CBN Cashless Policy and its Impact on Financial Inclusion

Barnabas Eke 

The introduction of the cashless policy by the Central Bank of Nigeria in 2012 was, among other benefits, meant to essentially minimise the quantum of physical cash being deployed in the course of business transactions across the country.

Even with the initial resistance that greeted the policy, it was not long before Nigerians began to buy into the payment options which soon evolved: The Automated Teller Machines (ATMs), Point of Sale (POS) Mobile Money, USSD Bank codes, banking Apps and most recently Nigeria Quick Response Code (NQR) and e-naira among others.

For both the urban and rural dwellers, perhaps the payment options that have been most impactful are the ATMs and the POS. Prior to the wide acceptance of these options, banks had to bend backward to operate on Saturdays to meet customers’ demands. It got to a point that even the most conservative banks had to brace up to provide weekend services due to the impact of competition. This was not a tea party for some staff of banks who had to work six days in a week to keep their jobs. Even at that, the queues at most banking halls; particularly on Mondays and Fridays were massive. Customers were subjected to such excruciating delays that going to pick up money from one’s bank became a nightmare.

The growth of ATMs and POS is changing the narrative for the better- courtesy of the cashless policy. To push for faster acceptance of ATMs, banks began to encourage the withdrawal of certain amounts only through the ATMs while freeing the banking halls for customers carrying out other transactions; including those withdrawing bulk cash.

As the spread of ATMs grew, customers began to get accustomed to other services that could be availed through the machine such as transfers and bills payment. These pushed the frontiers of the cashless policy in the right direction.

Arguably, the evolution of POS has become a game-changer for financial inclusion. This is applicable not only to the unbanked but also to the urbane who, regularly, rely on POS for their transactions.  The penetration rate of POS is so high that its adoption has seen so many payment companies (apart from the banks) roll out the machines that now dot every nook and cranny of Nigeria.

Beyond payment facilitation, the POS has become a huge ‘industry’ creating businesses and employment for Nigerians. A great number of mobile money operators licensed by the Central Bank of Nigeria have their own branded POS, which serves as a veritable penetration tool for driving the cashless policy. Over 10 Mobile money operators are currently in the Nigerian economy. These are aside from other payment transactions that are being driven by some of the registered telecom operators.

The Nigeria Quick Response (NQR) Code is considered to be another efficient non-contact digital means of transactions that has added value to the cashless policy. The QR-Code-Based payments and collections is powered by Nigeria Inter-Bank Settlement System (NIBSS) while being regulated by the Central Bank of Nigeria (CBN). It was launched on March 16, 2021 while Nigeria’s Domestic Card Scheme, which is otherwise known as AfriGo was launched in January, 2023 through the collaboration of CBN and NIBSS. The AfriGo which is the first in Africa is targeted at driving Financial inclusion, enhancing data sovereignty or protection, reducing the operating cost for financial institutions and freeing up forex reserves that would have been used to pay for services rendered by the use of the earlier existing cards owned by foreign companies.

Nigerians today are no longer in doubt of the efficiency with which FinTech companies being operated under some CBN licensed microfinance banks render payment services effortlessly without failure thereby deepening financial inclusiveness, cashless society and digitalization.

Some of the FinTech drivers operating and rendering digital financial services either as microfinance bank or stand – alone FinTech companies include: Sofri digital bank powered by Links Microfinance Bank; Mint, a virtual bank provided by Finex Microfinance Bank Ltd; Piggyvest operating as a microfinance bank; VFD Microfinance bank with streamlined digital and mobile banking platform; Moniepoint-operating as microfinance bank and delivering financial services digitally; FairMoney which is a digital bank focused on lending; Carbon is a digital bank that also provides a loan facility and investment opportunities; Kuda microfinance bank with accounts coming with a free debit card; among others. Of particular importance is that each of these comes with special and peculiar financial services targeted at easing difficulties in finance and banking sector of the economy thereby enhancing economic growth.

To complement the other channels in the payment space, the e-naira, a government issued electronic money was introduced in October 2021; few months after the unveiling of the NQR. These are all part of the CBN’s initiatives to bring the cashless policy implementation closer to all stakeholders in the nation’s economy.

While appreciating the degree of adjustment by the public towards adopting the series of payment options, the CBN Acting Director Corporate Affairs,  Dr. Abdulmumin Isa, further enjoined the public who are still hesitant not to entertain any fear. He said this was informed by the fact that it has become world trend, which Nigeria cannot afford to be left behind in the global digital financial ecosystem.

According the Apex Banks spokesman, other motivations why the CBN is desirous of ensuring that the public take advantage of the use of other digital payment options such as the eNaira,  include its convenience and the need to take full advantage of opportunities and benefits of digital payment channels.

This, he said, led to the launch of the eNaira in October 2021 aimed at broadening the payment possibilities of Nigerians, foster digital financial inclusion, with potential for fast-tracking inter-governmental and social transfers.

Although the adoption rate of each of the payment options varies, the policy has, no doubt, achieved a considerable level of success and transparency. They have not only offered convenience but also some degree of safety to parties involved in transactions. While not foreclosing the need to provide further safety nets, the progress we have seen is a pointer that with time, the benefits of the cashless policy would endure

Eke is a financial analyst based in Lagos