “a system of value that is used in the exchange of goods in an economy

“. From time immemorial, the inadequacies of the trade by barter system led humans to search for ways they can store the value of what they produce and exchange it for other goods and services they cannot produce. This led to the birth of cowries, metals, paper, digital/electronic records, cards, and crypto as forms of money, respectively in accordance with the evolution of human society.

 

The last three, digital/electronic records, cards, and crypto are the forms of money used in the cashless society. To understand it better, let’s use a semi-illustration of how a typical cashless economy works.

 

Banks store paper/physical cash and record them digitally attributing the same value of paper money brought in by an account holder to his account. Instead of withdrawing money from the banks, the customer makes seamless transactions using his debit card by inserting it into a Point-of-sale (POS) machine, specifically built to accept payment through the card. Over time, the banks might no longer store all their monies in cash. Rather, they remain as digital records.

In the world of crypto, people buy any value of any crypto of their choice and wait for market forces to increase the value of these cryptos or perhaps, make transactions with it in places where they are accepted.

 

All of these cannot work without the fundamental structures of internet connectivity, reliable card payment schemes like Mastercard and Visa, POS machines, Decentralized Finance (DeFi), and maybe ATMs.

 

Why Go Cashless?

A cashless economy comes with a myriad of benefits. Not just to the consumers but also to corporations, the government, and for the benefit of the society as a whole. These benefits are enough reasons why an economy should go cashless. Some of them include increased convenience, faster access to capital, easy tax collections, promote financial inclusion, the creation of employment opportunities, increased effectiveness of the monetary policy, and the ability to monitor terrorist financing and money laundering, amongst many others.

 

As said earlier, these reasons are enough to opt for a cashless economy. But the main reason for the existence of a cashless economy remains this: evolution. As societies and the people that make up these societies evolve, they find better ways or means of doing things. This can be seen in the world’s transition from the 1st, to the 2nd, to the 3rd, and now to the 4th industrial revolution (I.R). The forms of money used in these stages of I.R. fit into the system of that time, hence its adoption. Sooner or later, the cashless economy will submerge the reigning “King Cash” and create systems that can only be assessed with the cashless economy.

 

These last statements are for Nigeria, precisely. Let’s see the journey of the Nigerian Cashless Policy aimed at creating a Cashless Society in Nigeria.

 

The Journey so far: Nigeria’s Cashless Policies

It began in January 2012 but took effect in Lagos State only. On the 1st of July, 2013, the policy was extended to 5 states: Rivers, Anambra, Abia, Kano, Ogun, and the country’s capital, Federal Capital Territory (FCT). One year later, the whole country operated under the cashless policy. The policy as implemented by the Central Bank of Nigeria (CBN) restricted withdrawals to N150,000 and N3 million for individuals and corporate organizations respectively. If anyone tries to go beyond the limits,  it calls for a processing fee of three percent for individuals and five percent for corporations.

 

However, the withdrawal limit was reduced to N20,000 and N500,000 daily for both individuals and corporate organizations respectively. Coupled with this, the 200, 500, and 1000 notes were redesigned and with an order to consider old notes illegal as of the 31st of January, 2023. The mashup of these two policies created an effective injection of liquidity back into the banking system with more control over cash and an eventually limited supply of it. In effect, Nigerians scamper for cash to spend or resort to cashless alternatives. While some experts and CBN say this is a good idea, Nigerians are crying over the inaccessibility of their funds. Videos of theatrical displays at banks are all over the internet. What about the bank queues we always complain of? They just got longer.

 

Despite the echoed worries of Nigerians, this ruthless cashless policy might eventually bring about constructive and infrastructural development in the future. Business Day succinctly tells us of the growth the maiden cashless policy brought about. As they said,”…the number of Automated Teller Machines (ATMs) rose from 10,865 in 2011 to 19,355 in 2021. The number of PoS terminals rose from around 155,000 to 1.1 million as of April 2022. And the number of active banking agents is over 1.9 million according to data from SANEF.”

There is a potential growth streak coming, but aren’t our inactions slowing the down or preventing the financially illiterate from gaining convenient access to the cashless economy?

 

Recommendations – For a More Inclusive Cashless Society

Someone once said that if the infrastructural facilities were put in place, Nigerians would not have a hard time adapting to the cashless policy. The introduction of this article mentioned a few of the problems faced by Nigerians in the cashless society. Without the solutions to these problems or the putting in place of basic infrastructural facilities, many people would be left out of the benefits of the cashless policy. Instead of finding it convenient, they might be stressed out or unproductive as a result of inaccessibility to cash. Below are a few recommendations that would help Nigerians better adapt to the CBN cashless policy:

 

  • Placement of basic infrastructural facilities in places where they do not exist.
  • Improved internet connection and speed
  • The CBN should place a fine on banks that delay customers’ transactions or act nonchalant towards customers’ grievances. This can increase people’s trust in the banking system.
  • Nation-wide sensitization of the financially illiterate people and Small and Medium scale enterprises (SMEs)

 

Conclusion

The CBN’s drive towards making sure the cashless policy achieves its goal is well-meaning and highly commendable, but the policy alone is not sufficient enough to create the desired cashless economy. Building infrastructure and the sensitization of the financially illiterate will help break the traditional barriers to promoting a cashless economy in Nigeria. These two fundamental critical enablers would drive the growth of the cashless policy. And perhaps, when the Central Bank of Nigeria (CBN) decides to get it right, we’d all be sharing and hearing good tales of a cashless economy.

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