A cashless economy is simply at its prime when all means of payments are carried out without the use of physical cash. Payments will range from a list of options such as cheques, wire transfers, debit and credit cards, online transactions, and mobile banking. The advantages of a cashless society are enormous; from regulating, controlling, and securing the financial system of any economy.
The Central Bank of Nigeria, led by its Governor Sanusi Lamido Sanusi, has put forward a policy requiring that all cash withdrawals and deposits be set at a daily limit of a maximum of N150, 000 while pegging that of corporate entities at N l, 000,000, with penalty fees of N100 per extra Nl, 000 and N200 per Nl, 000 imposed on individual and corporate defaulters respectively.
The Central Bank of Nigeria's reasoning behind this policy could be because of a lot of issues affecting the financial system; from trying to check money Laundry and illicit activity, inflation, cost of maintaining an economy predominantly cash base, or just good old change which is one factor that's always constant in life.
If all things are perfect there are still a few down sides to a cashless economy. Money by its nature is abstract. The less cash that flows through our hands, the more intangible it becomes and the more we lose our sense of its real value. Our banked assets are now an electronic apparition, and the fear of not having cash on hand is a downturn.
Nigeria's economy as it relates to forms of payments
Nigeria compared to the rest of the world, as it relates to payments, is still in the era of the wild wild West. To fully understand the situation one has to study the history and analyze factors such as; the Nigerian culture, the role of its government, the state of infrastructure, the level of general education, the availability of real data, the amount of investments made and needed, security as it relates to laws (enforcements and it judiciary) confidence in the system (internal and external) and insurance and privacy issues to mention a few.
The journey of a thousand miles begins with the first step. I commend the CBN for its courageous attempts to effect change, and also worry that the system may not be ready for such a drastic approach. The problem is that in an already weak economy such as Nigeria implementing this policy now will only result in the opposite effect of what the CBN wants to achieve. The CBN would be in the best position to understand what the economy really needs to prosper, and its policy on withdrawals and deposits give reason for pause. What's the real reason driving this policy? You could say the Nigerian factor, which really means anything ranging from scams and corruption to the fix it now approaches. No where in the world, do they have fixed withdrawals and deposits. For the record, a cashless society should be now and the future for Nigeria and there is no one solution to every economical challenge.
There is one thing that's certain, in the next five to six years, if this policy is aggressively carried out; the growth of the Nigerian economy is going to contract significantly before it eventually picks up. There are a couple of concerns, the greatest of them being that it is most likely going to lead to the next real recession in Nigeria. For example 70 to 75 percent of the people of Nigeria do not have bank accounts. Therefore saying that the CBN does not have 70 to 75 percent of the nation’s financial statistics is a safe call. Money circulation works its way down and around from the top 10 percent of bank accounts which accounts for 75 percent of the total value of cash. The Majority of this 10 percent service directly or indirectly affects 70 to 75 percent of the Nigerians who are without bank accounts. Cutting this lifeline quickly, will force a significant number of Nigerian employers to require their employees to start operating bank accounts to save them cost of doing business in Nigeria; so that...
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