Academic journal article Journal of Management Research

Electronic Payment in Cashless Economy of Nigeria: Problems and Prospect

Academic journal article Journal of Management Research

Electronic Payment in Cashless Economy of Nigeria: Problems and Prospect

Article excerpt

Abstract

Before the emergence of modern banking system, banking operation was manually done which lead to a slowdown in settlement of transactions. This manual system involves posting transactions from one ledger to another with human hands. This work examines electronic payment in cashless economy of Nigeria: Problems and Prospect. The new policy by Central Bank of Nigeria (CBN) on cashless system of payment has raised a lot of concern to the growth of Nigerian economy, with the objective of reducing robbery, high cost of processing cash, revenue leakages, inefficient treasury management, promoting economic development through financial intermediation, among others. The aim of this paper is to ascertain the extent to which electronic payment affect cashless economy of Nigeria. Descriptive research design was used to carry out this study. The study indicates that the electronic system of payment has a great implication in cashless economy of Nigerian but it will led to significant decrease in deposit mobilization and credit extension by Nigerian deposit money banks. Consequently, the authors concluded that cashless system of payment will be examined and develop the e-payment system first, so that people will be used to it before talking of cashless economy. This is because; bulk of the Nigerian economy is driven by SME and petty traders. To retain this policy of cashless economy in Nigeria, the authors recommended that the migration of our payments system towards a cashless society would require some reforms and a lot of effort and sensitization especially for low income group, who are currently deeply rooted in using cash and see it as a convenient and easy way of receiving and making payments. The sensitization exercise would require the combined effort of various stakeholders, including government, financial institutions, clergy and non-bank providers of payment services. There should be improvement in infrastructural development so as to enhance e-payment system.

Keywords: Cashless Economy, Electronic Payment, economy, revenue leakages, PoS terminal, robbery.

1. Introduction

Before the emergence of modern banking system, banking operation was manually done which lead to a slowdown in settlement of transactions. This manual system involves posting transactions from one ledger to another with human hands. Figures or counting of money which should be done through computers or electronic machine were computed and counted manually which were not 100% accurate thereby resulting to human errors. Most banks then used only one computer in carrying out transactions which helped to ameliorate the sluggish nature of banking transaction.

According to David (2012), Nigeria did not embrace electronic banking early when compared to developed countries. Nigeria adopted electronic banking system in the early 2000s. During the introduction of electronic banking system, the use of raw cash was said to have breed corruption through the "cash and carry syndrome" usually linked with the swiftmovement of Ghana-must go" bags by some politicians. Electronic banking is defined as the use of computers to carry out banking transactions such as withdrawals through cash dispensers or transfer of funds at point of sale. Since electronic banking started in all Nigeria banks, it has been a woe for civil servants; checks show that some staffin establishments such as the national boundary commission for instance, are yet to receive their salaries for the previous months as efforts to electronically transfer salaries into their account have failed (Ibrahim, 2009).

James, (2009) a banker reported to vanguard annual report that "we should not destroy electronic-banking by looking at the negative aspects; we must strive towards perfecting it". He also said that the volume of data generated by the Government ministries, agencies is much, making it a bit difficult for banks to cope. Mathew, (2009) a civil servant says in his report to vanguard annual report on banks and cards that government should have done its homework "very well" before introducing the system, "they plugged us into a system they were not prepared for and the result is untold hardship visited on innocent people". …

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