25
Effect of Cashless Banking on Economic Growth in Nigeria.
Dr. Mrs. Ozoji Amara Priscilia
Department of Accountancy, University of Nigeria, Enugu Campus, Enugu.
E-mail: [email protected] Phone number: 08063018677
Dr. Mrs. Ezechukwu Beatrice O.
Department of Accountancy, Federal Polytechnic, Oko
E-mail: [email protected]
ABSTRACT
This study empirically examined the effect of
cashless banking on economic growth in
Nigeria, with a focus on the aggregate data
of all the banks operating in the country as at
2012-2018, as documented in the CBN
annual report. The study adopted an ex-post
facto research design, thus secondary source
of data collection was employed. Cashless
banking system as the independent variable
of this study was measured with total annual
value of automated teller machines, Point of
sale, internet banking and mobile – phone
banking transactions(TATM, TPOS, TMPS
and TIB) during the period of cashless
banking (2012-2018) in Nigeria; whereas the
dependent variable, economic growth was
measured with bank’s contribution to
Nigeria’s real gross domestic products
(BGDP) from 2012-2018. Data gathered
were presented in tables and analyzed using
multiple regression techniques (ordinary
least squares) of model estimation with the
aid of E-Views 10.0 econometric software.
Results show that all the explanatory
variables (TATM, TPOS, TMPS and TIB)
have positive and significant effect on BGDP
in Nigeria (B1 (X1), B2 (X2), B3 (X3), B4
(X4) = 0.223749 (0.0214), 0.153603(0.0148),
0.212357(0.0041) and 0.119908(0.0395)
respectively). Considering the independent
variables as a group, the study revealed that
cashless banking system has a significant
positive effect on BGDP in Nigeria (R2=
91.4%, F- Stat.= 84.37156 and Prob(F-
statistics) = 0.000000<0.05). Though the
result showed that cashless banking in
Nigeria has significantly increased Nigeria’s
economic growth, the coefficient values of the
explanatory variables are quite low, showing
that more growth could still be achieved with
further improvement in the practice of
cashless banking in Nigeria especially now
that the world grapples with Covid-19
pandemic and its economic meltdown. Based
on the findings, a collaboration and
cooperation of various stakeholders like the
government, CBN and Bank’s customers
were recommended to strengthen the
Nigeria’s cashless banking system for long-
term sustainability. The government should
ensure the provision of uninterrupted power
supply which would aid smooth operations of
digital financial activities. The CBN should
intensify its enlightenment campaign to
sensitize the public on the need to use
cashless banking instruments. Bank’s
customers have greater role in accepting and
using the cashless banking instruments.
Keywords: Cashless banking, Cashless
policy, Economic growth, COVID-19.
1. INTRODUCTION
Banking system in Nigeria has passed the era
at which banking business required only the
physical presence of the customers or their
agents in the bank premises to the era where
banking activities can also be carried out
from home, business premises or even on the
road with the aid of digital devices. This is as
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
26
a result of technology advancement
witnessed in the 21st century, which has
transformed the landscape of businesses
including the banking sector. Sanusi (2002)
as cited by Dogarawa (2005) states that the
introduction of electronic banking (e-
payment) products in Nigeria commenced in
1996 when the Central Bank of Nigeria
(CBN) granted all states trust bank approval
to introduce a closed system electronic purse
called electronic system cards (ESCA). Other
forms of electronic cards like pay card, value
card and smart pay were further introduced
by Diamond bank in February 1997,
Smartcard Nigeria plc (a company floated by
a consortium of 9 banks) in 1998 and
Gemcard Nigeria limited (another consortium
of more than 20 banks) in 1999 respectively
with CBN approval (Ekwueme, Egbunike
and Okoye, 2012). In other to facilitate the
electronic cards usage and further enhance
their service delivery, the automated teller
machine (ATM), Point of sale (POS)
terminals, and other card used electronic
devices were deployed by some banks.
In the bid to reduce (not eliminate) the
amount of physical cash circulating in the
economy and encourage more electronic-
based transactions, the CBN recently in 2012
introduced/Implemented cashless policy in
Nigeria. The CBN cashless policy effective
from June 1, 2012 stipulates a daily
cumulative limit of ₦500,000 and
₦3,000,000 on cash withdrawals and
lodgments by individual and cooperate
bodies respectively free of processing fees.
The processing fee of 3% and 5% (currently
reviewed in February, 2017 as follows: above
₦500,000 - ₦1,000,000: 2%, above
₦1,000,000 - ₦5,000,000: 3%, above
₦5,000,000: 7.5% and above ₦3,000,000 -
₦10,000,000: 5%, above ₦10,000,000 -
₦40,000,000 :7.5%, above ₦40,0000,0000:
10% - Fatokun, 2017) will be charged to
individuals and corporate organizations
respectively that make withdrawals above the
daily limits for amounts above the
cumulative limit. Lodgments above the limit
attracts 2% and 3% (reviewed in February,
2017 as follows: above ₦500,000 -
₦1,000,000: 1.5%, above ₦1,000,000 -
₦5,000,000: 2%, above ₦5,000,000 :3%, and
above ₦3,000,000 - ₦10,000,000: 2%, above
₦10,000,000 - ₦40,000,000: 3%, above
₦40,000000: 5% - Fatokun, 2017)
processing fees for individuals and corporate
bodies respectively (CBN, 2012).
Furthermore, 3rd party cheques above
#150,000 shall not be eligible for encashment
over the counter from 2012. Value for such
cheques shall be reviewed through the
clearing house.
Consequently, Nigerian banks now transited
from cash-based banking system to cashless
banking system. The implication is not an
outright absence of cash transactions in
banking sector but one in which the amount
of cash-based transactions are kept to the
barest minimum while encouraging more
electronic based banking transactions. Hence,
cashless banking in Nigeria could better be
called cash-light banking system (Okoye,
2018).
The CBN (2012), when stating the key
reasons for the introduction of cashless
policy pointed out that cashless banking
system (efficient and modern payment
system) is a key enabler for economic
growth. In line with the CBN (2012) view
above, Omotunde, Sunday and John-Dewole
(2013) in their study on the impact of
cashless economy in Nigeria, stated that the
impact of cashless economy in Nigeria is
expected to be felt in modernization of
Nigerian payment system, reduction in the
cost of banking services as well as reduction
in high security and safety risks, including its
stability in curbing banking related
corruptions and fostering transparency.
Effect of Cashless Banking on Economic Growth in Nigeria.
27
Additionally, Aiyedogbon, Obumneke and
Gugong (2013) in their research on the
effectiveness of cashless banking on
economic growth in Nigeria, disclosed that
ATM and POS have significant impact on
Nigerian economic growth (1% change ATM
and POS results to 0.46% and 1.60% increase
in Nigerians GDP). whereas mobile money
has not contributed immensely to Nigerian
economic growth (1% in mobile money
reduces the GDP by 0.19%). The views
above are contrary to the persistent public
outcry in recent time in Nigeria as regards the
ever increasing challenges which the practice
of cashless banking since its inception has
posed to the banks and growth of the
economy. For instance, Ezeudu and
Anyanwu (2014) disclosed that the
introduction of cashless banking policy
would automatically reduce the number of
personnel needed to carryout different
financial transactions in the banks. This
implies that the rate of unemployment in the
country would be increased and this affects
the country’s GDP (economic growth) since
the private consumption of the unemployed
labour force would be negatively affected.
