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1.1 BACKGROUND OF THE STUDY
The introduction of electronic banking, online transactions and POS payment on SMEs in Nigeria has paved way for a new era of development where the use and demand for physical cash is gradually declining. These recent evolution of technology in the Nigerian SMEs posses interesting questions for economist, financial institutions, business analyst and the government regarding the current economical status, logistics, and availability of instruments to guarantee economic growth and stability, efficiency and effectiveness of the cashless policy.
Looking at the business world today, the cashless policy in SMEs in Nigeria is considered adaptive to the big cash to purchase goods and service in and outside the country with the help of POS.
The Shoprite mull in Nigeria today, started in 1979. The Shoprite Group of Companies started from small with the purchase of a chain of 8 Cape-based supermarkets for R1 million. The next 36 years were marked by various acquisitions and innovative expansion strategies that brought it to the R102 billion businesses that Shoprite is today
Shoprite is the leading retailer across Africa and is the brand of choice for many consumers across the African continent. Shoprite’s large following of loyal customers can be attributed to our ability to offer the widest range of products and the highest standards of freshness and quality whilst maintaining the lowest prices.
Shoprite first entered Nigeria in December 2005, which was opened in the shopping centre, The Palms in Victoria Island, Lagos. Shoprite has since opened a store in Lagos, Abuja, kwara, Enugu, Kano and another store in Oyo.
The Shoprite Abuja on Plot 232 murtala Mohamed expressway along apposite mechanic village road has 3,853m2 stores which is located in the newly built Grand Towers mull overseeing the Abuja business district, can be compared in size to the stores located at Palms shopping mall in Lekki, Lagos. The center which is approximately 10,00m2 build-up area play host to other A-list companies like KFC and spur anchoring the food court.
In big SMEs market like Shoprite in Abuja cashless means of payment can reduce the large amount of money transporting to the bank, cashless means enhance security, speed up transaction, and enhance productive in the Nigeria economy.
Since the inception of humanity, various payment methods have been used to purchase goods and services starting with the trade by barter. The trade by barter method of transaction has been the foundation for the introduction of money and coins to solve the problem of double coincidence of wants and divisibility faced by trade by barter. The use of money/coins was introduced after the use of trade by barter method, and it has solved various challenges associated with trade by barter, but the use of money as an exchange medium has its own challenges and dis-advantages and can still be replaced with a better payment system-the cashless policy.
Various advantages enjoyed by more developed nations such as the US has prompted the Central Bank of Nigeria (CBN) and SMEs to adopt the cashless policy. At the end of the 1980s the use of cash for purchasing consumption goods in the US has constantly dropped with inflation (Humphrey, 2004). Nigeria’s aim to be among the biggest economy by 2020 has driven her to gradually move from a pure cash economy to a cashless policy. Since Nigeria gained her independence in1960, there have been different constitutional reforms, change in economic and banking policies and SMEs mainly aimed at stabilizing the economy, enhancing social welfare and enhancing economic growth and development.
In view of being one of the best and biggest economies in 2020, the CBN has started implementing the cashless policy in some major states/cities in Nigeria such as Lagos, Abuja, Kano, Port-Harcourt and Onitsha. The CBN and Pro cashless policy activists have asserted reduction in crime rates, minimized risk associated with carrying huge sums of money, reduction in political corruption, reduction in banking cost, improvement on monetary policy in management of inflation and the overall growth and development of the economy of Nigeria as advantages associated with the implementation of the cashless policy.
1.2 STATEMENT OF THE PROBLEM
Monetary policy as a technique of economic management to bring about sustainable economic growth and development through cashless policy and SMEs introduced by the Central bank of Nigeria (CBN) is not fully operational due to high rate of illiteracy, in-adequate sensitization/education of the benefits of the cashless policy, and in-adequate logistics (such as the provision of internet connections in commercial areas, computers and Point on Sale (POS) machines).
Apart from the physical challenges, economic data and indicators are not fully available and reliable. There is a great challenge in attempting to analyze the true impact of the cashless policy on the economy of Nigeria as only few monetary and macroeconomic indicators can be traced with relation to the subject matter. Several scholars have attempted to analyze the cashless system. However, it becomes clear that few studies present a comprehensive evaluation of cash-less payment implications in developing countries. Most ignore its economic benefits of the equation while some do incomplete examination of its negative implications. This is often due to unreliable panel data for monetary and macroeconomic indicators. Although, this study focuses on Nigeria, it is difficult to translate cashless studies from one country to another. Even payments instruments that look similar across countries on the surface may be different due to historical and legal variations (Daniel et al, 2004).
