Disadvantages of Cashless Policy in Nigeria

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In 2012, the Central Bank of Nigeria introduced a new policy on

cash-based transactions which entailed a charge on daily cash

withdrawals that exceed N500,000 (for Individuals) and N3,000,000 for

Corporate organizations. This means that individuals and corporate

organizations that made cash withdrawals above the specified limits

would be charged a service fee.









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withdraw amounts exceeding N500, 000 will be charged a processing fee

of 3%, they will also be charged a processing fee of 2% for lodgements

Corporate account owners who withdraw amounts exceeding N3 million

will be charged a processing fee of 5%. They will also be charged a

processing fee of 2% for lodgements



Disadvantages of Cashless Policy in Nigeria







The implementation of the cashless policy was aimed at reducing the

amount of physical naira notes circulating in the economy. This would

encourage more electronic-based cash transactions through the payments

for goods, transfers of cash, etc.







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The cashless policy can simply be described as financial operations

performed without the use of banknotes. With the cashless policy,

financial transactions will be carried out with the use of credit

cards, electronic transfers and bank transfers while avoiding physical

cash handling from one person to another.



A cashless economy is an environment where money is spent without

being physically transferred from one person to the other. The

adoption of a cashless policy has implications for the citizens of a

country. For example, people and organizations are forced to convert

their paper money to bank deposits. The hope is that when people and

organizations put their naira notes into deposits, they would then be

persuaded to spend the money rather than save it because of the

disadvantages that come with bank deposits such as high-interest rates

and fees. This would then boost consumption and the GDP. According to

the Central bank, reasons for the adoption of the cashless policy are

as follows:High cost of cash: There is a high cost of cash that comes

with volume cash handling from the CBN to commercial banks and

Nigerians too.

High risk of using cash: Volume cash handling encourages robberies,

theft and other cash-related crimes. It also can lead to loss in the

case of fire and flooding incidents.

Inefficiency & Corruption: Volume cash handling as well as high cash

usage enables corruption, embezzlement, money laundering and other

cash-related fraudulent activities.



In spite of the good intentions that came with the adoption of the

cashless policy, it has come with its own criticism and disadvantages.

That is what this article espouses. Here, you will find the

disadvantages that come with the cashless policy. Read on below:





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Machine malfunctions



The cashless policy involves the use of electronic transfers, payments

etc. Often times, there are complaints with POS malfunctions and other

technical issues that come with it. It is important that the

manufacturers of the POS machines provide easy and quick solutions or

other available options to tackle several technical issues that may

result in the course of using POS machines. The government should

include fair competition in order to prevent monopoly-like behaviour

by POS and other financial tool manufacturers.



Debiting customers’ account twice



There is often the complaint of customers being debited twice in the

course of the transaction while using the ATM’s machine. These

technical malfunctions have to be addressed.



High transaction charges



There is a complaint of high transaction charges that come with online

as well as machine transactions. This is discouraging for the masses

and poses a challenge to the implementation of the cashless policy.



Infrastructure deficit



Many have argued that the financial institution in Nigeria is not

adequate to carry the many responsibilities of a cashless society. The

government needs to be more strategic and intentional about the

expansion of many more electronic media such as ATMs, Point of Sales

system (POS) in the country for the economy to be affected and

positively impacted by the cashless policy. There needs to be the

provision of adequate and well-functioning infrastructural facilities

in Nigeria. Another infrastructure that needs to be provided is

electricity. The availability of electricity goes a long way in

facilitating the usage of electronic money. This in turn would

influence the overall success of the cashless policy. Whenever there

is a case of power outage or poor network services, financial

transactions come to a halt.







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Poor Network connectivity and Communications



Nigerian telecommunication sector has always been plagued by poor

network and connectivity. It seems that Telecommunications companies

in Nigeria pay more attention to quality voice services rather than

network connectivity. This makes for slow access to the internet and

inconsistent network availability. The government needs to address

this issue by making policies for Telecommunication companies so they

can guarantee network quality and availability at all times and

especially in the use of data and internet services.



Financial illiteracy



Another challenge to the implementation of cashless policy in Nigeria

is the high rate of illiteracy. Many in remote villages are not

financially literate enough to understand how cashless transactions

work.



Inadequate sensitization or education



Many have faulted the government on their lack of adequate

sensitization and education to the masses on the benefits of cashless

policy



High cost of transactions and High interests



Paper money will cost a person almost nothing to hold or keep at home

except for the risk of theft and robbery. However, there is no

incremental risk. However, converting paper money into bank deposits

will cost you (in terms of high-interest rates). There is also the

risk of losing one’s money if one’s bank goes under.



Problem for remote villages



The cashless policy would be problematic for people in remote areas of

the country who do not have access to the banking system.



Bank Administrative Competence



Many have also argued for the inability of banks to deal with the

administrative hassle of handling small cash transactions and related

customer queries.







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The government needs to put more regulations in place for the cashless

policy to be successful. For example, penalties must be put in place

so as to enforce the public to comply with the cashless policy.





















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