CASHLESS POLICY AND PERFORMANCE OF BANK IN NIGERIA A STUDY OF FIRST BANK PLC
1.1 BACKGROUND OF THE STUDY
Banks are the cornerstone of an economy. It is the engine house for societal and economic development. The importance of banking services to the growth and development of any economy cannot be over- emphasized. The most significant development of the millennium which has substantially influenced business operation in the world today is the emergence of the information age. The remarkable progress achieved in information and Communication Technology (ICT) has made its possible for the information to be digitalized and also transmitted faster and even cheaper in mega and tetra bytes. Taking advantage of this rapid technological progress and financial market development, a number of innovative products for making transactions have been developed in recent years, these transactions involve the transfer of monetary value from one person to another. Thus, a transaction consists of mechanisms which include institutions, people, rules and environment that make exchange possible.
However, transaction made using these innovative products are accounting for an increasing proportion of the volume and values of domestic and cross border retails transaction. Currency and notes are converted into data which are transmitted through telephone lines and satellite transporters (Ovia 2002). These new financial services through electronic medium have caused substantial reduction in transaction costs and ease of transfer of funds.
Prior to the advent of this electronic devices in the delivery of banking services in Nigeria, banking operations were marred with ineptitude, time consuming bureaucratic, bottleneck, long queues, crowd and such like complaints from the public. As a result of all these, the psychology or mental picture of the average individual towards banking services has been negatively affected. Some individual seems to prefer to keep their money to themselves or put it in to use anywhere else but not the bank. They prefer to do so as they always encounter one problem or the other whenever they go to withdraw money at the bank. Moreover banks generally develop large amount of data in the course of their operations. The collection, storage and management of these data are no doubt a very daunting task. The manual approach of these bank services and management was characterized by long queues, tally numbering, stress, loss of valuable works hour, and so on.
Various advantages enjoyed by more developed nations such as the US has prompted the Central Bank of Nigeria (CBN) to adopt the cashless policy. At the end of the 1980s the use of cash for purchasing consumption goods in the US has constantly dropped with inflation (Humphrey, 2004). Nigeria’s aim to be among the biggest economy by 2020 has driven her to gradually move from a pure cash economy to a cashless policy. Since Nigeria gained her independence in1960, there have been different constitutional reforms, change in economic and banking policies mainly aimed at stabilizing the economy, enhancing social welfare and enhancing economic growth and development.
In view of being one of the best and biggest economies in 2020, the CBN has started implementing the cashless policy/banking in some major states/cities in Nigeria such as Lagos, Kano, Port-Harcourt and Onitsha. The CBN and Pro cashless policy activists have asserted reduction in crime rates, minimized risk associated with carrying huge sums of money, reduction in political corruption, reduction in banking cost, improvement on monetary policy in management of inflation and the overall growth and development of the economy of Nigeria as advantages associated with the implementation of the cashless policy.
1.2 STATEMENT OF THE PROBLEM
Monetary policy as a technique of economic management to bring about sustainable economic growth and development through cashless policy and banking introduced by the Central bank of Nigeria (CBN) is not fully operational due to high rate of illiteracy, in-adequate sensitization/education of the benefits of the cashless policy, and in-adequate logistics (such as the provision of internet connections in commercial areas, computers and Point on Sale (POS) machines).
Apart from the physical challenges, economic data and indicators are not fully available and reliable. There is a great challenge in attempting to analyze the true impact of the cashless policy on the economy of Nigeria as only few monetary and macroeconomic indicators can be traced with relation to the subject matter. Several scholars have attempted to analyze the cashless system or e-banking. However, it becomes clear that few studies present a comprehensive evaluation of cash-less banking implications in developing countries. Most ignore its economic benefits of the equation while some do incomplete examination of its negative implications. This is often due to unreliable panel data for monetary and macroeconomic indicators. Although, this study focuses on Nigeria, it is difficult to translate cashless studies from one country to another. Even payments instruments that look similar across countries on the surface may be different due to historical and legal variations (Daniel et al, 2004).
1.3 OBJECTIVES OF THE STUDY
The main objective of the study is to examine Cashless policy and performance of Bank in Nigeria a study of first bank PLC
The Specific objectives of the study include:
- To examine the impact of the cashless policy on economic growth of Nigeria.
- To examine the various challenges associated with the implementation of the cashless policy at first bank on Nigeria.
- To proffer suggestions on how cashless policy and other monetary policies can be managed for better contribution to the economic growth and development of Nigeria.
1.4 RESEARCH HYPOTHESIS
- Ho: Cashless policy has no significant impact on the reduction of inflation in Nigeria
Hi: Cashless policy has significant impact on the reduction of inflation in Nigeria.
