Cashless Economy and the Nigerian Experience

Michael O. Ndugbu, Emeka Ochiabuto


The paper establishes a relationship between predictors of a cashless Economy and a country’s move toward a cashless economy. Data for this research were sourced from the Central Bank of Nigeria Statistical Bulletin and Bureau of Statistics. The study covered the periods between 1981 and 2013. The analysis employed ordinary least square to evaluate a set of factors which affect such move. The results as analyzed by EVIEW statistical software confirmed positive fundamental relationships among market discipline two years ago, financial inclusion in the past year, and previous move toward a cashless society and the move toward a cashless Economy. Standard of living had a negative impact on the move toward a cashless economy. The market discipline elasticity of Move toward a Cashless Economy was inelastic as Banks response has been below expectation towards reforms for Cashless Economy and finding alternatives. The lesser the time then the more inelastic Banks are to market discipline. Financial inclusion was found never a threat on the move toward a cashless Nigeria. The Financial inclusion move toward a cashless Economy is inelastic due to the inability of individuals, households, or groups to access appropriate financial services or products. Without this ability people are often referred to as financially excluded. Standard of living in Nigeria is a threat on the move toward a cashless Nigeria presently as the calculation of standard of living by real GDP per head does not translate to welfare of the citizens. To perform as expected, Banks should be given time to respond to market discipline. Given that financial inclusion is never a threat on the move toward a cashless Nigeria, Government should enable individuals, households, and groups to access appropriate financial services or products in terms of affordable credit, having less difficulty obtaining a bank account, not being financially at risk through not having home insurance, understand budget and manage money or plan for the unexpected, know how to make the most of their money. Government should try increasing disposable income ceteris paribus then the limit of such an Economy is a cashless Economy. Citizen’s welfare should make its way into the top of Nigeria’s priority list. One last additional point to wrap up is that what we do today defines our tomorrow. To be cashless and to sustain the cashless culture Nigeria should work on direction first and then think acceleration.

Keywords:  Cashless economy, Standard of living, Market discipline, financial inclusion.

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