Additionally, Kutznet, 1973 (as cited in
Agbadudu and Obayagbona, 2013) stated that
every modern economic growth must possess
six identified characteristics and one of them
is high rate of increase in total factor
productivity especially labour (increase in
employment rate). Furthermore, the current
economic situation in Nigeria where job
losses, may drive more people into fraudulent
acts, as disgruntled and ex-staff may serve as
resource for committing fraudulent activities
(Nigeria Electronic Fraud Forum Annual
Report, 2016); thus the insecurity in the
country is been increased and this affects the
total investment (GDP in extension) in the
nation. In support of this view, UNCTAD,
2013 (as cited in Agbadudu and Obayagbona,
2013) stated that Foreign direct investment
inflows to Nigeria fells from $8.9 billion
(#1.424 trillion) in 2011 to $7 billion (#1.120
trillion) in 2012 due to political insecurity
and a weak global economy.
Now, in view of wide range of conflicting
empirical studies on how cashless banking
affects the economic growth in Nigeria,
coupled with the fact that most of these
studies used total GDP as the measure for
economic growth, ignoring that total GDP of
every country (whether real or nominal)
composed of different sector’s contributions
to GDP and a result of a study that shows an
increase in GDP may be as a result of the
positive contributions of other sectors of the
economy (other than the banks) to GDP; this
study specifically aimed at empirically
determining the effect of cashless banking on
banks contribution to Nigeria’s GDP.
In other to achieve this objective, a
hypothesis stating that cashless banking in
Nigeria has no significant effect on banks
contribution to Nigeria’s real gross domestic
product (BGDP) was formulated and tested.
The remaining part of the paper is organized
in the order of review of the literature under
investigation which was presented in section
two, the methodology presented in section
three, results of empirical findings presented
in section four, and finally, conclusion and
recommendations presented in section 5.
2. REVIEW OF RELATED
LITERATURE
In this section, different literatures as related
to the study were reviewed in the order of
conceptual review, theoretical framework and
empirical review.
2.1 Conceptual Review
2.1.1 Electronic banking
Banking has come a long way from the time
of ledger cards and other manual filling
system to the computer age. From the
traditional view point, banking business
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
28
means the business of receiving deposits on
current accounts, savings account and other
similar accounts and the payments and
collections of cheques drawn or paid in by
customers through the physical presence of
the customer or his agent, client or creditor in
the bank premises. Digitization later re-
sharpen this initial arrangement to the idea
that individuals and companies can have
access to payments, savings and credit
products with the aid of electronic devices,
without ever stepping into a bank. This
placed electronic as prefix to banking (e-
banking). James and Rodger (2016) have it
that digital finance can essentially turn a
smart phone into a wallet, a cheque book, a
bank branch and an accounting ledger, all in
one.
Electronic banking simply means carrying
out banking business electronically. Shehu,
Aliyu, and Musa (2013) posited that e-
banking involves providing retail or small
value products and also large or wholesale
banking products electronically. Gordon
(2000) as cited by Okoye (2018) defined
electronic banking as part of the growing
field of electronic commerce. Whereas
electronic commerce is the mechanism of
transactions via electronic means usually the
internet and other methods as well.
According to Adewolo (2015), E-Banking
involves creating opportunities through the
infrastructure in the digital age. Odigiyan
(2005) as cited by Anyaoha (2000) holds the
view that e-banking emphasizes the
following perspectives: from the
communication perspectives, it is the
delivery of banking information, products
and services or payment through telephone
lines, computer networks or another means.
From the business perspective, it is the
application of technology towards the
automation of banking transactions and
workflow. Services perspective sees it as a
tool that addresses the desire of companies,
customers and management to cut services
costs while improving the quality of product
and increasing the speed of services delivery.
In Nigeria, electronic banking system did not
mean the execution of banking transactions
through electronic means only, but include
cash –based banking transactions also. Many
Nigerians still make cash withdrawals over
the counter in addition to electronic – based
banking transactions in the electronic
banking era. In support of this view,
Ekwueme et al (2012) stated that e- banking
in Nigeria can be said to be an ‘add’ process
and not an ‘or’ process. Therefore, e- banking
system in Nigeria involves both cash – based
banking transactions and electronic based
banking transactions but predominated by
cash-based banking transactions.
2.1.2 Cashless policy cum cashless banking
in Nigeria
In order to encourage more electronic means
of transaction and reduce the high cost of
cash in Nigerian financial system, the CBN
recently, in 2012 came out with a policy
called cashless policy. The CBN cashless
policy effective from June 1, 2012 stipulates
a daily cumulative limit of ₦500,000 (at the
conception of the policy in 2011, these were
pegged at N150,000) and ₦3 million
(previously pegged at N1 million at the
conception of the policy in 2011) on cash
withdrawals and lodgments by individual and
corporate bodies respectively free of
processing fees (or cash handling charge or
service charge). Individuals and corporate
organization that make withdrawals above
the daily limits will be charged the
processing fee of 3% and 5% (currently
reviewed in February, 2017 as follows: above
N500,000 - N1m: 2%, above N1m – N5 m:
3%, above N5 m: 7.5% and above N3m -
N10 m: 5%, above N10 m – N40m: 7.5%,
above N40 m: 10% -Fatokun, 2017)
respectively for amount above the cumulative
Effect of Cashless Banking on Economic Growth in Nigeria.
29
limits. Lodgment above the limit attracts 2%
and 3% (reviewed in February, 2017 as
follows: above N500,000 - N1 m: 1.5%,
above N1m – N5 m: 2%, above N5m: 3%
and above N3m - N10 m: 2%, above N10m –
N40 m: 3%, above N40 m: 5% -Fatokun,
2017), processing fee for individuals and
corporate bodies respectively. This limit
applies to all accounts so far as it involves
cash, irrespective of the channel used,
(example, over the counter, ATM, 3rd party
cheques, enchased over the counter etc) in
which cash is withdrawn, with exception of
accounts operated by Ministries, Departments
and Agencies of the Federal and State and
local governments, solely meant for the
purpose of revenue collections (Fatokun,
2017 added lodgment only). Exemptions are
also extended to Embassies, Diplomatic
Missions and Multi- lateral and Aid-donor
Agencies as well as Micro Finance Banks
and Primary Mortgage Institutions (CBN,
2012). It was also stated that the limit also
applies to cash brought through cash- In-
Transit (CIT) companies, as they are licensed
to provide cash-pick up services. Any bank
that continues to offer cash in transit
lodgment services to Merchants shall be
sanctioned. Furthermore, 3rd party cheques
above ₦150,000 shall not be eligible for
encashment over the counter. Value for such
cheques shall be received through the
clearing house.
The cashless policy gave rise to cashless
banking in Nigeria. According to Akhalumeh
and Ohiokha (2012), cashless banking system
is a system in which transactions are not done
predominantly in exchange for actual cash.
Odior and Banuso (2012) added that 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. Obinna as cited in Osazebaru,
Sakpaide and Ibubune (2014) opined that this
system increases convenience, create more
service options, reduce cost of cash related
crimes and provide cheaper access to credit.
Ovia as cited in Ezuwore-Obodoekwe, Eyisi,
Emengini and Chukwubuzo (2014) posits
that currency and notes are converted into
data which are transmitted through telephone
lines and satellites transporters in a cashless
banking system. In view of this, Ejiofor and
Rosak (2012) posit cashless system as one
with the ability to store money in an
electronic purse on a card which is then used
to purchase product at vending machine or at
any point of sales terminal located within the
business premises.
