Volume of e-payment transactions reflects Nigeria’s cashless policy progress

The volume of e-payment transactions in the last 10 years show that Nigeria has made progress on the cashless policy.

The Central Bank of Nigeria (CBN) announced the naira redesign policy in October 2022. According to the CBN, this would minimise the quantity of currency in circulation and create a cashless society in Nigeria. The cashless policy seeks to decrease instances of armed robbery, extortion, kidnapping, terrorism, ransom payments,  and other crimes, according to the apex bank.

Daily withdrawals from over-the-counter and ATM/PoS services are limited to N20,000 for individuals and N100,000 for corporate entities.

Residents and businesses in Nigeria can withdraw more than the cap only once a month without having to pay processing costs. However, they would only be permitted to take up to N1 million (for individuals) or N5 million (for enterprises) per month and must submit written applications outlining their need for the money. 

E-Payment transactions

The use of large sums of raw cash for transactions is discouraged by a cashless policy, which favours bank transfers, ATM cards, point-of-sale systems, and other financial tools for moving money in transactions. The cashless policy was first introduced in 2012, and was first implemented in Lagos State and later expanded to cover Abuja and five states, including Kano, Ogun, Rivers, Anambra, and Abia, Two years later, the cashless system was implemented across the nation. Nigeria has witnessed a significant rise in the use of e-payment systems since the introduction of cashless policy in Nigeria.

The number of e-payment transactions increased from 428.2 million in 2012 to 16.3 billion in 2021. Similarly, the number of POS terminals in the country increased to 1.1 million POS in 2022 from 155,000 in 2017. Despite this growth, the CBN believes Nigeria needs a tight cashless regulated system.

The National Electronic Funds Transfer (NEFT), Unstructured Supplementary Service Data (USSD), cheques, POS, and Real Time Gross Settlement (RTGS) transactions define Nigeria’s cashless policy.

One of the main goals of cashless policies in Nigeria is to reduce the amount of physical cash that is being used in the system.

Has this policy worked in countries where it was implemented?

According to a WeForum article, one of the main reasons developing countries have yet to adopt the cashless policy fully and still rely heavily on cash transactions is that the bulk of the population, especially those living in rural regions, do not have bank accounts. The term “unbanked population” is used to describe these people.

The developed nations that have adopted this policy, on the other hand, have gone ahead to enhance internet infrastructure, digitise their systems and implement free incentives, which may include free transfers.

One of the countries that have fully implemented the cashless policy is India, a developing country with a total population of 1.41 billion and a GDP of $3.18 trillion. Like Nigeria, India has a high proportion of its population living below the poverty line. Sixty percent of the population live below the World Bank’s median poverty line of $3.10 a day.

Similar to Nigeria, India published a circular that restricted the use of specific currencies and established withdrawal limits. This caused long lines at the ATM locations and repeated changes in the policy. Despite the rise in digital payments, data collected six years after the implementation of the policy reveal that India still has a large amount of cash in circulation, the greatest amount ever recorded.

The failure of the cashless policy in India was attributed by experts to the economy’s lack of readiness for such a drastic transformation. A sizable portion of the population in India lack access to banking services or the digital tools necessary to make electronic payments possible.

Sweden, Finland, and the United Kingdom are among the nations that have adopted the cashless system, and it has been successful for them. But these countries are all developed countries.

Dataphyte asked a policy analyst, Ronke Onadeko, if Nigeria would eventually end up with more currency in circulation than it did before the cashless policy. Three elements, according to Ronke Onadeko, would come into play to determine the direction. According to her, more young people would have new wealth and be liquid, and their decisions about how to spend the money could skew the results in any direction.

The adoption of policies and infrastructural support was also another factor that would determine the fate of cashless policy in Nigeria, noting that if the current situation was not changed, many new entrants into the cashless world could revert to full cash.