1.1 Introduction
The Central Bank of Nigeria (CBN) Cashless Policy refers to a financial reform initiative introduced to reduce the dominance of physical cash transactions in the Nigerian economy and promote the use of electronic payment systems such as mobile banking, internet transfers, point of sale (POS) transactions, and automated teller machines (ATMs). The policy is designed to improve the efficiency of payment systems, reduce the cost of cash handling, enhance transparency in financial transactions, and strengthen monetary policy implementation within the economy (Central Bank of Nigeria, 2012).
The cashless policy was formally introduced in Nigeria in 2012 as part of broader financial sector reforms aimed at modernizing the payment system and aligning it with global best practices. The policy encourages individuals, businesses, and government institutions to adopt electronic channels for financial transactions in order to reduce risks associated with cash-based economies such as robbery, corruption, and money laundering (Sanusi, 2011). It also seeks to improve financial inclusion by integrating more citizens into the formal banking system through digital platforms.
As a prelude to other parts of this study, this chapter will discuss the background upon which this study was initiated, the statement of problems that led to this study, the Aim and Objectives of the study. Others are significance of the study, scope of work, research hypothesis and questions, limitation of the study and definition of terms.
1.2 Background of Study
The Central Bank of Nigeria (CBN) Cashless Policy represents a significant transformation in the Nigerian financial system aimed at reducing the reliance on physical cash and promoting electronic payment channels. According to the Central Bank of Nigeria (2012), the policy was introduced as part of broader financial sector reforms designed to modernize payment systems, improve monetary policy effectiveness, and enhance the overall efficiency of the Nigerian economy. The policy encourages the use of electronic platforms such as mobile banking, internet transfers, point of sale (POS) terminals, and automated teller machines (ATMs) in place of cash-based transactions.
Sanusi (2011) reported that the Nigerian economy had long been characterized by a high dependence on cash transactions, which contributed to inefficiencies in financial management, increased transaction costs, and higher risks of corruption and money laundering. He asserted that transitioning to a cashless economy would strengthen transparency in financial dealings and improve the effectiveness of monetary policy implementation. This assertion laid the foundation for the introduction of the cashless policy in Nigeria in 2012.
According to Adeoti (2013), the cashless policy was introduced to reduce the volume of physical cash circulating within the economy and to encourage the adoption of electronic payment systems. Adeoti further contended that the policy would not only improve the efficiency of financial transactions but also enhance financial inclusion by integrating more Nigerians into the formal banking system. However, he noted that infrastructural challenges such as poor internet connectivity and inadequate power supply continue to hinder its full implementation.
Ojo (2014) stated that the implementation of the cashless policy has significantly changed the structure of banking operations in Nigeria. He affirmed that banks have been compelled to invest heavily in digital infrastructure and electronic banking services to meet the growing demand for cashless transactions. Despite these improvements, he observed that a large proportion of the Nigerian population, particularly in rural areas, still prefers cash-based transactions due to low digital literacy and limited trust in electronic systems (Ojo, 2014).
According to Ayo and Babajide (2015), the cashless policy has contributed to reducing the risks associated with carrying large amounts of cash, such as armed robbery and theft. They reported that the introduction of electronic payment systems has improved the speed and convenience of financial transactions, thereby enhancing economic activities. However, they also asserted that issues such as cyber fraud, network failures, and high transaction charges remain major challenges affecting the effectiveness of the policy (Ayo and Babajide, 2015).
Eze and Chinedu (2016) contended that the success of the cashless policy in Nigeria is largely dependent on the level of financial inclusion and technological readiness of the population. They stated that many small and medium-scale enterprises still rely heavily on cash transactions due to limited access to digital banking infrastructure.
In the context of Enugu State, which serves as the focus of this study, the adoption of the cashless policy reflects a mix of progress and persistent challenges. According to Nwankwo and Okeke (2018), urban areas in Enugu have experienced increased usage of electronic payment systems due to better access to banking services and improved telecommunications infrastructure. However, they affirmed that rural communities in the state continue to face significant barriers such as poor network coverage, low awareness of digital banking services, and limited access to financial institutions.
CBN Enugu branch reports (2020) stated that the cashless policy has contributed to increased electronic transactions within the state, particularly among government agencies, financial institutions, and large commercial enterprises. Nonetheless, they reported that small-scale traders and informal sector operators still rely heavily on cash due to perceived insecurity and lack of technical knowledge in using electronic platforms.