Cashless banking system in Nigeria can
therefore be seen as a system of banking that
involves both cash- based banking
transactions and electronic based banking
transactions but predominated with electronic
based banking transactions. However,
cashless banking in Nigeria could better be
referred to as cash light banking system.
2.1.3 Major instruments of cashless
banking in Nigeria
In addition to human teller, automated teller
machine (ATM), Smart card or electronic
pulse (use of point of sale terminal), internet
banking and mobile phone banking are the
major instruments of cashless banking in
Nigeria.
• Automated Teller Machine: This is an
electronic device which allows banks
customers to make cash withdrawals,
deposits, transfer funds between
accounts and check their account
balances at any time without the need
for a human teller but through an
insert of ATM card and entering of
the customer’s personal identification
number (PIN) which gives access to
the account of the owner of the card.
Some ATMs impose a surcharge, or
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
30
usage fee, on consumer who are not
member of their institution or on
transactions at remote locations.
ATMs must disclose the existence of
a surcharge on the terminal screen or
on a sign next to the screen.
Customers should check the rules of
their institutions to find out when or
whether a surcharge is imposed.
When an ATM card is lost by a customer, the
issuer should be notified by a certified letter
from the customer, return receipt requested,
so that the customer can prove that the
institution received his/her letter. A copy of
the letter sent by the customer is kept for
record purposes. Failure to notify the
institution of the error within 60 days, the
customer may have little recourse. Under
Federal Law, the institution has no obligation
to conduct an investigation if the customer
has missed the 60-days deadline. After
notification about an error in the customer’s
statement, the institution has 10 business
days to investigate. The financial institution
must tell you the results of its investigation
within three business days after completing it
and must correct the error within one
business day after determining that the error
had occurred. If the institution needs more
time, it may take up to 45 days to complete
the investigation but only if the money in
dispute is returned to the customer’s account,
he/she is notified promptly of the credit
(Okoye, 2018). If no error is found at the end
of the investigation, the money is taken back
by the institution with a written explanation
sent to the customer. The CBN recently in
Nigeria, issued a warning that banks will be
liable for ATM frauds committed with cards
issued without card owners requesting for it.
• Point of Sale Terminal (use of
smart card): This is an electronic
device mounted by a merchant for use
by the customer to make payment for
goods and services purchased, obtain
balance inquiry and electronic fund
transfer without the physical use of
cash. At POS terminals, a customer
slots in his/her card (smart card) into
the device to settle and store the
transaction, issue receipt and disclose
the balance on the card, his/her
account is debited at that point
resulting in a transfer of funds to the
merchant’s (service provider's)
account. The merchants are
designated centres where cardholders
can transact business using electronic
pulse or card. They include such
places as restaurants, hotels, airlines,
supermarkets and lately some
pharmaceuticals. As a matter of
policy, merchants normally targeted
for the scheme are outlets with a
business turnover of not less than one
million naira annually. Merchants,
unlike card holders, need not have an
account with the bank. But as a matter
of necessity, they are required to open
an account with the bank.
According to Ekwueme et al. (2012) as cited
in Okoye (2018), smart card is a card issued
to a customer (a person who has a current
account with the bank) by a member bank of
SMART CARD Nigeria Limited to aid them
in their transactions. Ideally, each card holder
(customer, to whom a card or electronic pulse
is issued) should be an existing customer
with a member bank of the consortium
responsible for such e-money product. The
card issued to the customer is usually PIN
protected (Personal Identification Number),
and each card holder has access/pass code or
password different from any other person's.
Effect of Cashless Banking on Economic Growth in Nigeria.
31
Such a pass code must be kept secret and
must be changed any time it becomes known
to someone else. The bank is exempted from
any form of liability whatsoever for
complying with any or all instrument(s)
given by means of the customer’s pass code
or access code if by any means any of such
code becomes known to a third party. At
intervals, the card should be taken to any
branch or designated branch as the case may
be to UPLOAD (similar to crediting the
account). When this is done, it reduces the
cash value of the current account with the
bank and increases the cash value of the card.
Uploading is done using the Bank Teller
Terminal (BTT).
Member banks of the consortium help to
reconcile the card balances with the current
account of the cardholder domiciled in the
bank. Banks normally charge interest for the
role though this varies from bank to bank.
Like merchants, the bank also has point of
sales terminal to satisfy customers who need
cash for other non-business related
transactions (Iyabi, 1997 as cited in Okoye,
2018).
• Mobile Phone: Mobile phones can
be used to effect payments and
deliver financial services in digital
finance (e- banking and cashless
banking system). Some of the
banking services which are provided
through mobile phone include
account balance inquiry, funds
transfer, payment of bills, short
message service (SMS) which notifies
the customer of any transaction on
his/her account. In the view of James
and Rodger (2016), dig ital finance
can essentially turn a smart phone
into a wallet, a checkbook, a bank
branch and an accounting ledger, all
in one.
Internet (WEB): internet is also used to
carry out banking transactions and also
disseminate information. The word “internet”
is the abbreviation for international network
for communication. It means a global
network of computers. It is a collection of
computers networks, computers and millions
of users, who share a compatible means for
interacting with one another to exchange
information (Awe, 1998 as cited in Okoye,
2018). Banks send letters / messages related
to their customer’s account (for example,
statement of account, debit or credit into
customer’s account etc), electronically to
their customers anywhere in the world via
electronic mail (E-mail) and e-mail to fax (a
supplementary service to the email services
designed to enable a subscriber send
messages to those who have no e-mail
facility but fax facilities). Also, banks
disseminate information or advertise their
services via their websites. Those in need for
such information will then use special
software called “browser” to link up with the
websites and read or download any
information they want.
• Human Teller: This involved the use
of human beings in the execution of
banking operations. The tellers accept
cash deposits, make cash payments
and also render other banking services
to the customers over the counter.
Even the use of electronic devices
discussed above cannot be possible
without human beings because
computers and other digital devices
are operated by human beings. Hence,
the cashless banking system in
Nigeria did not imply an outright
absence of human beings in carrying
out banking transactions but one that
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
32
encourage more electronic based
transactions.
2.1.4 The Operational Efficiency of
Cashless Banking in Nigeria
The operational efficiency of cashless
banking in Nigeria can be assessed by
critically evaluating the banking operations
before and after the introduction of cashless
banking in Nigeria
2.1.4.1 Pre- Cashless banking period in
Nigeria
This period is characterized by large
domination of cash-based and paper-based
banking transactions. In Nigeria, the era
commenced in the year 1892 with the
establishment of first bank (then African
Banking Corporation). Iganiga (1998) and
Osabuohien (2008) as cited in Ekwueme et al
(2013) maintained that there was no banking
legislation until 1952 when three foreign
banks (Bank of British West Africa, Barclays
Bank, and British and French Bank) and two
indigenous banks (National Bank of Nigeria
and African Continental Bank) were
established, with a total number of 40
branches. Ugwoke (2013) added that
Nigerian banking industry have witnessed a
lot of regulatory and institute advances since
1952. As at 1988, the Nigerian banking
system consisted of the CBN, 42 commercial
banks and 24 Merchant Banks (Iganiga 1998
and Adam, 2005 as cited by Osabuohien,
2008). Between the period 1892-1995,
banking transactions in Nigeria were mostly
paper-based transaction. This is the time of
ledger cards and other manual filling system.
Manual processing of documents was in use.
