From Cash to Cloud - Nigeria’s Cashless Policy.

It is commonly said that cash is king, and in many ways, this ideology has largely prevailed in Nigeria. From petty trades in the marketplace to large ticket transactions, cash is often a preferred method in settling transactions. In recent times, however, a new cashless policy has been implemented by the governor of the Central Bank of Nigeria, Godwin Emefiele, that is expected to fast-track the transition from a predominantly cash economy to a cashless economy.

Starting the year, Emefiele announced the full implementation of the cashless policy effective Monday, January 9, 2023. The new cashless policy sets daily limits on over-the-counter cash withdrawals at ₦500,000 for individuals and ₦3,000,000 for businesses, among many other restrictions detailed here. A similar policy was enacted in 2012 but was later suspended in 2015 due to a lack of adequate technology to support the transition. However, this time, Emefiele claims that, in addition to key running targeted stakeholder engagement sessions to drive awareness, the infrastructure required to ensure a smooth functioning cashless system, such as Payment System Banks (PSBs), point of sale terminals (POS), agency banking, mobile banking, and ATMs, has now been deployed.

The goal

According to the CBN circular, the policy’s goal is to capture more transactions using electronic-based payment methods. It also aims to lower the cost of banking services and drive financial inclusion. In doing this, the CBN hopes to capture the informal sector (which handles large amounts of cash transactions) and to improve the effectiveness of monetary policy tools in containing inflation. Ultimately, an increase in the banked population and digital transactions may result in more effective tax collection and increased government revenue, while limited cash-based transactions could also help to reduce fraudulent activities, corruption, and money laundering.

Is Nigeria truly ready to go cashless?

While the CBN's goal appears plausible, it raises the question of whether we are truly prepared. The transition to a cashless economy and survival of the policy would severely depend on adequate infrastructure, strong power and network connectivity, improved cyber security, and incentives to boost the adoption rate for the unbanked. We believe that these are critical considerations that must be addressed if Nigeria is to truly go cashless in the long run.