According to Okoye and Ezeani (2021), the cashless policy has the potential to stimulate economic growth in Nigeria by improving transaction efficiency and reducing the cost of cash management. They contended that when fully implemented, the policy will enhance financial transparency, reduce corruption, and support sustainable economic development. However, they also emphasized that the success of the policy depends on addressing challenges such as inadequate infrastructure, low financial literacy, and high service charges. Furthermore, World Bank (2022) affirmed that countries that have successfully implemented cashless policies have experienced improved financial inclusion and economic stability. It stated that Nigeria's progress in this direction is notable but still constrained by structural and institutional limitations that must be addressed to achieve full benefits.
This study is set against the backdrop of these developments, which reflect the growing shift toward digital financial systems in Nigeria and the increasing need to evaluate the effectiveness, benefits, and challenges of the Central Bank of Nigeria cashless policy within the context of Enugu State.
1.3 Statement of Problems
Investigation revealed that many individuals and small business operators still depend heavily on cash transactions due to inadequate knowledge of electronic banking platforms and lack of trust in digital systems. This situation has slowed down the adoption rate of cashless transactions and weakened the expected economic impact of the policy. In addition, poor internet connectivity and unreliable power supply continue to disrupt electronic payment systems, thereby discouraging consistent usage.
Furthermore, while the policy has recorded some level of success in urban banking environments, rural and semi-urban areas like parts of Enugu State still experience slow adoption due to infrastructural and socio-economic limitations. Financial institutions also face operational challenges in maintaining secure, efficient, and accessible digital platforms that meet the growing demands of users. It is against this backdrop that this study seeks to assess how the policy has influenced the adoption of electronic payment systems such as mobile banking, internet banking, point of sale (POS) transactions, and other digital financial services within Enugu State.
1.4 Aim and Objectives of Study
The aim of this study is to examine the impact of the Central Bank of Nigeria cashless policy on the Nigerian economy, with specific reference to CBN Enugu.
The specific objectives of the study are to:
- Assess the level of awareness and adoption of the cashless policy among individuals and businesses in Enugu State.
- Evaluate the effect of the cashless policy on the efficiency of financial transactions within the study area.
- Determine the extent to which infrastructural challenges such as internet connectivity and power supply affect the implementation of the cashless policy in Enugu State.
- Examine the relationship between the cashless policy and the reduction of cash-related risks such as theft, fraud, and cash handling costs in the Nigerian economy.
- Identify the challenges limiting the full implementation and effectiveness of the cashless policy in Enugu State.
- Analyze how the cashless policy has influenced financial inclusion and participation in formal banking systems among residents and businesses in Enugu State.
1.5 Research Questions
The study came up with research questions so as to be able to ascertain the above stated objectives. The specific research questions for the study are stated below as follows:
- What is the level of awareness and adoption of the Central Bank of Nigeria cashless policy among individuals and businesses in Enugu State?
- How does the cashless policy affect the efficiency of financial transactions within the study area?
- To what extent do infrastructural challenges such as internet connectivity and power supply affect the implementation of the cashless policy in Enugu State?
- What is the relationship between the cashless policy and the reduction of cash-related risks such as theft, fraud, and cash handling costs in the Nigerian economy?
- What are the key challenges limiting the full implementation and effectiveness of the cashless policy in Enugu State?
- How has the cashless policy influenced financial inclusion and participation in formal banking systems among residents and businesses in Enugu State?
1.6 Research Hypotheses
In order to pursue the objective of this study, the following generalized statements have been designed to guide and aids in obtaining the result for the experiment to be conducted. For this work, the null hypothesis will be represented with H0 while the alternative hypothesis will be represented with hypothesis H1.
Hypothesis One
- H0: There is no significant relationship between the Central Bank of Nigeria cashless policy and the efficiency of financial transactions in Enugu State.
- H1: There is a significant relationship between the Central Bank of Nigeria cashless policy and the efficiency of financial transactions in Enugu State.
Hypothesis Two
- H0: Infrastructural challenges such as internet connectivity and power supply do not significantly affect the implementation of the cashless policy in Enugu State.
- H1: Infrastructural challenges such as internet connectivity and power supply significantly affect the implementation of the cashless policy in Enugu State.
Hypothesis Three
- H0: The cashless policy does not significantly influence financial inclusion among residents and businesses in Enugu State.
- H1: The cashless policy significantly influences financial inclusion among residents and businesses in Enugu State.