In the 1970s, computerization in the Nigerian
banking industry was introduced first by
Society General Bank (Nigeria) Limited.
Salawu and Salawu (2007) stated that few
banks that were computerized in the mid
1990 adopted the Local Area Network (LAN)
whereas the sophisticated ones among the
banks implemented the WAN by linking
branches within cities and one or two
implemented intercity connectivity using
leased lines. As a result of these, slow pace
of banking operations were experienced in
the Nigerian banks during this time (1892-
1995). Ovia (2005) have it that banks’
customers were inevitably made to spend
several hours in the congested banking halls
in carrying out their transactions. In support
of this view, Ekwueme et al (2013) posit that
pre-electronic banking periods were days
when banking halls are characterized by long
ques mainly as a result of delays in the
traditional banking operations thereby
leading to low operational efficiency in the
banking sector.
The need to innovate and modernize banking
operation to meet customer’s demand for
improved service delivery in the face of
advanced information and technology era
made the adoption of internet and other
electronic means of banking transactions
imperative. The Nigerian banks in 1996
witnessed the introduction of e-banking (e-
payment) products by the central bank of
Nigeria (Dogarawa, 2005 and Sanusi, 2002
as cited in Ekwueme et al, 2013). During this
period, banking operations were usually
performed through electronic means.
Irechukwu (2000) lists some banking services
that have been revolutionized through the use
of ICT as including account opening,
customer account mandate, and transaction
processing and recording. This phenomenon
has the capacity of bringing about speedy
operations and enhanced productivity in
banks (Osabuohien, 2008; Adeoti, 2005, and
Ovia, 2005 as cited in Ekwueme et al, 2013).
The fear being expressed is the bulk
withdrawals that were witnessed during the
e-banking period which usually attract high
cash related costs like cash in transit costs,
cash processing cost and vault management
cost. CBN (2012) stated that the total direct
Effect of Cashless Banking on Economic Growth in Nigeria.
33
cost of cash to financial system in Nigeria in
2009 amounted to #114.5b.
Conclusively, the era pre-cashless banking
system could be said to be the combination of
cash-based banking system and electronic
banking system, but dominated by cash-
based banking system. A cash-based
economy is one with large percentage of cash
residing outside the banking sector. It is
characterized by the psychology to physical
hold and touch cash. The statistical evidence
provided by CBN (2012) revealed that, cash
related transactions accounted for 99% of
customers’ activities in Nigerian banks as at
December, 2011.These heavily cash-based
transactions do not occur without heavily
cash related costs. Hence, there is the need
for a cashless banking system.
2.1.4.2 Post Cashless banking period in
Nigeria
Using electronic banking as a platform, the
CBN cashless policy was introduced in
Nigeria in the year 2012. The policy is geared
towards engendering an efficient payment
system anchored on electronic-based
transaction. According to Odior and Bunuso
(2012), cashless banking is that banking
system that is aimed at reducing, but not
eliminating, the volume of physical cash
circulating in the economy whilst
encouraging more electronic based
transaction. Post cashless banking period are
the periods in which the use of non-cash
payment methods (e.g electronic payment)
dominates the use of cash in payments. This
does not imply entire absence of cash-based
transactions but a system that kept the
cashless transactions to the barest minimal.
This has resulted to reduction in the risks
associated with the use of physical cash that
do rise from burglaries and thefts as well as
financial losses in fire outbreaks. Also, high
operational costs (costs emanates from cash
management and movement, currency sorting
and printing) incurred by banks and other
financial institutions had considerably
reduced by cashless banking system. In line
with the view stated above, Okoye and
Ezejiofor (2013) posit that cashless economy
policy will help to fight against
corruption/money laundry, reduced the risk
of carrying cash and also enhance the growth
of financial stability in the country. Tee and
Ong (2016) maintained that there is
significant effect of adopting cashless
payment on the economy of five EU
countries, namely Austria, Belgium, France,
Germany and Portugal. Martin, Nnamani,
Marire and Mgbodile (2014) viewed that
cashless banking in Nigeria will help in
modernization of Nigerian payment system,
reduction in cost of banking services as well
as reduction in high security and safety risks.
There is no doubt that the adoption of
cashless banking system has in Nigeria
enabled banks to achieve a higher level of
operational efficiency, provide cost effective
services and offer a wide spread flow of
information at no time and at a reasonable
cost but the major fear being expressed is its
effect on the economic growth in Nigeria.
2.1.5 Economic Growth
Economic growth is simply an increase in
aggregate productivity. It could be seen as
increase in the capacity of an economy to
produce goods and services, compared from
one period to another. The definition of
economic growth above presupposes that
GDP is the best measure of economic
growth. It can be measured in nominal or real
terms. The later of which is adjusted for
inflation while the former of which did not
involve adjustment for inflation. Economic
growth could be seen as the measure of the
rate of change that a nations’ gross domestic
product (GDP) goes through.
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
34
The two main factors affecting economic
growth are;
(a) Aggregate demand (AD) and
(b) Aggregate Supply (productive
capacity)
(a) Aggregate demand: in short term,
economic growth occurs when there is
an increase in aggregate demand (AD).
If there is spare capacity in the
economy, then an increase in AD will
cause a higher level of real GDP.
AD=C+I+G+X-M
Where C= consumer spending, I= investment
(gross fixed capital investment), G=
government spending, X= export, M=
imports.
AD could be increased when there is lower
interest rate (which reduces the cost of
borrowing and encourages spending and
investment), increased wages (which increase
disposable income and encourages consumer
spending), increased government spending
(G), fall in value of sterling which makes
exports (X), increased consumer confidence
(which encourages spending (C), lower
income tax (which increases disposable
income of consumers and increases consumer
spending (C).
(b)Aggregate Supply: An increase in long run
aggregate supply (productive capacity) as
well as AD brings about long term economic
growth. As could be increased when there is
increases capital e.g. investment in new
factories or investment in infrastructure such
as roads, increase in working population
(through immigration, higher birth rate etc),
increase in labour productivity (through
better education and training or improved
technology), discovering new raw materials
and technological improvement to improve
the productivity of capital and labour.
Other factors affecting economic growth are
inflationary rate (low inflation encourages
business investment while high inflation
increases volatility) and economic and
political stability (stability encourages firms
to invest in increasing capacity while rise in
uncertainty brings about fall in firm’s
confidence and thus can cause firms to delay
investment).
2.1.5. 1 GDP as the Measure of Economic
Growth
GDP is the broadest quantitative measure of a
nation’s total economic activity. It represents
the monetary value of all goods and services
produced within a nation’s geographic
boarders over a specified period of time. A
country’s GDP could be stated in real value
or nominal value. Real GDP is the value of
final goods and services produced in a given
year when valued at constant price. Nominal
GDP on the other hand is the value of the
final goods and services produced in a given
year valued at the price that prevailed in that
same year. For the purpose of this study,
Nigerian bank’s contribution to real GDP is
used. This is seen as the most suitable
measure of economic growth using GDP,
since it controls for inflation and more
accurately reflects actual economic growth.
Otherwise, a decline in the value of money
could raise GDP without any extra economic
production.
Below are the four components of GDP;
(a) Private consumption and expenditure
(C): This component measures the
money value of goods and services
which are purchased by households and
non-profit institutions for current use
during a period of account. These are
classified into consumer durables,
semi-durables, non-durables and
services.
Effect of Cashless Banking on Economic Growth in Nigeria.
