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This study investigates the role of e-payment systems on economic growth in Nigeria over the period of 2010-2018.  Specifically, the study analyses the role of e-payment systems on economic growth using value of e-payment transactions and volume of epayment transactions. The study used quarterly time series data for value of POS, ATM, mobile, Internet transactions and real GDP for model 1 and volume of POS, ATM, mobile, internet transactions and real GDP for model 2. The multiple regression analysis, Johansen cointegration test, Granger causality test and Vector error correction model (VECM) were employed in this study. The results of the multiple regression analysis for model 1 and 2, shows that ATM and internet transactions is positive and insignificantly related to economic growth while there is a negative and insignificant relationship between POS transactions and real GDP in Nigeria.  The result also shows that volume of mobile transactions is positive and significantly related to economic growth while value of mobile transactions is positive but insignificantly related to economic growth in Nigeria. The Granger causality test for model 1 shows the existence of a unidirectional causal relationship between value of POS, ATM and mobile transactions and real GDP. The granger causality test for model 2, shows there is a unidirectional causal relationship from volume of POS, mobile and internet transactions to real GDP. The Johansen cointegration test for both model 1 and 2, establishes the existence of a long run equilibrium relationship between e-payment systems and economic growth in Nigeria. The vector error correction model (VECM) results for model 1 and 2 shows the existence of a short run relationship between e-payment systems and economic growth in Nigeria. The study recommends the government invest in communication and internet infrastructure, internet security as well as awareness campaigns in order to capture a higher percentage of the population on these e-payment platforms and increase the number of banked in the population which will boost aggregate consumption, employment, trade and increase government revenues which would lead to an increase in economic growth.



1.1 Background of the Study


The impact of e-payment systems on economic growth has been a topic of interest to researchers and policy makers particularly in developing countries. The digitalization of finance and transactions represent a modern phenomenon in the world of finance. E-payment systems play a critical role in modern economies due to globalization and technological advances being made all around the world. The continuous advances in the internet technology have brought huge impact on business operations and have in particular brought about a paradigm shift in banking operations. In Nigeria, banks have invested greatly in technology, and have widely adopted electronic and telecommunication networks for delivering a wide range of value-added products and services in order to meet up with global development and improve the quality of service delivery, and reduce transaction cost (Ayo and Ukpere, 2010).


Electronic payment system is a way of making transactions or paying for goods and services through an electronic medium without the use of check or cash. It’s also called an electronic payment system or online payment system. The electronic payment system has grown increasingly over the last decades due to the widely spread use of internet-based banking and shopping. As the world advance more on technology development, a lot of electronic payment systems and payment processing devices have been developed to increase, improve and provide secure e-payment transactions while decreasing the percentage of check and cash transaction. e-payment economy does not mean an outright elimination of cash transactions in the economic setting but one in which the amount of cash-based transactions is kept to the barest minimum (Afaha, 2019). In recent years, the introduction of e-payment systems has provided a medium through which money circulates conveniently. Onyeagba (2015) stated that cashless system of payments and instruments contribute significantly to the broader effectiveness and stability of the financial system. For example, in South Africa and Kenya small electronic payment systems have been introduced and adopted by millions of Kenyans and hundreds of thousands of South Africans. The introduction of these platforms has provided a cheaper alternative for low-income families to carry out transactions. This has eliminated the cost of travel and bank charges for these users and low-income families (Akintaro, 2012).


The federal government of Nigeria introduced a policy based on cash less transactions in January 2012. One of the main reasons this policy was introduced was to develop and modernize payment systems in Nigeria. This was in line with the National Payment Systems Vision 2020 (PSV 2020) with the primary objective of the policy being, to create a safe, efficient and effective mechanism for conveniently making and receiving all types of payments from any location at and at any time through various electronic channels. The policy through the advanced use of information technology facilitates fund transfer, thereby reducing time wasted in Banks. E-payment systems have provided the platform to which Nigeria transitions to a modern market economy. A well-functioning e-payment system has been recognized to have much relevance on financial stability, monetary policy and overall economic activity (CBN 2011).

Electronic Payment Systems (EPS) apart from their convenience and safety also have a significant number of economic benefits which include mobilizing savings, and ensuring most of the cash available in the country are with banks. This will make funds available to borrowers both businesses and individuals (Afaha and Sylvester, 2019). Although Nigerian e-payment systems have continued to develop and advance, there has been limited impact on the economy and economic growth due to various inefficiencies on the side of the federal government. Ajisegiri and Oyebisi (2014) stated that it is impossible to fully absorb the benefits of payment systems due to poor internet access and unreliable electricity supply, especially in rural areas as many modern payment platforms require access to the internet. Inadequate infrastructure such as roads and railways have also limited the benefits for payment systems as goods that have been paid for will need to be transported between states or borders, ignorance of the population has also played a part due to the average Nigerian’s love for cash which had been the status quo for payments and transactions before the cash less policy by the Central Bank of Nigeria. Outdated financial policies coupled with a high rate of corruption have also hindered the role payment systems play in the economic growth of Nigeria.


The purpose of this study is to examine the role of e- payment systems on economic growth in Nigeria. It is essential for the government to provide a safe and business friendly working environment to ensure e-payment systems are used to their full potential, which would stimulate the economy and boost economic growth.


