Cashless economy and Nigeria as developing nation

Culture is a very important factor in project success. The principles, policies and practices that work in a developed country like England, may not work in a Third World country like Nigeria. This is due to the different cultures existing in these two different countries. While a developed nation has high per capita income because of higher rate of employment; a diverse industrial mix, including a large services sector; a developed financial system; high literacy level; people having a longer life expectancy; and well-developed infrastructure like roads, educational system and hospitals, developing nations struggle to ensure food security, roads for transportation of goods and people, educational facilities, pipe borne water and electricity. Life is thus difficult in developing nations, especially in the cities where there are traffic hold-ups and housing shortage.

Before the discovery of money, people traded by barter. This practice entailed the exchange of goods and services for goods and services. So, if I give you beans, you will give me yam or rice, the equivalent of the beans I gave you. According to Economic History, the goldsmith receipts were the first form of money. The receipts issued to the owners of gold who kept them with goldsmiths were the first to represent money as anybody that presented these receipts to the goldsmiths that issued them were treated as the owners of the gold. Thus, the receipt for a weight of gold was as valuable as the gold it represented. People could then exchange the receipt for a product or service which is the equivalent of the value of the gold. Money made no fair trading possible, as in the pre-money era; some goods could not be easily exchanged for small pieces of other goods. Examples are goats and horses.

Around 700 B.C., the Lydians became the first Western culture to make coins. Other countries and civilizations soon began to mint their own coins with specific values. Using coins with set values made it easier to compare values and trade money for goods and services. While Nigerians complain that the metal money (coins) is too heavy to carry, the problem with paper money is that they can easily wear out if not properly handled. Data sourced from the Central Bank of Nigeria (CBN) showed the cost of printing new naira notes jumped by 75 percent from N33.3 billion in 2016 to N58.6 billion in 2020. The cost of printing new naira notes stood at N49.5 billion in 2017; N64 billion in 2018 and N75.5 billion in 2019.

Cashless economy is a good policy, but it cannot be implemented swiftly, just as Rome was not built in a day. CBN ought to implement the policy over a long period of time, say six months. The first step should have been ‘awareness creation’ among the general public about the advantages of the policy. CBN will then come up with a policy that will make payment for goods and services cheaper by using plastics (credit and debit cards) than using physical cash. The basic needs of Nigerian masses are food and transportation. The cashless policy, which CBN first attempted in 2012 but failed, would have been successful in 2023 if CBN had researched how an average Nigerian lives. But instead, CBN was more concerned about the negligible percentage of Nigerians, including kidnappers, who are keeping a substantial and significant amount of naira in their houses and offices. In any country without ‘rule of law’, no control measure will work.

The average Nigerian wants to eat by buying piecemeal food and groceries daily and go to his place of work and market using cash. CBN ought to have put in place a structure that will make travel cards possible in Nigeria first, especially in the cities, so that people can travel for days and weeks without using cash. Food vouchers ought to have been introduced. Cashless policy is one of the most hotly discussed topics within the global financial sector, and two separate studies have now shed new light on United Kingdom (UK) progress towards a cashless society. According to the latest report from software recommendation engine Capterra, more than 50 percent of (UK) consumers are paying with digital wallets. The main advantages given are convenience and safety, with digital payments allowing people to leave their house without a bulky wallet.

The research underlines how the COVID-19 pandemic has accelerated the transition to a cashless economy in the UK. Capterra says that 86 percent of digital wallet users have started using them since the outbreak of the pandemic, while a further 19 percent of consumers are interested in using digital wallets for the first time in future. An analysis of bank ATM withdrawals from financial technology platform Abound indicates that up to 65 percent of consumers still rely on cash withdrawals on a regular basis; more than 90 percent of those surveyed have used an ATM in the last six months, including nearly two-thirds (65%) of people in the last month. Abound claims that, despite the increasing popularity of cashless payment methods, the research shows how far away the UK is from becoming truly cashless. Only five percent of the population is living completely cash-free.

The transition towards cashless, and the effects this will have on society, is one of the most hotly debated topics within the fintech sector in the UK. Mobile payments have considerably increased in the past decade but there are still unanswered questions about how a truly cashless society would work in practice – or, indeed, if it is even possible. It is certain that people cannot be forced to embrace it. The Financial Conduct Authority (FCA) says there were still more than one million unbanked individuals in the UK in 2020. So, the UK is targeting 2026 as a year to have an appreciable cashless economy; that is in spite of the country being fairly low down the unbanked league tables. Indeed, Abound’s research shows both a regional and generational divide in the continuing use of cash. Londoners and young people were significantly less likely to use cash than their older counterparts, or those living outside London.

Gerald Chappell, chief executive officer of personal lending company Abound, says: “While going contactless and paying with smartphones, like Apple or Google Pay, has become the default at many businesses since the COVID-19 pandemic, our data indicates that cash remains extremely popular – and in fact, is bouncing back.” Researchers show that as the cost of living bites people’s incomes, people are using cash to reduce their spending. It is much easier to see physically where their money is going. Cashless policy is already killing a lot of small businesses in Nigeria.

The fact is Nigeria needs more than cashless policy to curb kidnapping, vote-buying and horse-trading during elections. What we need are implementation of our already existing law on vote-buying and enacting a law making it an offence for anybody to keep more than N500,000 in his or her house and office.

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