1.7 Significance of Study
It is believed that at the completion of the study, the findings will provide the Central Bank of Nigeria with evidence on the effectiveness of the cashless policy in reducing cash dependency and improving electronic payment adoption in Enugu State, thereby supporting policy review and financial regulation.
Additionally, the study will provide commercial banks with accurate information on customer usage of electronic banking services, which helps improve service delivery, strengthen digital platforms, and reduce transaction failures.
Furthermore, the research will provide government agencies with data on how the cashless policy influences economic activities such as revenue collection, payment efficiency, and cash circulation, which supports fiscal planning and policy implementation.
Lastly, the study will benefit researchers and academic institutions by providing empirical findings on the implementation of the cashless policy in Enugu State, which serves as reference material for further studies on digital financial systems and economic development in Nigeria.
1.8 Scope of Study
The scope of this study is focused on the Central Bank of Nigeria (CBN) cashless policy and its impact on the Nigerian economy, with specific reference to the CBN Enugu Branch and selected financial activities within Enugu State, Nigeria.
1.9 Limitations of the Study
A study of this nature is bound to experience certain problems as such the constraints imposed on the research include:
- Time Constraints: A study of this nature needs relatively long time during which information for accurate or at least near accurate inference could be drawn. The period of the study was short, time posed as constraints to the research.
- Financial Constraints: The research would have extended the survey to other area at the empirical level, but limitation as included cost of transportation to the source of material and the cost of time setting of the already completed work.
- Lack of Cooperation: Many of the respondents are usually aggressive on issue that border cooperation among the respondents border.
- Response Bias: The study will involve surveys and interviews with cooperative managers and members. Response bias may occur if respondents provide socially desirable answers or if there is reluctance to disclose negative financial information due to privacy concerns or fear of repercussions.
1.10 Definition of Terms
Cashless Policy:
Cashless policy refers to a financial strategy introduced by the Central Bank of Nigeria to reduce the volume of physical cash in circulation and encourage the use of electronic payment systems such as mobile banking, internet transfers, point of sale (POS) transactions, and automated teller machines (ATMs). According to the Central Bank of Nigeria (2012), the policy is designed to improve payment efficiency, reduce cash handling costs, and enhance transparency in financial transactions within the economy.
Central Bank of Nigeria (CBN):
The Central Bank of Nigeria is the apex financial regulatory authority responsible for formulating and implementing monetary policies in Nigeria. According to Sanusi (2011), the CBN is mandated to ensure price stability, regulate the banking sector, and promote a sound financial system that supports economic growth and development.
Electronic Payment System:
Electronic payment system refers to the use of digital platforms to conduct financial transactions without the use of physical cash. Adeoti (2013) stated that electronic payment systems include mobile banking, internet banking, POS terminals, and electronic fund transfers, which allow faster and more secure financial transactions.
Cashless Economy:
A cashless economy is a financial system where transactions are conducted primarily through electronic means rather than physical cash. According to Ayo and Babajide (2015), a cashless economy improves efficiency in payment systems, reduces transaction costs, and enhances financial inclusion by integrating more individuals into the formal banking sector.
Financial Inclusion:
Financial inclusion refers to the process of ensuring that individuals and businesses have access to affordable and appropriate financial services. Eze and Chinedu (2016) affirmed that financial inclusion involves access to banking services, credit facilities, savings accounts, and electronic payment platforms that support economic participation.
Point of Sale (POS) Terminal:
A Point of Sale terminal is an electronic device used by businesses to process payment cards for goods and services. According to Okoye and Ezeani (2021), POS systems facilitate cashless transactions by allowing customers to make payments directly from their bank accounts using debit or credit cards.
Internet Banking:
Internet banking is a digital banking service that allows customers to perform financial transactions through the internet. Nwankwo and Okeke (2018) stated that internet banking enables users to transfer funds, pay bills, and manage accounts without physically visiting a bank branch.
Mobile Banking:
Mobile banking refers to the use of mobile devices such as smartphones and tablets to carry out financial transactions. According to the Central Bank of Nigeria (2012), mobile banking enhances accessibility to financial services, especially in areas with limited banking infrastructure.
Financial System Efficiency:
Financial system efficiency refers to the ability of the financial sector to process transactions quickly, securely, and at minimal cost. Sanusi (2011) contended that efficient financial systems support economic growth by improving the speed and reliability of monetary transactions.
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