1.3 OBJECTIVES OF THE STUDY
The main objective of the study is to examine the impact of the cashless policy on the economy of Nigeria and how it affects economic growth. Specific objectives of the study include:
1. To examine the impact of the cashless policy on economic growth of Nigeria .
2. To examine the various challenges associated with the implementation of the cashless policy/Shoprite Abuja.
3. To proffer suggestions on how cashless policy and other monetary policies can be managed for better contribution to the economic growth and development of Nigeria.
1.4 RESEARCH HYPOTHESIS
1. Ho: Cashless policy has no significant impact on the reduction of inflation in Nigeria
Hi: Cashless policy has significant impact on the reduction of inflation in Nigeria.
2. Ho: Cashless policy has no significant impact on economic growth of Nigeria
Hi: Cashless policy has significant impact on the economic growth of Nigeria.
1.5 SIGNIFICANCE OF THE STUDY
The study will give various insights into the various implications the introduction of the cashless policy will have on the economy of Nigeria. Through examining various economic indicators such as the gross domestic product (GDP) and inflation, the study will examine and compare growth trends and changes to determine whether the cashless policy introduced by the CBN has a negative or positive effect on the economy of Nigeria.
Various challenges and prospects identified in the study will also enable various stakeholders to tackle these challenges effectively by making policies that will address them and boost the economy of Nigeria.
1.6 SCOPE OF THE STUDY
In pursuance of the objective of the study; attention shall be focused on electronic banking among other electronic commerce implementation. In order to conduct an empirical investigation into the adoption of Electronic banking in Nigeria and will also examine the nature of electronic banking operations from the CBN bulletin from2010-2012.
1.9 DEFINITION OF TERMS
Access Products – Products that allow consumers to access traditional payment instrument electronically, generally from remote locations.
ATM Card – An ATM card (also known as a bank card, client card, key card, or cash card) is a payment card provided by a financial institution to its customers which enables the customer to use an automated teller machine (ATM) for transactions such as: deposits, cash withdrawals, obtaining account information, and other types of banking transactions, often through interbank networks.
CBN - Central Bank of Nigeria.
Chip Card – Also known as an integrated circuit (IC) Card. A card containing one or more computers chips or integrated circuits for identification, data storage or special purpose processing used to validate personal identification numbers, authorize purchases, verify account balances and store personal records.
Electronic Data Interchange (EDI) – The transfer of information between organizations in machine readable form.
Electronic Money – Monetary value measured in currency units stored in electronic form on an electronic device in the consumer’s possession. This electronic value can be purchased and held on the device until reduced through purchase or transfer.
Internet Banking- This is a product that enables the Bank leverage on the Internet
Banking System Module in-built on the new Banking Application (BANKS) implemented by the Bank to serve the Internet Banking needs of the Bank’s customers.
Mobile Banking - This is a product that offers Customers of a Bank to access services as you go. Customer can make their transactions anywhere such as account balance, transaction enquiries, stop checks, and other customer’s service instructions, Balance Inquiry, Account Verification, Bill Payment, Electronic fund transfer, Account Balances, updates and history, Customer service via mobile, Transfer between accounts etc.
Payment System – A financial system that establishes that means for transferring money between suppliers and of fund, usually by exchanging debits or Credits between financial institutions.
Point Of Sale (POS) Machine - A Point-of-Sale machine is the payment device that allows credit/debit cardholders make payments at sales/purchase outlets. It allowed customers to perform the following services Retail Payments, Cashless Payments, Cash Back Balance Inquiry, Airtime Vending, Loyalty Redemption, Printing mini statement etc.
Smart Card – A Card with a computer chip embedded, on which financial health, educational, and security information can be stored and processed.
Transaction Alert - Our customers carry out debit/credit transactions on their accounts and the need to keep track of these transactions prompted the creation of the alert system by the Bank to notify customers of those transactions. The alert system also serves as notification system to reach out to customers when necessary information need to be communicated.
Western Union Money Transfer (WUMT) - Western union Money transfer is a product that allowed people with relatives in Diaspora who may be remitting money home for family up-keep, Project financing, School fees etc. Nigerian Communities known for having their siblings gainfully employed in other parts of the world are idle markets for Western Union Money Transfer.
· Daniel, D. G., R. W. Swartz, and A. L. Fermar, (2004): ―Economics of a Cashless Society: An Analysis of Costs and Benefits of Payment Instruments‖, AEI-Brookings Joint Center
· Humphrey, D. B. (2004): ―Replacement of cash by cards in U.S. Consumer Payments, Journal of Economics and Business, 56, 211–225.
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