The world is evolving every day. Gone are the days when communication was limited to face to face, signals or by postage. Today communication can take place between two or more people from any distance in the world through telecommunication or internet or other technological means. But the technological world is not stopping at that rather, new innovations are coming out, making life easier and of course more and more sophisticated.

These innovations as they come makes serious impacts on the way things are being done all over the world and whatever is dictated as the new trend by the technological power house becomes the target of every nation. Thus, the trend of e-payment that began in the United States of America decades ago has become the next big thing for developing countries. For many years, developed country like Canada, United Kingdom, Sweden, France among others, have run their economy trough electronic payment without hitches. Interestingly, a lot of other African countries have keyed into this system, embracing electronic system of payment while dealing with less of cash. Countries like Kenya, Tanzania, South Africa, and Ghana among others have become reference point in the continent in terms of electronic payment system. Kenya for instance had introduced the M-PESA, a small value electronic payment and store of value system that is accessible from ordinary mobile phones. It has been exceptional growth since its introduction by mobile phone operator Safaricom in Kenya in March 2007 and has already been adopted by 9 million customers which is about 40 percent of Kenya’s adult population. Again several electronic payment system has been introduced in Ghana in recent times with the most significant being e-zwich smart card payment system, a national domestic smart card payment system meant to reduce the large amount of cash held out side the banking system. Already it is showing the signs of reversing the trend of majority un-banked population in the country as more people embrace it.

In this regard, it is not surprising that Nigeria having successfully transverse the world of Global System for Mobile Communication (GSM) is now set to test the waters of a cashless economy. A key factors in the adoption of this new system, according to the Central Bank of Nigeria (CBN) is the fact that Nigeria economy is too heavily cash-oriented in transaction of goods and services, a development which is seen as a negation to global trend considering Nigeria’s ambition to be amongst the top 20 economies of the world by the year 2020. Besides, it is also targeted at reducing the huge volume of cash transactions which imposes tremendous cost to the banking sector and, consequently the customer, in terms of cash management, frequent printing of currency notes, currency sorting and cash movements. A cashless economy or an e-payment system is a situation where there is little or very low cash flow in a given society, thus every other purchases and transaction will be made by electronic channels, examples of which are direct debit electronic fund transfer, while payments, multi-functional ATMs, internet banking and a significant increase in point of sales (POS) penetration and usage. In other word, it simply refers to the widespread application of computer technology in the financial system. Payments under this new system will range from a list of options such as cheques, wine transfer. Debit and credit cards, online transactions and mobile banking (Central Bank of Nigeria, transition to a cashless economy in Nigeria. May, 2011).

As a result of this new technological change in the banking system world over and Nigeria’s consideration to be amongst the top 20 economies of the world by the year 2020, the this new system Central Bank of Nigeria(CBN), lead by its Governor Sanusi Lamido Sanusi, has put forward a policy requiring that all cash withdrawals and deposits be set at a daily limit of a maximum of N150,000 while pegging that of corporate entities at N1,000,000 with penalty fees of N100 per extra, N1,200 per extra, N1,000 imposed on individuals and corporate defaulters respectively (Central Bank of Nigeria, Transition to a cashless economy in Nigeria, May 10, 2011).

In this study, the preferred channels of operation of the Central Bank of Nigeria (CBN) cashless policy will be analyzed.


Indeed the effort towards a better baking as regards to settling utility bills, payment for goods and services and money transfer can only yield the desired result if there are reliable and efficient payment system in place and this is the trust of the cashless economy system as initiated by the Central Bank of Nigeria (CBN). Despite that fact that the Central Bank of Nigeria and other indigenous banks are spearheading financial system reforms, we are yet to make a significant breakthrough in the acceptability, efficiency and reliability on non-cash payment system in Nigeria because, cash still remains the most popular transaction payment instrument, even cashless system is being contemplated.


This study attempts to tackle issues on the operationalization of the cashless system through the various e-payments schemes available, its acceptability, contribution to the reduction of physical cash payment system and the possible challenges of its hitch free operation. The following objectives are outlined.

To find out the channels of operation

To find out the most preferred channels of operation

To find out its procedures of operation.

To find out challenges/problems of operation.


The e-payment system even though has been in use in other advanced countries in the world and most recently in some African countries, it is a relatively new in the Nigerian financial system. Therefore, this e-payment system and it various channels of operation needs to be clearly explained to all stakeholders/users for there to be a clear understanding of how this system works and the enormous economic benefits to be gained if the system actually works as described by the Central Bank of Nigeria (CBN).

For this study, the following are the research questions:

What are the channels through which the cashless system can be operated?

What are the most preferred channels of the system’s operation?

What are the procedures of the system’s operation?

What are the challenges/problems of the operation of the system?


This study aims at analyzing the cashless system, its preferred channels of operation, the procedures and some potential challenges that many stand as an impediment against the smooth running or operation of the cashless system in Nigeria. Also, references will be made with other channels of operation in other countries of the world. The list of the available channels through which the system can be operated world over is in exhaustive. Some selected channels of means through which is system can be operationalized. Another important issue that this study will be also focus is the Nigeria perception about this relatively new trend (cashless system) in the financial system by the apex bank.


The primary informal nature of Nigeria’s economy, however, requires a heavy reliance on cash transaction in both the retail and commercial sectors. The enormous negative effect of a high usage of physical cash includes: cash related crimes and robberies, increasingly high cost of cash exchanging hands and enabling corruption, high cost of maintenance and money laundering just to mention a few. All these has a considerable effect on the Nigeria financial system. Thus the cashless policy through effective and efficient channels of operation will reduce these problems to the barest minimum.

This study is designed to examine the operationalization of the cashless system in Nigeria through its preferred channels, thereby creating more awareness about the system and the various available channels of operation to the general public. Thus this study including its conclusion and recommendations of the research findings will be very useful to all stakeholders (including customers, corporations and government) bringing to their knowledge, have full understanding of the cashless system, its benefits and the role of these stakeholders to ensure the effectiveness of this system.


One of the major limitations of this study is relatively small sample size and this is as a result of cost and timeliness. Another limitation encountered in the course of this research is the fact that some respondent were unwilling to fill the questionnaire administered, reason being either they were too busy and or uninterested.






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