Cashless policy in Nigeria: Meaning, implications, advantages and more

In recent years, the Nigerian government has implemented a cashless policy aimed at reducing the use of cash in everyday commercial transactions and promoting digital payments.

This article will examine what the cashless policy means, its implications, advantages, and how individuals and businesses can adjust to the new system. It will also explore the current state of cashless payments in Nigeria and provide insights into the future of digital finance in the country.

What Nigeria’s Cashless Policy means

The Nigerian Cashless Policy is a government initiative aimed at reducing the use of physical cash in transactions and promoting digital payments. The policy, which was introduced in 2012, was established to increase financial inclusion, reduce corruption and money laundering, and improve the efficiency of the financial system. The policy requires that individuals and businesses carry out transactions above a certain threshold through electronic means, such as mobile money, Point of Sale (POS) terminals, and online banking.

The Central Bank of Nigeria (CBN) is the regulatory body responsible for implementing the policy and has provided guidelines for compliance, including setting the limit for cash transactions and providing incentives for digital payment adoption. The CBN has also introduced several measures to encourage the use of digital payments, such as partnering with mobile network operators to increase the reach of mobile money services and reducing the fees for electronic transactions.

Advantages of going Cashless in Nigeria

The move towards a cashless economy has several advantages for individuals and businesses in Nigeria.

Digital payments are faster and more convenient than traditional cash transactions. Transactions can be carried out in real-time, regardless of location, and without the need for physical currency.
Digital payments are safer and more secure than cash. They reduce the risk of theft and loss, as well as make it easier to track and monitor transactions.
Digital payments can improve financial inclusion, as they allow individuals and businesses to access financial services even if they do not have a traditional bank account. This is particularly important in Nigeria, where only a small percentage of the population has access to formal banking services.
Digital payments also provide a more accurate and efficient way of tracking transactions and payments, which can help to reduce fraud and corruption.
Digital payments can help to reduce the cost of transactions and increase efficiency, as they eliminate the need for physical currency handling and storage. This can result in savings for individuals and businesses, as well as improve the overall efficiency of the financial system.
The move towards a cashless economy in Nigeria presents several advantages for individuals, businesses, and the country as a whole.

Potential implications of the Cashless Policy

The move towards a cashless economy in Nigeria is not without its potential implications and challenges. One of the main concerns is the digital divide, as individuals and businesses without access to digital technology or the internet will be left behind in the shift to digital payments. This is particularly important in Nigeria, where the majority of the population lives in rural areas with limited access to technology.

Another potential implication is the potential for data breaches and cyberattacks, which can compromise the security of personal and financial information. As digital payments become more prevalent, the government and regulatory bodies need to ensure that appropriate security measures are in place to protect individuals and businesses from such threats.

In addition, the move towards a cashless economy may also have social and economic implications, as traditional payment methods and the informal sector may be disrupted. For example, small business owners and street vendors who rely on cash transactions may need to adapt to the new system, which could result in increased costs and reduced profits. Furthermore, the elimination of physical currency may also impact the way people save and store their wealth, which could have wider economic implications.

It is also important to note that the move towards a cashless economy may also have implications for privacy and freedom, as individuals’ financial transactions will be more easily accessible and trackable. The government and regulatory bodies will need to ensure that appropriate measures are in place to protect the privacy and personal information of individuals and businesses.

Current state of digital payments in Nigeria

The adoption of digital payments in Nigeria has increased significantly in recent years, largely due to the government’s push towards a cashless economy. According to the Central Bank of Nigeria (CBN), the volume of digital transactions has increased dramatically, with mobile money transactions accounting for the majority of digital payments.

The use of Point of Sale (POS) terminals has also increased, particularly in urban areas, and several commercial banks have launched mobile banking services to meet the growing demand for digital payments. The CBN has also established partnerships with mobile network operators to increase the reach of mobile money services, particularly in rural areas where access to traditional banking services is limited.

Despite the growth in digital payments, cash is still widely used in Nigeria, particularly in rural areas and in the informal sector. The government and regulatory bodies will need to continue to encourage the adoption of digital payments and provide support for individuals and businesses to transition to the new system.

How to adjust to the Cashless Policy

The move towards a cashless economy in Nigeria will require individuals and businesses to adjust to the new system. For individuals, this may involve opening a digital bank account or using a mobile wallet to make payments. This will require access to digital technology and the internet, and individuals may need to seek training and support to get started.

For businesses, the shift to digital payments may involve updating systems and processes to accept digital payments, as well as investing in digital infrastructure such as Point of Sale (POS) terminals. Businesses may also need to train staff on the use of digital payments and provide support for customers who are not familiar with the new system.

The government and regulatory bodies will need to provide support and resources to help individuals and businesses transition to the new system. This may include training and education programs, as well as financial incentives and subsidies to encourage the adoption of digital payments.

Conclusion

The cashless policy in Nigeria is a significant step towards a digital economy and has the potential to bring several benefits, including increased financial inclusion, reduced costs and fraud, and improved transparency and efficiency in financial transactions.

However, the shift to a cashless economy also presents several challenges, including the digital divide, security risks, social and economic implications, and potential implications for privacy and freedom. The government and regulatory bodies will need to work together to mitigate these risks and ensure that the shift to digital payments is successful and sustainable.

It is important for individuals and businesses to be aware of the cashless policy and to take steps to adjust to the new system. This may involve opening a digital bank account or using a mobile wallet, updating systems and processes, and seeking training and support to get started.