1.2 Statement of the Problem



Over the years, the use of payment systems in Nigeria has been increasing considerably but its impact hasn’t been adequately translated to the economy. One of the main reasons for this is the reluctance and ignorance of Nigerian’s to use the internet for transactions due to the fear of fraud. The tech savvy nature of some payment systems also hinders the ability to capture a majority of the population.  Another major issue hindering the possibilities of payment systems is the banking and finance sectors ability to capture a majority of the population on these platforms. The facilities that will be used for efficient financial transactions by the available deposit money banks in Nigeria may not be able to carry the load of the electronic system; ATM’s, Point of Sales system, mobile banking and other mediums have to dramatically expand to touch at least 80% of the whole country before any efficient financial intermediation can be achieved (Rueben and Anyanwaokoro, 2019). Customers also complain of network failures alongside ATM failures. Implying that network and the ATM machines must be improved dramatically to accommodate for smooth operations of financial activities (Rueben and Anyanwaokoro, 2019). Acha et al (2017) highlighted the unavailability of POS at purchase centers, poor internet access, lack of knowledge on how to use payment systems, transaction difficulties, limited ATM machines, ATM robbery and lack of access to funds as some of the challenges affecting the actualization of the cashless policy and shift toward electronic systems of payment.  It is also impossible to fully capture the population due to high rate of illiteracy in the country. For citizens to fully enjoy the benefits of e-payment systems, they must know how to read and write and also possess basic ICT literacy (Joseph and Richard, 2015). Ajisegiri and Oyebisi (2014) attributed the usage of mobile money and internet/web services or platforms to internet connectivity and cost of bandwidth, low internet connectivity and high cost of band width as a major issue affecting the use of mobile money and internet/ web services in Nigeria.





1.3 Research Questions


The study will answer the following research questions:

  1. What is the long run relationship between e-payment systems and economic growth in Nigeria?
  2. What is the short run relationship between e-payment systems and economic growth in Nigeria?
  3. What is the causality relationship between e-payment systems and economic growth in Nigeria?


1.4 Objectives of the Study


The main objective of this study is to examine the impact of e- payments systems on economic growth in Nigeria.  The specific objectives are:

  1. To examine the long run relationship between e-payment systems and Nigeria’s economic growth.
  2. To examine the short run relationship between e-payment systems and Nigeria’s economic growth.
  3. To determine the causal relationship between e-payment systems and Nigeria’s economic growth.


1.5 Scope of the Study


The study examines the role of e-payment systems on economic growth in Nigeria, covering the period of 2010 to 2018. The variables used in the study are real GDP, value of POS transactions, value of ATM transactions, value of mobile transactions, value of internet transactions, volume of POS transactions, volume of ATM transactions, volume of mobile transactions and volume of internet transactions.

1.6 Significance of the Study


It is well documented that financial and business transactions through payment systems have a direct relationship with rising growth of an economy Zandi (2016), Hasan et al (2012), Yusuf (2016), Oyewole et al (2013). There is no economy that will survive without the transactions of goods and services. The study will contribute in the following ways:


Firstly, the findings will shed more light on the importance of e-payment to the Nigerian economy and the benefits that can be derived from the population adopting these technologies. The findings will provide information that will guide policy makers in making decisions on appropriate policies that will improve the use of epayment systems in order to capture the money in circulation within the banking system and formal market.


Secondly, this work will be of importance to the private sector and general public as it will educate the public and potential investors on the growing potential of payment system users and the potential market they can capture for their businesses or markets.


Lastly, with the growing level of insecurity in the country, the use of e-payment systems enables the ease of movement and transaction without cash, thereby preventing incidences of robbery and extortion by ill vices in Nigeria. It also aids security agencies in tracking down and tracing kidnappers and robbers as it places a limit on the cash flowing in the system therefore making it difficult for them to carry out their nefarious activities and also less attractive to pursue the trade.


1.7 Structure of the Study


This study is organized as follows:

Chapter one is the introduction of the study which comprises of the background to the study, statement of the problem, objectives of the study, scope of the study and the significance of the study. Chapter two is the review of past literature. It reviews the conceptual framework, theoretical framework and empirical review. Chapter three is the methodology of the study, which comprises of research design, model specification and method of data analysis. Chapter four present the results and analyses the data. Chapter five gives a summary of findings and policy recommendations.


1.8 Definition of Terms


  1. Economic Growth: Economic growth is an increase in the capacity of an economy to produce goods and services, compared from one period to another. It can be measured in nominal or real (adjusted for inflation) terms. It can also be seen as general increase in capacity of an economy to produce its essential needs.
  2. Cashless Policy: Cashless policy is the ability to carry out transactions without the use of banknotes. It is a policy introduced by the Central Banks to reduce the amount of physical cash in circulation, thereby encouraging the use of electronic platforms for settlement or payment of goods and services.
  3. Gross Domestic Product (GDP): The monetary value of all finished goods and services produced within a country’s borders in a specific time period (typically 1 year). The gross domestic product (GDP) is the most commonly used measure of economic activity. It represents the total dollar value of all goods and services produced over a specific time period.
  4. Electronic Payment (e-payment): This is the way of making transactions or paying for goods and services through an electronic medium, without the use of cash or cheques.
  5. Monetary Policy: This is the macroeconomic policy measures undertaken by the government or central bank to influence the availability, cost and use of money and credit.


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