Nigeria has a bold vision of being one of the top twenty world economies by 2020, and one of the proactive steps they've taken to get there is the Cash-less Nigeria Project. Introduced in Lagos in 2012, this policy introduced a "cash handling" charge for organizations and individuals withdrawing or depositing money above given limits--N500 thousand for individuals and N3 million daily for company accounts.
The Cashless-Nigeria policy was created to enhance financial inclusion and intermediation and to reduce revenue leakage in an effort to improve Internally Generated Revenue(IGR), decrease incidences of theft, and--perhaps most importantly--decrease the sum of cash payments occurring in the country. The charges for cash and the related dangers of a cash-driven economic system were high and rising, endangering Nigeria's economic state. Thus, the mandate to less cash transactions, more electronic payments.
A Vision of Modernization
Nigeria has traditionally been a country beset by money laundering, illegal financial activity, and out-of-control inflation. To morph from this handicapped system into an economic leader of the 21st century, Nigeria must have an economy that's less reliant on cash, and more fluid with its payment methods.
The Cash-less Nigeria project is intended to drive improvement and modernization of payment processes, minimizing the charges for banking and credit services and driving financial addition by offering a more effective transaction system and better reach. This is the theory. Now, for the effects.
A Cashless Economy
Nigeria's cashless policy is moving the country progressively toward a cashless economy: all methods of payments performed without physical cash. Instead, payments can be made via mobile banking, online transactions, credit and debit cards, wire transfer, and checks. In our increasingly mobile era, this just makes sense: financial transactions can now be completed form anywhere, at any time, using mobile devices and computers.
Aside from its effects on the national economy, this change hopes to have pronounced effects on businesses and citizens:
- A decrease in physical bank visits, since people can now create transactions from the telephone, electronic devices, and ATMs.
- A decrease in theft. Robbers are opportunists, drawn to cash movements--large sums of money being transported in vans as well as individual muggings and break-ins. Using electronic payment systems can reduce the number of cash robberies. In fact, this has been one of the marketing messages the Central Bank of Nigeria (CBN) has been emphasizing to get citizens motivated to adopt the policy.
Of course, a cashless economy also carries some risks, particularly in a country like Nigeria that's susceptible to infrastructure instability. Unstable power supplies and network failures are two of the biggest hindrances to a smoothly running cashless economy.
Another downside to going cashless is that less human employees are now needed to operate bank transactions, since most of the work is now being done by machines. While some argued this would lead to a rise in unemployment in Nigeria, the manufacturing of the POS machines could also compensate.
Risks aside, the Cash-less Nigeria Project means progress for this African country, and they are well on the way to reaching their ultimate goal of economic leadership.