35
(b) Investment expenditure (I): Investment
means additions to the physical stock of
capital during a period of time. Gross
private domestic investment shows the
aggregate value in this regard.
Investment includes building of
machinery, housing construction,
construction of factories and offices
and additions to a firm’s inventories of
goods. Investment is further classified
into 4 categories;
(i) Business fixed investment: Amount
which business units spend on purchase
of newly produced capital goods like
plant and equipment.
(ii) Inventory investment (or change in
stock). Net change in inventories
(stock) of final goods awaiting sale of
finished goods, semi-finished goods
and raw material. These are included
because they represent currently
produced goods which are not included
in the current sale of final output
(iii) Residential construction investment:
The amount spent on construction of
flats and residential houses.
(iv) Public Investment: Capital formation
by government in the form of building
of roads, bridges, canals, schools,
hospital etc.
(c) Government purchase of goods and
services: This summarises government
spending on goods and services. It
includes; (i) purchase of intermediate
goods and (ii) wages and salaries paid by
government. Transfer payment which are
made by government to households and
firms are not counted as part of GDP
thus since the consumption or investment
by recipients of the transfer payments is
counted in C and I
(d) Net exports (X-M): It shows the
difference between domestic spending
on foreign goods (imports) and foreign
spending on domestic goods (exports).
GDP is calculated with the formula:
GDP=C+I+G+(X-M). This can be
restated as:
GDP = Gross National Expenditure +
Trade balance
Where trade balance include
merchandise (export – imports of goods)
and services (export – imports of
services).
2.1.6 Differences Between Economic
Growth and Economic Development
In many literatures, economic growth and
economic development are often used
interchangeably. This is not right in the view
of many economists, accountants or finance
experts. Economic growth means different
thing entirely from economic development.
Economic growth occurs whenever there is a
quantitative increase in a country’s input and
output over a period of time (Agbadudu and
Obayagbona, 2013). A country’s economic
growth could be defined as a long term rise in
the capacity to supply increasingly diverse
economic goods to its population, this
growing capacity based on advancing
technology and institutional and ideological
adjustments that it demands (Kuznets 1973,
as cited in Agbadudu and Obayagbona,
2013). Therefore, economic growth simply
describes expansion in capital, in the
productive labour force, in output and
income.
On the other hand, economic development is
a multi-dimensional process involving
changes in structures, attitudes and
institutions as well as the acceleration of
economic growth, the reduction of inequality
and eradication of absolute poverty (Tadaro,
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
36
1977) as cited by Agbadudu and Obayagbona
(2013). From the point of view of Merier
(1964), as cited by Agbedudu and
Obayagbona (2013), economic development
is seen as the process whereby the real per
capita income of a country increases over a
long period of time subject to the stipulations
that the number below an absolute poverty
line does not increase, and that the
distribution of income does not become more
equal.
Hence, economic development is wider in
scope than economic growth, it encompasses
both economic growth and other indices like
changes in structures and attitudes,
eradication of absolute poverty etc.
Economic development also involves
sustaining growth in per capita income
whereas economic growth involves
sustaining growth in national income.
2.2 Theoretical Framework
The theoretical framework that guided this
study was based on two theoretical
conceptions which include the neo-classical
growth theory and Acceptance Technology
Model (TAM).
2.2.1 Neo-classical growth theory: The neo-
classical growth theory was developed in the
late 1950s and 1960s of the twentieth century
as a result of intensive research in the field of
growth economics. Robert Solow, an
American economist and J. E. Meade, a
British economist are the two prominent
contributors to the neo-classical theory of
growth.
This theory postulates that long run growth
can only happen from both the exogenous
labour force growth and technological
progress. In other words, Jhingan (2003)
posits that neo-classical growth theory
explains that output is a function of growth in
factor inputs, especially capital and labour
and exogenous technological progress. Any
change in this exogenous variable,
technology, will cause a shift in the
production function.
This theory has been criticized by some
scholar, among others is Nobel Laureate
Prof. Amartya Sen. He stressed that the neo-
classical growth theory of Solow is missing
knowledge or education as an important
factor contributing to economic growth. He
argued that increase in knowledge or
education increases the productivity of
workers by improving their productive skills
and abilities. Therefore, human capital as
knowledge or education was identified by
Nobel Laureate Prof. Amartya Sen and
should be presented as a separate factor
which contributes to growth of output.
In view of the criticism above, it can be
deduced that knowledge is an evitable tool
for growth in employment rate and economic
growth in general. But this knowledge should
not be taken as a separate factor since is the
already established factor-workforce (labour)
that contributes to economic growth by the
neo-classical theorists that should be
equipped with knowledge and education to
make the employed and underemployed ones
more productive and decrease the number of
unemployed ones when gained the required
knowledge of products of digital finance.
Instead the labour in the neo-classical model
could be termed skilled labour.
This study revolved around this theory since
cashless banking is seen as the combination
of cash-based banking system and electronic
banking system. Cash-based banking
employed the use of human beings (labour
force) in rendering banking services while
electronic banking employed the use of
Effect of Cashless Banking on Economic Growth in Nigeria.
37
electronic devices which came as a result of
technological advancement for its operation.
Therefore, digital banking system contributes
to long run growth in employment rate and
the growth of the country.
2.2.2 Acceptance Technology Model
(TAM): TAM was proposed by Fred Davis
in 1985 in his doctoral thesis at the MIT
Sloan School of Management (Ajayi, 2014).
The model suggests that when users are
presented with a new technology, a number
of factors influence their decision about how
and when they will use it. The factors are
perceived usefulness (PU) and perceived
ease-of-use (PEOU). Specifically, TAM
argued that one’s actual use of a technology
system is influenced directly or indirectly by
the user’s behavioural intentions, attitude,
perceived usefulness of the system, and
perceived ease of system. Applying this
theory in this study, TAM is an information
systems’ theory that models how users come
to accept and use new technology (ATM,
POS, Mobile phone banking and internet) in
carrying out banking transactions that will
encourage Nigerian economic growth.
2.3 Empirical Review
A cross country analysis was carried out by
Humphrey, Pully and Vesala (1996) on the
holding of cash and use of five noncash
payment instruments (check, paper giro,
electronic giro, plus credit and card payment)
in 14 developed countries, including the US
over 1987-1993, focusing on the
determinants of a country’s payment
structure and substitution among noncash
paper-based and electronic payments. The
paper-based transactions are composed of
checks and paper-based giro payments
whereas the electronic payments transactions
are made up of electronic giro, debit card
(POS) and credit card payments. Five –
equation model in log linear form was
employed for the study using Ordinary Least
Squares. The findings of the study disclosed
that there were 119 billion noncash
transactions in 1993; that the average person
initiated 165 noncash transactions per year.
Of these, 35 percent were electronic. It was
shown that a 10 percent reduction in cash
holdings is associated with a 6.8 percent rise
in noncash transactions. Hence, cash and
noncash use are negatively related, implying
that substitution between them is due more to
differences in use across countries than it is
to changes in use over seven-year time
period. Also, the study categorized the
factors identified as best explaining the
observed payment pattern into two – (1)
those that reflect payment option availability
or the consequences of past payment patterns
on the part of users; and (2) those that
measure relevant institutional, cultural or
historical differences across countries.
Specifically, Own prices (prices of related
instruments) are shown to have exerted little
influence on the use of payment methods.
