ASSESSSING THE IMPACT OF CBN CASHLESS POLICY DIRECTIVE IN A MARKET ORGANIZATION

CHAPTER I

INTRODUCTION

1.1 Background to the Study

Central bank of Nigeria is the Apex bank of the Federation; in 2012 it introduced the new directive called the Cashless Policy. The main aim of this policy was to reduce the amount of physical cash in circulation, and this policy stipulated a charge on cash withdrawals which exceeded £500,000 for individuals, and £3,000,000 for corporate organizations. In our economy, too much cash is being used for transaction of goods and services especially for buying and selling purposes while in other developed countries payment options or instruments are made available, such as POS, ATM, bank transfer etc. All these have brought a huge achievement in these countries. Money has different role which it performs in the economy: first, it’s a unit of account, means of payment and a medium of exchange. Money in subsequent years have evolved over decades and centuries in other to reduce transaction cost in resolving an exchange. For example, the trade by barter system was associated with a high transaction cost, due to the amount of time and effort used in locating a suitable partner for exchange.

Eventually, another aspect in the evolution of money was the need for diversity. Hence, the   emergence of study of money (notes and coins) made the process less costly by allowing individuals to concentrate in production based on their strengths, and also enabling monetary authorities to mint coins in suitable dominations, therefore fostering diversity (Baddeley, 2004). Subsequently there is a pull towards the use of electronic money, and usually hard to define due to its mix of technological and economic characteristics (Basel committee, 1998, BIS, 1996). According to the European Central Bank, Electronic Money can be defined as an electronic store of monetary value on a technical device that is globally used for making payments to undertakings other than the issuer, without involving bank accounts in the transaction, but acting as a prepaid barrier instrument.

However, the Central Bank of Nigeria (CBN) introduced the cashless policy in order to:

1. Modernize and develop the Nigerian payment systems in line with the vision 2020 goal of being among the top 20 economy by the year 2020.
2. Increase the efficiency and effectiveness of monetary policy through management of inflation and boosting economic growth.
3. Reduce cost of banking services (including cost of credit) and to also boost financial activates through provision of more efficient transaction options.

Cashless policy has aided curb consequences with possession and usage of physical cash in the economy. For example;

1. Inflation: This happens when there is too much money in circulation.
2. Risk of using cash: This gives rise to unwanted uncertainties, such as robbery, fire outbreak, Act of God (flood) etc.

With introduction of this policy it will aid market organizations to benefit maximally from faster access to capital, reduced revenue leakage and reduced cash handling cost. In this case study, our focus is to assess how the cashless policy instruments like ATM, POS and Bank Transfer have impacted the market organization (ShopRite).

1.2 Statement of the Problem

The Apex financial institution announced the implementation of the cashless policy which kicked up the phase 1 of the policy in Lagos in Jan 1 2012, while in 2013 states namely; Ogun, Kano, Abia, Lagos, River state, Anambra and FCT which was the phase 2 of the implemented cashless policy. The aim of the policy directive was to drive modernization and development in Nigerian payment system in accordance to the goal of being amongst the top 20 economies by the year 2020. In view of this new policy the Apex bank in Nigeria (CBN) believes that there is a direct relationship between enhanced and modernized payment system and with economic development, which drives economic growth. This vision of a cashless society which also aids to reduce high cost of spending and money related crimes, however even with the decision and positive implication of the policy, many states and regions of the federation had a bad perception of this policy. This made the House of Rep call on CBN to suspend the policy till due consultation had been made. However, the policy was implemented and many saw it as unnecessary. It is on this note that this research work is being carried out in order to establish with facts the impact of the cashless policy on a market organization.

1.3 Objectives of the Study

The main objective of the study is to examine the impact of CBN’s cashless policy directive on a market organisation. These are;

1. Evaluating the impact of ATM payment transactions system as cashless policy in a market organisation.
2. To ascertain the impact of POS payment transactions system as cashless policy in a market organisation.
3. To determine the impact of Bank Transfer payment system as cashless policy in a market organisation.

1.4 Research Questions

In order to ascertain that the above stated objectives are achieved, the following research questions have been raised:

1. Has ATM payment transaction system impacted on the market organisation?
2. Has POS payment transaction system impacted on the market organizations?
3. Has Bank Transfer payment transaction impacted on the market organization?

1.5 Research Hypotheses

Having ascertained the research questions, the following research hypothesis have been formulated in their null forms:

1. H₀₁: ATM payment transaction system has not impacted on the market organizations
2. H₀₂: POS payment transaction system has not impacted on the market organizations
3. H₀₃: Bank Transfer payment transaction system has not impacted on the market organizations

1.6 Scope of the Study

This study focuses on the impact of cashless policy directive from 2015 till date. Whereas the impact of cashless directive is limited to a market organization and secondary sources of data are also limited. In consideration of Shop Rite Mall, Airport Road, Abuja.

1.7 Significance of the Study

It is expected that this study will contribute in giving light to the the CBN cashless policy and how it has affected business transactions in the market organization. Also, this study will be useful for policy and decision makers in determining the extent to which the CBN policies on cashless transaction has reached. Finally, this study will serve as a reference material to prospective researchers on related topic and a stepping stone for people who may want to carry out further research on the subject matter.

 

1.8 Definition of Terms

Cashless: This is allowing a means of transaction without handling cash by means of bank transfers, use of credit cards, cheques etc.

Policy: its set principles, protocols or procedures set to guide decisions and achieve desirable result.

Organisation: It’s any entity such as institutions, companies etc. This is the coming together of one or more persons who have same goals and particular purposes (making profit). Also according to Adurayemi (2016), the Central bank of Nigeria’s cashless policy is designed to provide payment services and reduce cost.

ASSESSSING THE IMPACT OF CBN CASHLESS POLICY DIRECTIVE IN A MARKET ORGANIZATION

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