CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND TO THE STUDY

Mixed reactions have continued to trail the cashless policy introduced by the Central Bank of Nigeria (CBN) in January 2012. The implementation of the policy commenced in Lagos in 2012 but it was extended to the Federal Capital Territory (FCT), Rivers, Kano, Ogun, Anambra and Abia states in July 2013. While some die-hard cynics describe the policy as just another economic jargon that may not be feasible, others say it will boost the country’s economic growth in line with global best practices. The CBN cashless policy aims at reducing the amount of physical cash in circulation; thereby encouraging more electronic-based transactions in payment for goods and services (CBN, 2012).

The cashless economy policy of the Central Bank of Nigeria (CBN) has come with both pains and gains. As some are knocking it, others are hailing it.

The policy, as enunciated by the CBN, entails “cash-based transactions and stipulates a cash handling charge on daily cash withdrawals or cash deposits that exceed N500,000 for individuals and N3,000,000 for corporate bodies’’ (CBN, 2012) The former CBN Governor, Mallam Sanusi Lamido Sanusi, explained that the cashless economic policy was designed to promote financial intermediation and financial inclusion, while minimizing revenue leakages and eliminating incidence of robbery. It will also reduce the amount of cash payment and encourage electronic payment (Berentsen, 1998). He further explained that the policy became imperative because the cost of cash and associated risk of cash-driven economy to Nigeria’s financial system was ever increasing.

The policy on withdrawal allows individual customers to make a free cumulative withdrawal of N500, 000 daily across the counter and ATM. Withdrawal above the free limit will attract processing fee of three per cent for every N1, 000 above the limit. Many Nigerians considered this as not good enough as these extra charges is seen as a means of extortion. However, many individual costumers might need more than N500, 000 in day for one purpose or the other because the citizens are already used to the system of going about with cash and this has been considered as one of the pains of the cashless policy.