While the influence of cultural and
institutional factors was found to be very
strong. Also higher per capita incomes were
found to generate more non-cash
transactions. Moreover, greater availability of
new payment instruments encourages their
use, the erosion of consumers’ sense of
security (proxy by the incidence of violent
crime) increases the use of all noncash
payments, higher banking concentration is
associated with a greater reliance on
electronic payments and the persistence of
behaviour patterns among users slows the
change in payment use.
Hasan et al (2012) examined the fundamental
relationship between the adoption of
electronic retail payments (payment cards-
mostly used on ATM machines and POS
terminals, credit transfers, direct debits,
cheques and cash proxy by cash withdrawal
through ATM) and overall economic growth
across 27 European countries from the period
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
38
1995 – 2009. GDP, trade and household
consumption were used as proxies for growth
in real economy the result confirm that
migration to efficient electronic retail
payments stimulates the overall economic
growth, consumption and trade. Among
different payment instruments, this
relationship is strongest for card payments,
followed by credit transfers. Cheque
payments are found to have relatively low
macroeconomic impact. Additionally, the
findings revealed that the impact of retail
payments on the real economy is more
pronounced in euro area countries.
In developing economy like Nigeria, while
analyzing the e-payment system in Nigerian
financial system, Ezeudu and Anyanwu
(2014) examined the various aspects of
cashless banking channels, the problems
facing cashless banking as well as its
advantages and disadvantages to Nigerians.
A survey instrument was used for data
collection, and a non- parametric tool of chi-
square was employed in data analysis. The
study discovered that the introduction of
cashless banking policy would automatically
reduce the number of personnel needed to
carry out the different financial transactions
in the bank. Also, Ezeudu and Anyanwu
(2014) discovered that cashless banking has a
positive effect on Nigerian economy.
In the appraisal of cashless economy policy
in development of Nigerian Economy, Okoye
and Ezejiofor (2013) examined the
significant benefits and essential elements of
cashless economy as well as the extent to
which it can enhance the growth of financial
stability in Nigeria. The study adopted the
use of questionnaire method of data
collection to elicit information from three
categories of respondents- civil servants,
businessmen and students. Analysis of
variance (ANOVA) and chi-square (X2)
statistical tools were used to test the
hypothesis one (Ho1: cashless economy
initiate will not be of significant benefits to
Nigerians) and hypothesis two (Ho2: the
adoption of the cashless economy policy
cannot enhance the growth of financial
stability in the country) respectively. The
study shows that the cashless economy
initiative will be of significant benefit to
Nigerians- the policy will help to fight
against corruption/ money laundry and
reduce the risk of carrying cash. It was also
discovered that the adoption of the cashless
economy policy can enhance the growth of
financial stability in the country.
Furthermore, Omotunde, Sunday and John-
Dewole (2013) studied the impact of cashless
economy in Nigeria. They employed the use
of survey instrument for data collection and
discovered that the introduction of cashless
economy in Nigeria can be seen as a step in
the right direction. The study further
expressed that, the impact of cashless
economy in Nigeria is expected to be felt in
modernization of Nigerian payment system,
reduction in the cost of banking services as
well as reduction in high security and safety
risks, including its stability in curbing
banking related and fostering transparency.
Also, in a research carried out by
Osazevbaru, Sakpaide and Ibubune (2014) on
cashless policy and banks’ profitability in
Nigeria, discovered that cashless economic
policy has positive impacts on banks’ profit
through reduction in cost of operations and
banking the unbanked populace.
Aiyedogbon, Obumneke and Gugong (2013)
carried out a research on the effectiveness of
cashless banking on economic growth in
Nigeria using GDP as the only variable for
measuring economic growth. The log linear
error correction model was adopted in the
study to examine how automated teller
machine (ATM), Point of sale (POS) and
Effect of Cashless Banking on Economic Growth in Nigeria.
39
mobile money (MM) had impacted on
Nigeria’s Gross Domestic Product (GDP).
The study discovered that ATM and POS
have significant impact on Nigerian
economic growth (1% change ATM and POS
results to 0.46% and 1.60% increase in
Nigerians GDP). It was also discovered in
their study that mobile money has not
contributed immensely to Nigerian economic
growth (1% in mobile money reduces the
GDP by 0.19%). This implies that ATM and
POS have experienced high patronage than
MM since the introduction of cashless
banking system in Nigeria and these in turn
have positively affected Nigerian GDP than
MM. This can be attributable to the policy
reduction in cash related vices like robbery,
cost of processing cash, revenue leakages
from cash handling and inefficient treasury
management through cash processing. The
low patronage of MM may be attributable to
inadequate awareness and education of the
customer on how to maximally use their
phone to transact simple banking operations.
3. METHODOLOGY
The ex-post facto research design was used.
Thus, secondary sources of data collection
were employed in this study. Data on the
independent variable, cashless banking
system measured with the total annual value
of ATM, POS, internet banking and mobile –
phone banking transactions (major e-
payment instruments) during the period of
cashless banking (2012-2018) in Nigeria
were sourced from CBN Annual Reports
(2013, 2015 and 2018). Whereas the
dependent variable, economic growth
measured with the banks’ contribution to real
gross domestic products in Nigeria was
sourced from CBN (2012-2019). The study
developed a multivariate regression model
using the two (2) categories of research
variables over the period 2012-2018. The
multivariate regression model in this study is
stated in its econometric terms as
BGDPt = β o + β 1TATMt + β 2TPOSt + β
3TMPSt + β 4TIBt + Et ----------------------------
-- (1)
Where:
TATMt indicates the aggregate value of
ATM (Automated Teller Machines)
transactions in Nigeria for each of the period
under study, TPOSt is an indicator of the
aggregate value for the POS (point of sale)
transactions in Nigeria for each of the periods
under study, TMPSt indicates the aggregate
value of electronic payments made through a
mobile device (a mobile phone) in Nigeria
for each of the period under study, TIBt is an
indicator of the aggregate value of banking
transactions via internet for each of the year
under study. β o = constant (intercept), β 1- β
4 = the coefficients of regression, that
indicate how a unit change in the independent
variables (TATM, TPOS, TMPS and TIB)
affects the dependent variable (BGDP) and E
= Error term, which is incorporated in the
equation to cater for other factors that may
influence BGDP. Finally, t = Period to be
covered by the study (t = 1,---,7 )
Data gathered were presented in tables and
analysed using multiple regression
techniques (ordinary least square regression)
of model estimation (with the aid of E-Views
10.0 econometric software). In order to
determine the overall significance of the
model (regression coefficient), F- statistics
was observed in the model and was used in
testing the hypothesis formed for this study.
4. RESULTS
4.1 Data Analysis and Interpretation of
Results
The multiple regression analysis carried out
using E-Views 10. 0 were presented in the
table below:
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
40
Table 4.1.1:Ordinary Least Squares Regression Result on the Effect of Cashless Banking
System on Banks’ Contribution to Real Gross Domestic Products (BGDP) in Nigeria.
Dependent Variable: BGDP
Method: Least Squares
Date: 07/15/20 Time: 15:26
Sample: 2012 2018
Included observations: 7 Variable Coefficient Std. Error t-Statistic Prob.
