Accounting Project Topics

The Impact of Cashless Policy on the Performance of Nigeria Financial Institutions

The Impact of Cashless Policy on the Performance of Nigeria Financial Institutions

The Impact of Cashless Policy on the Performance of Nigeria Financial Institutions

Chapter One

Objectives of the Study

The main objective of the study is to examine the impact of the cashless policy on performance of Financial Institutions in Nigeria and how it affects economic growth. Specific objectives of the study include:

  1. To examine the impact of the cashless policy on performance of financial institutions.
  2. To investigate the effect of the Automated Teller Machine (ATM) on banks profitability.
  3. To determine the impact of point of sale (POS)on banks
  4. To determine the impact of cashless policy on money laundering and corruption




This chapter deals with the review of related literature. The review was discussed under the following subheadings: concept of a cashless society, concept of economic growth, concept of economic development, concept of CBN cashless policy in Nigeria and theoretical framework.

Conceptual review

Concept of cashless economy

A cashless economy is an environment in which money is spent without being physically carried from one person to the other. The first issue in the cashless economy is the issue of electronic purse. This is electronic information that is transmitted to a device which reveals the information about how much a person has stored in the bank and how much he can spend.

The advantages of a cashless economy are enormous; cost of transportation and the danger of carrying large sum of money about will possibly reduce. The policy, it is claimed by the makers, will enhance the integration of our economy as presently 78.8 percent of the country’s rural populations are largely unbanked.  According to the CBN, this policy, when fully implemented therefore, will drive Nigerian’s huge informal economy which is driven by small scale farmers, traders, craftsmen and other types of small and medium sized businesses and eventually integrate it into the nation’s formal economy.

The move to use electronic cash, commonly dubbed “cashless” however, has its own challenges, which in Nigeria, appear to be accentuated by the perennial problem of inadequate physical and social infrastructure. The introduction of the policy in Nigeria therefore brings up issues that touch on security, privacy, crime and computerization. Societal acceptance of the policy is therefore critical to its sustenance or the tendency to rebel against it by the common man on the street becomes imminent. However, as the financial institutions have implemented such things as debit cards, credit cards, internet banking, etc, it has slowly brought society into the acceptance zone whereby another step could be taken. Without society being able to understand the pros and cons of electronic cash, the full benefit of the cashless society may never be realized.

The cashless policy will potentially result in an extensive application of computer technology in the financial system, as technologies are developing rapidly on the transfer of funds from one place to another. This places the Computer Professional Registration Council at the centre of control and regulation of the emerging technology in our economy.

It has been argued that cashless transactions are viable and more secured mode of payment in any economy. Currently, about 63.7 per cent of Nigerians do not have bank accounts but the new initiative would enhance banking habit among individuals, especially among the rural dwellers so that they can easily transfer money to their people wherever they might be. The high cost of minting the Naira has also necessitated an alternative economic system where less or no cash is required for various transactions. Specifically, the average cost of producing a naira note is about N4.00. Producing N1 billion notes of Nigerian Naira, therefore, means spending N4billion. Hence the cashless policy introduction by CBN to reduce the cost involved in minting the naira as much as possible.

This latest development, according to the apex financial regulatory authority is therefore, coming on the heels of increasing dominance of cash in the economy with its implication for cost of cash management to the banking industry, security, money laundering, among others. The cashless policy itself is the trend in most countries of the world. Almost all the central banks across Africa are bracing up for a cashless economy because almost all African countries have the same problems associated with cash based economy. There is slow processing time involved in counting and queuing for deposits in the bank.




Research Design

This study employed a descriptive research design method. A regression method of ordinary least square (OLS), Augmented Dickey Fuller unit root test and Johansen co-integration test of research design were adopted to ascertain the effect of the adoption of CBN’s cashless policy in the Nigerian banking industry.

Population and Sample

A sample of 6 banks was selected from the population of 15 banks listed in the Nigerian Stock exchange for a period of 6 years from 2009-2014.




The computed values of these statistics are reported in Table 4.1 below:

Table 4.1: Result of Descriptive Statistics of the Variables





Cashless policy particularly the use of ATM increases the ROA of the bank through a cashless approach. This implies that as POS usage volume increase, it increases the ROA of the bank through a cashless approach. As well cashless policy also increases the volume of the use of ATM.As ATM usage volume increased, it increases the ROE of the bank through a cashless approach. From the data collected and analyzed, it is safe to conclude that the deployment of ICT enhances the application of various policies such as the cashless policy for improving bank performance. It is therefore recommended that the cashless policy should be strengthened and all bottle necks like poor power supply and all loopholes that could lead to fraudulent exposure be tactically proactively tackled.


More electronic payment devices like ATM and POS should be acquired and installed in remote areas to facilitate quick banking transactions and banking inclusion while the (CBN) as well as commercial banks should increase its awareness to the Nigerian Public and encourage literacy among bank customers in Nigeria to enable them appreciate and embrace policies that rely on information technology for banking transactions.


  • Adewoye J. O., (2013): Impact of mobile banking on service delivery in the Nigerian commercial banks. Int. Rev. Manage. Bus. Res. 2(2):333-344.
  • Ajayi, L.B.,(2014): Effect of Cashless Monetary policy on Nigerian Banking Industry: Issue, Prospects and Challenges, International Journal of Business and finance Management research. IJBFMR 2 (2014)29-41.
  • Ajayi, S. I., and Ojo, O.O., (2006): Money and Banking: Analysis and Policy in the Nigerian Context, Second Edition, University of Ibadan, Daily Graphics Nigeria Ltd.
  • Alagh, J.I., (2014): Impact of Cashless Banking on Banks’ Profitability (Evidence from Nigeria). Asia Journal of Finance and Accounting, Vol. 6, No.2, pp.362-376
  • Ashike, H., (2011):“Cashless Economic can Reduce Risk of Carrying Huge Cash”, [Online] Available:…/22217.
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