Concept of Cashless Policy

 

Concept of Cashless Policy

Generally, cashless policy is a policy that minimizes the use of cash by providing alternative channels for executing financial transactions. In view of being one of the best and biggest economies in 2020, reduced the cost of cash related transactions and promote electronic banking system, the CBN introduced the cashless policy in Nigeria in the year 2012. According to Odior and Banuso (2013), cashless banking is that banking system aimed at reducing, but not eliminating, the volume of physical cash circulating in the economy whilst encouraging more electronic based transaction.

 

The cashless policy took effect from April 1, 2012 in Lagos as a pilot project pegs daily cash transactions over the counter for individuals and corporate bodies at one hundred and fifty thousand naira (N150,000) and one million naira (N1,000,000) respectively. However, these amounts were later reviewed upward to five hundred thousand naira (N500, 000) and three million (N3, 000,000) for individuals and corporate organizations respectively. Any over the counter (OTC) cash transactions above the aforementioned amount for individuals and corporate organizations attract a charge. The essence of the policy is to shift the economy from a cash based economy to a cashless one. Thus it is geared towards engendering an efficient payment system anchored on electronic based transactions. Electronic based transaction seeks to drive the development and modernization of Nigeria’s payment system in line with hervision 20:20 20 goal of being among the top 20 economies of the world by the year 2020 (Central Bank of Nigeria, 2011). It is a truism that an efficient and modern payment system is a key enabler and a sine qua non for driving growth and development. The policy also aims at improving the effectiveness of monetary policy in managing inflation in the economy.

 

The cashless policy applies to all accounts, including collection accounts and the cash limits apply to an account irrespective of channel (i.e. whether it is over the counter, ATM, third party cheques cashed over the counter etc).As far as cash is involved, any withdrawal or deposit that exceeds the limits attracts a service charge (Central Bank of Nigeria, 2011). The charge is borne by the account holder and is about N100 per every 1000 in bank charges (This day Live 2012, April 25). The limit however does not prevent customers from withdrawing or depositing beyond the pegged limits but such customers should be prepared to pay the aforementioned penal fee. The implementation of the policy which was test run in Lagos was extended to other states of the federation from January 1, 2013. However, contrary to the initial plan to introduce the policy to all states of the federation by January 1, 2013, the apex bank has now decided to pursue the implementation process in stages, beginning from five additional states and the Federal Capital Territory. These states are Kano, Ogun, Anambra, Rivers, a state in the North Eastern zone of the country and the Federal Capital Territory (FCT), Oketola (2012). The internet is perhaps one of the most useful tools to businesses and individuals in contemporary world economies. Its use has touched virtually every aspect of human endeavor especially banking. Technological breakthroughs and product designs have led to the emergence of e-banking services which, in recent time has become globally popular except in developing countries including Nigeria (James, 2012).The Central Bank of Nigeria (CBN) in 2011 released a circular on the introduction of ‘cashless’ policy which sets cash deposit and withdrawal limits.

 

That the country would from June 1^st 2012 join the committee of nations that embrace the electronic means of payment and limit the use of cash to the very barest. The apex bank has also gone ahead to assert that the commencement of its “cashless policy” for cities such as Lagos, Abuja and Port Harcourt to demonstrate the CBN’s seriousness about the policy which has generated huge debate from Nigerians. While the apex bank is of the view that the cashless policy is the way to go in line with global trends, many Nigerians both informed and uninformed have divergent views about the policy (CBN, 2011). The Governor of the central bank of Nigeria (CBN), is of the view that the electronic means of payment is the vogue throughout the world. He stressed that the policy, if allowed to succeed, would save the country huge resources such as cost of printing cash and its transportation from the mint to the length and breadth of the country.