C 3.724672 0.993112 23.70506 0.0000
TATM 0.223749 0.353461 2.933025 0.0214
TPOS 0.153603 0.277894 3.692738 0.0148
TMPS 0.212357 0.134732 5.376145 0.0041
TIB 0.119908 0.191047 2.727638 0.0395
R-squared 0.914342 Mean dependent var 3.294286
Adjusted R-squared 0.743026 S.D. dependent var 0.035989
S.E. of regression 0.018244 Akaike info criterion -4.994154
Sum squared resid 0.000666 Schwarz criterion -5.032789
Log likelihood 22.47954 Hannan-Quinn criter. -5.471683
F-statistic 84.37156 Durbin-Watson stat 1.987865
Prob(F-statistic) 0.000000
Significant at p ≤ 0.05
Source: Researcher’scomputation, 2020 (using E-View)
The result of the regression analysis in table
4.1.1 above shows that the model for the
effect of cashless banking system (TATM,
TPOS, TMPS and TIB) on banks
contribution to real gross domestic product
in Nigeria is:
BGDP= 3.724672 + 0.223749TATM +
0.153603TPOS +0.212357TMPS +
0.119908TIB + Et
This indicates that, the intercept of
regression line (the constant value) is
3.724672 which shows that the value of
BGDP in Nigeria is 3.724672 when all the
cashless banking variables are zero. In other
words, the meaning is that, the value of
BGDP in Nigeria will be about 3.724672 in
any year which cashless banking is not
practiced in Nigeria. Also, it was observed
that TATM, TPOS, TMP and TIB have
significant positive effect on Nigeria’s
BGDP with their respective coefficient (β)
and significance values (x) of 0.223749
(0.0214), 0.153603(0.0148), 0.212357
(0.0041) and 0.119908 (0.0395). The
function thus shows that one percentage
change in TATM, TPOS, TMP and TIB
results to 0.223749, 0.153603, 0.212357 and
0.119908 percentage increase in Nigeria’s
BGDP. Furthermore, the coefficient of
determination (R-squared) of 0.914342
shows that the independent variables as a
group explained 91.4% of the variations in
the BGDP; while the remaining 8.6% can be
explained by other variables other than the
cashless banking system variables of TATM,
Effect of Cashless Banking on Economic Growth in Nigeria.
41
TPOS, TMPS and TIB used in this model.
The Durbin-Watson statistic of 1.987865
indicates that there is no auto-correlation
problem.
4.2 Test of Hypothesis
Ho: cashless banking system has no
significant effect on Banks contribution to
real gross domestic products in Nigeria.
In testing the hypothesis above, the data
derived on the total value of cashless
banking variables used for this study
(TATM, TPOS TMPS and TIB) and the
BGDP in Nigeria during the cashless
banking period (see Appendix) are used to
run a regression test that incorporated a F-
statistics test using E- Views 10.0 as shown
in table 4.1.1 above. The F-Statistics was
observed in the multivariate regression
model in order to determine the overall
significance of the model (regression
coefficient) and further affirm the
statistically significant effect of cashless
banking system on the dependent variables.
The result showed that there is a significant
effect of independent variables taken
together on BGDP with the f–value and
corresponding significance value of
84.37156 and 0.000000 (which is less than
5% level of significance) respectively.
Therefore, we reject the null hypothesis that
states that cashless banking system has no
significant effect on BGDP in Nigeria.
Hence, we can confidently and statistically
conclude that there is a positive and
significant effect of cashless banking system
on BGDP in Nigeria.
4.3 DISCUSSION OF RESULTS
The findings from this study are discussed
under the objective stated in this study as
shown below:
The objective of this study is to determine
the effects of cashless banking on banks’
contribution to real Nigeria’s gross domestic
products (BGDP). The result revealed in this
study as shown in table 4.1.1 disclosed that
all the explanatory variables (TATM, TPOS,
TMP and TIB) have significant positive
effect on Nigeria’s BGDP with their
respective coefficient (β) and significance
values (x) of 0.223749 (0.0214),
0.153603(0.0148), 0.212357 (0.0041) and
0.119908 (0.0395). The function thus shows
that one percentage change in TATM, TPOS,
TMP and TIB results to 0.223749, 0.153603,
0.212357 and 0.119908 percentage increase
in Nigeria’s BGDP. The positive sign and
significance of the TATM, TPOS, TMP and
TIB are attributable to the policy (cashless
policy) reduction in the risks associated with
the use of physical cash that do arise from
burglaries and theft, financial losses in fire
outbreaks and cost of processing cash.
Considering the independent variables as a
group, the study also revealed that there is a
positive and significant effect of cashless
banking on BGDP (R2= 91.4%, F- Stat.=
84.37156 and Prob(F-statistics) =
0.000000<0.05). Therefore, we can conclude
that there is a positive and significant effect
of cashless banking system on BGDP. The
implication is that an increase in cashless
banking variables increases BGDP. This
could be attributable to the reduction of the
banks operational cost (costs emanated from
cash management, movement, currency
sorting and printing) which cashless banking
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
42
policy has contributed. This in turn has
increased the profit performance of these
banks cum banks contribution to GDP in
Nigeria.
The results are consistent with the studies of
Aiyedogbon and Obumneke (2013), that
found out that ATM and POS have
positively impacted on Nigerian GDP
(though in disagreement with the result of
their findings in respect of Mobile money -
TMPS as represented in this study, that has
negatively impacted on GDP); and Hasan et
al (2012) who discovered that migration to
efficient electronic retails payments
stimulates the overall economic growth
(GDP), consumption and trade.
5. CONCLUTION AND
RECOMMENDATIONS
In the bid to catch up with global
developments of 21st century (technology
advancement) and to properly place the
banking sector in favourable positions for
competitions, the Nigerian banks have
widely adopted the use of electronic means
in delivery of their services and executing
their banking operations. The implication is
not that Nigerian banking system has gone to
the era where there is an outright absence of
cash transactions in the banking sectors but
the one in which banking transactions
involved both cash-based and electronic
based transactions while cash based
transactions are kept to the barest minimum
with the introduction of cashless banking
Therefore cashless banking could be seen as
the combination of cash-based banking
system and electronic banking system but
predominated with electronic based
transactions. Hence, cashless banking in
Nigeria could better be called cash-light
banking system. Though the result of this
study showed that cashless banking in
Nigeria has significantly increased Nigeria’s
economic growth, the coefficient values of
the explanatory variables are quite low,
showing that more growth could still be
achieved with further improvement in the
practice of cashless banking in Nigeria
especially now that the world grapples with
Covid-19 pandemic and its economic
meltdown. Consequence upon this, a
collaboration and cooperation of various
stakeholders like the government, CBN and
Bank’s customers were recommended to
strengthen the Nigeria’s cashless banking
system for long-term sustainability. In more
specific terms, the study recommended the
following:
1. The government should ensure the
provision of uninterrupted power supply.
Even though that the electricity in Nigeria
has been privatized, government should
ensure effective supervision of the electricity
distribution companies in the country in
order to enhance the epileptic power supply
in Nigeria. This would aid smooth operations
of digital financial activities.
2. The CBN should intensify its
enlightenment campaign to sensitize the
public on the need to use cashless banking
instruments with the understanding that more
could still be achieved in improving the
contribution of Banks to real gross domestic
products in Nigeria.
3. Bank’s customers have greater role in
accepting and using the cashless banking
instruments especially now that the Covid-19
pandemic has triggered an unprecedented
Effect of Cashless Banking on Economic Growth in Nigeria.
43
demand for digital economy solution
towards getting our economy back to
businesses, incomes and growth.
REFERENCES
Agbadudu, J.E. and Obayagbona,J. (2013).
Foreign Direct Investment and
Economic Development in Nigeria
(Assessing the impact). ESUT Journal
of Accountancy 4(2), p.1.