- Ho: Cashless policy has no significant impact on economic growth of Nigeria
Hi: Cashless policy has significant impact on the economic growth of Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
The study will give various insights into the various implications the introduction of the cashless policy will have on the performance of Banks in Nigeria. Through examining various economic indicators such as the gross domestic product (GDP) and inflation, the study will examine and compare growth trends and changes to determine whether the cashless policy introduced by the CBN has a negative or positive effect on the economy of Nigeria.
Various challenges and prospects identified in the study will also enable various stakeholders to tackle these challenges effectively by making policies that will address them and boost the economy of Nigeria.
1.6 SCOPE OF THE STUDY
In pursuance of the objective of the study; attention shall be focused on first bank of Nigeria electronic banking among other electronic commerce implementation. In order to conduct an empirical investigation into the adoption of Electronic banking in Nigeria and will also examine the nature of electronic banking operations from the CBN bulletin from2010-2019.
1.9 DEFINITION OF TERMS
- Access Products – Products that allow consumers to access traditional payment instrument electronically, generally from remote locations.
- ATM Card – An ATM card (also known as a bank card, client card, key card, or cash card) is a payment card provided by a financial institution to its customers which enables the customer to use an automated teller machine (ATM) for transactions such as: deposits, cash withdrawals, obtaining account information, and other types of banking transactions, often through interbank networks.
- CBN – Central Bank of Nigeria.
- Chip Card – Also known as an integrated circuit (IC) Card. A card containing one or more computers chips or integrated circuits for identification, data storage or special purpose processing used to validate personal identification numbers, authorize purchases, verify account balances and store personal records.
- Electronic Data Interchange (EDI) – The transfer of information between organizations in machine readable form.
- Electronic Money – Monetary value measured in currency units stored in electronic form on an electronic device in the consumer’s possession. This electronic value can be purchased and held on the device until reduced through purchase or transfer.
- Internet Banking- This is a product that enables the Bank leverage on the Internet
- Banking System Module in-built on the new Banking Application (BANKS) implemented by the Bank to serve the Internet Banking needs of the Bank’s customers.
- Mobile Banking – This is a product that offers Customers of a Bank to access services as you go. Customer can make their transactions anywhere such as account balance, transaction enquiries, stop checks, and other customer’s service instructions, Balance Inquiry, Account Verification, Bill Payment, Electronic fund transfer, Account Balances, updates and history, Customer service via mobile, Transfer between accounts etc.
- Payment System – A financial system that establishes that means for transferring money between suppliers and of fund, usually by exchanging debits or Credits between financial institutions.
- Point Of Sale (POS) Machine – A Point-of-Sale machine is the payment device that allows credit/debit cardholders make payments at sales/purchase outlets. It allowed customers to perform the following services Retail Payments, Cashless Payments, Cash Back Balance Inquiry, Airtime Vending, Loyalty Redemption, Printing mini statement etc.
- Smart Card – A Card with a computer chip embedded, on which financial health, educational, and security information can be stored and processed.
- Transaction Alert – Our customers carry out debit/credit transactions on their accounts and the need to keep track of these transactions prompted the creation of the alert system by the Bank to notify customers of those transactions. The alert system also serves as notification system to reach out to customers when necessary information need to be communicated.
- Western Union Money Transfer (WUMT) – Western union Money transfer is a product that allowed people with relatives in Diaspora who may be remitting money home for family up-keep, Project financing, School fees etc. Nigerian Communities known for having their siblings gainfully employed in other parts of the world are idle markets for Western Union Money Transfer.
- First Bank of Nigeria: First Bank of Nigeria, sometimes referred to as FirstBank, is a Nigerian multinational bank and financial services company headquartered in Lagos. It is the biggest bank in Nigeria by total deposits and gross earnings. It operates a network of over 750 business locations across Africa, the United Kingdom and representative offices in Abu Dhabi, Beijing and Johannesburg set up to capture trade-related business between geographies. The bank specialises in retail banking and has the largest retail client base in Nigeria. In 2015
REFERENCES IN CASHLESS POLICY IN NIGERIA:
- Daniel, D. G., R. W. Swartz, and A. L. Fermar, (2004): ―Economics of a Cashless Society: An Analysis of Costs and Benefits of Payment Instruments‖, AEI-Brookings Joint Center
- Humphrey, D. B. (2004): ―Replacement of cash by cards in U.S. Consumer Payments, Journal of Economics and Business, 56, 211–225.
- Humphrey, D. B. and A. N. Berger (1990): ―Market Failure and Resource Use: Economic `Incentives to Use Different Payment Instruments‖., New York, Monograph Series in Finance and Economics.