Agboola, A.A. (2006). Electronic Payment
System and Tele-banking Services in
Nigeria. Journal of internet banking
and commerce. 11(3), Retrieved on
20/8/2016 from
http://www.arraydev.com/commerce/ji
bc.
Aiyedogbon, J.O., Obumneke, E. and
Gugong, B. (2013). The effectiveness
of cashless banking on Economic
growth in Nigeria. ESUT Journal of
Accountancy, 4(2) p.150.
Ajayi, L.B. (2014). Effect of cashless
monetary policy on Nigerian banking
industries: Issues, prospects and
challenges. International Journal of
Business and Finance Management
Research. Retrieved on 1/12/2016
fromwww.bluepenjournals.org/ijbfmr .
Akhalumeh, P. B. and Ohiokha, F. (2012).
Nigeria’s Cashless Economy: The
Imperatives. International Journal of
Management and Business Studies,
2(2) p. 31-36.
CBN (2009). Annual report and statement of
accounts Retrieved on 12/2/2012 from
www.cenbank.org.
Central Bank of Nigeria, (2012). New Cash
Policy, presentation for the interactive
Engagement Session with stakeholders
on cash-less Lagos, Stakeholder
Session-Supermarket Operators.
CBN (2012-2019). Real Gross Domestic
Product (Million Naira). Retrieved on
3/7/2020 from
https://www.cbn.gov.ng/rate/Real
GDP.asp? year 2012-2017
Dogarawa, A.B. (2005). The impact of E-
banking on customer satisfaction.
Zaria, Department of Accounting,
Ahmadu Bello University.
Ejiofor, V.E and Rasika, J.O. (2012).
Realizing the Benefits and challenges
of cashless Economy in Ni00geria: its
perspective. International Journal of
advances in computer sciences and
Technology, (IT) 7-13 Retrieved on
02/09/16 from
http://warse.org/pdfs/ijacs+02112012.p
df.
Ekwueme, C.M, Egbunike, P.A and Okoye,
A.P (2013). An Empirical Assessment
of the Operational Efficiency of
electronic Banking: evidence of
Nigerian banks. Review of public
Administration and management, 1(2),
p. 108
Ezeudu, I.J. and Anyanwu, . U.N. (2014).
Analysis of the E-payment System in
Nigeria Financial Sector in Esut
Journal of Accountancy. 5(1) p.82
Ezuwore-Obodoekwe C.N, Eyisi A.S,
Emengini S.E and Chukwubuzo A.F
(2014) A Critical Analysis of Cashless
Banking Policy in Nigeria.
Fatokun, D. (2017). CBN Reviews Charges
on Deposits and Withdrawals
Retrieved on 27/02/17 from
https://www.proshareng.com/news/mo
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021
44
bilemoney/CBN-Reviews-charges-on-
Deposits-and-withdrawal/33831.
Hasan, I., De Renzis, T. and Schmiedel, H.
(2012). Retail Payments and Economic
Growth. Bank of Finland Research
Discussion Papers. 19.
Humphrey, D.L Pulley, L.B and Vesds, J.M
(1996). Cash, Paper and Electronic
Payments: A Cross Country Analysis.
Journal of Money, Credit and Banking.
28(4). Retrieved on 2/1/17 from
http://www.JStor.org/.
Irechukwu, G. (2000). Enhancing the
Performance of Banking Operations
through Appropriate Information
Technology’ in Information
Technology in Nigerian Banking
Industry, Ibadan, Spectrum Books.
James, M. and Rodger, V. (2016). What
Digital Finance means for Emerging
Economies. Retrieved on 6/8/2019
from
https://fortune.com/2016/10/24/digital-
finance-emerging economies/
Jhingan, M.L. (2003). Macro-Economic
Theory 11th Revised Edition-India,
VRINDA Publications (P) LTD.
Martin, C.E, Nnamani J.N, Marire, M.J.
Mgbodile, C.C. (2014). The Impact of
Central Bank of Nigeria Cashless
Policy on Nigerian Economy. Journal
of Business and Management. 16(12),
P. 84 – 95.
Odior, E.S. and Banuso, F.B. (2012).
Cashless Banking in Nigeria:
Challenges, Benefits and Policy
Implication, European Scientific
journal June edition 8(2).
Okoye, A. P. (2018). Effect of Cashless
Banking on the Unemployment Rate in
Nigeria. Asian Journal of Economics,
Business and Accounting, 6(4). P.1-18
Okoye, P.V.C. and Ezejiofor, R. (2013). An
Appraisal of Cashless Economy Policy
in Development of Nigerian Economy.
Research Journal of Finance and
Accounting. 4 (7).
Omotunde, M.,Sunday, J. and John-Dewole,
A.T. (2013). Impact of Cashless
Economy in Nigeria. Gruner Journal of
Internet, Information and
communication systems, 1(2) p.040-
043.
Onwumere, J.U.J. (2009). Business and
Economic Research Methods. Enugu,
Vougasen Limited.
Osazevbary,H.O., Sakpaide, E.J. and
Ibubune, R.O. (2014). Cashless Policy
and Banks’ Profitability in Nigeria.
European Journal of Accounting and
Auditing and Finance Research, 2(10)
p.1-12.
Saberu, O. J., Afonja, J. A., Akande, M. O.
and Olure-Bank, A. (2015). The Effect
of Cashless Policy, Saving and
Bank Credit on Economic Growth in
Nigeria Deregulated economy using
Deposit Money Banks As a Case
Study. Journal of Emerging Trends in
Economics and Management Sciences,
6(2). P. 144 – 150.
Salawu, R. O. and Salawu, M. K. (2007).
The emergency of internet banking in
Nigeria: An appraisal. Retrieved on
4/8/13 from
http://scialet.net/fulltext/?doi=itj.2007.
490.496.
Effect of Cashless Banking on Economic Growth in Nigeria.
45
Tee, H. and Ong, H (2016) cashless payment
and economic growth in Tee and Ong
Financial Innovation 2 (4).
Ugwoke, R. O. (2013). Problems and
Prospects of ATM, and Other E-
Banking Services in Nigeria: Analysis
of Perception of Staff and Banking
Public. Esut Journal of Accountancy.
4(2) p.41
Uzoagulu, A. E. (1998). Practical guide to
writing research project report in
tertiary institutions. Enugu, John
Jacob’s Publishers Ltd.
APPENDIX
Data on cashless banking variables (TATM, TPOS, TMPS and TIB) and BGDP in cashless
banking period (2012-2018) in Nigeria.
Value of cashless banking Variables BGDP
(#’ billion) (#’ billion)
TATM TPOS TMPS TIB Total
2012 1,984.7 48.0 31.5 31.5 2,095.7 1,687.9
2013 2,828.9 161.0 142 .8 47.3 3,180.0 1,833.7
2014 3,679.9 312.1 339.2 74.2 4,405.4 1,982.7
2015 3,970.3 448.5 442.4 91.6 4,952.8 2,123.9
2016 4,988.1 759.0 756.9 132.4 6,636.4 2,027.5
2017 6,437.6 1,409.8 1,102.0 184.6 9,134 2,053.0
2018 6,480.1 2,383.1 1,236.1 404.6 10,503.9 2,094.7
Sources: CBN Annual report, 2013, 2015, 2018 and CBN, 2012-2019.
International Journal of Interdisciplinary Business Strategy (IJIBS) Vol. 1 No. 1, Feb. 2021