CHAPTER ONE

INTRODUCTION

Background of the study

Cashless policy is a policy established in Nigeria by the

central bank in Nigeria in 2012 to club excesses in the handling

of in Nigeria.

The policy is meant to: drive development and

modernization of our payment system in line with the Nigeria’s

vision 2020 goal of being amongst the top 20 economies by the

year 2020. An efficient and modern payment system is positively

correlated with economic development and is a key enabler for

economic growth. To reduce the cost of banking service

(including cost of credit) and drive financial inclusion by providing

more efficient transaction option and greater reach. To improve

the effectiveness of monetary police in managing inflation and

driving economic growth (www. cbn gov. /cashless).umeano

(2013) the head shared service of the central bank of Nigeria

(CBN). Shed high on the introduction of the cashless policy,

umeano (2013) stated that cashless policy of the central bank of

Nigeria was meant to discourage excessive use of cash in the

economy. Umeano, (2013) note that use of cash has negative

consequences such high cost of printing and attendant risk of

hiding cash (daily trust).

According to server, (2012) report that, the cashless

Nigeria project was created to enhance financial induction and

intermediation to reduce revive leakage in an effort to improve

internally generated revenue (IGR), decrease incidence of sum

of cash payment occurring in the country. The charges for and

related dangers of cash driven economy system were high and

rising endangering Nigeria’s economic state. Nigeria has

traditionally been a country beset by money laundering, illegal

financial activity and –of-control inflation. To morph from his

handicapped system into economic leader of the 21th century,

Nigeria must have an economy that’s less reliant on cash and

more fluid with its payment methods (seaver, 2012).

According to obi (2012) the managing director/CEO of e-

transact international limited, Mr. obi gave reasons why the

central bank of Nigeria (C B N) has embarked on cashless

policy, he said that cost of minting the Nigeria is so high that the
best alternative is to have an economy where less or no cash is

required for various transactions specifically, obi said that

average cost of a naira note you in your hands is about N4. If

you produce N1 billion note Nigeria, which means you have

spent N4 billion. So I can see why the governor of central bank

of Nigeria (C B N) was calling for a cashless economy. He want

to reduce cost of involve minting our naira as much as possible.

Obi notes that the directive was in the right direction, the

naira is ‘not durable and security of handing cash is not

guaranteed, cash is difficult to document because you cannot

really capture all in financial system, cash based economy

encourages money laundering activates. There is high level

evasion in a cash based economy (www. nsacc. [Link] /

imperative of advancing)

1.2 STATEMEMENT OF PROBLEM

The research is undertaken with the aim of solving specific

problem. In order to increase knowledge in chosen area of study.

The major problems this research aims to look into include:

mobile
Mobile banking

Financial institution present may opportunities for electronic theft

and cyber- attacker’s’ improved techniques and ever more

aggressive malware makes their increasingly vulnerable (Jan

Volcker). The proliferations of mobile devices increase the

complexity of the security problem for banks. The number of

connected device now exceeds the number of people on the

planet there are

So. Many passwords account channels and different ways to do

mobile banking (ATM, phone, web) that hackers are targeting

everyone, everywhere and by any method possible.

LITERACY

Literally is the ability to identify understands, interpret,

create, computer and communicate using visual audible and

digital material across discipline and in any context. Rangy 12

percent of the world’s population is considered functionally

illiterate with only basic or below – basic literacy level in their

native languages. Cashless policy is meant for those who can

read and write. In Nigeria the computer programmed language is

English and those who cannot read and write or those who can

not understand English are at disadvantage position.

1.3 OBJECTIVES OF THE STUDY

The broad objective of this study is to educate on the

impact of a cashless policy and its challenges among financial

institution in Nigeria.

 To examine the effect of mobile banking on cashless

policy.

 To examine the effect literacy level on cashless policy

1.4 RESEARCH QUESTIONS

 What is the effect of mobile banking on cashless policy?

 What is the effect of literacy level on cashless policy?

1.5 RESEACH HYPOTHESIS

 Ho: there is no significant policy on mobile banking

Hi: there is significant effect of cashless policy on mobile

banking

 Ho: there is no significant effect of literacy level of cashless

policy
 Hi: there is significant effect of literacy level of cashless

policy

1.6 SIGNIFICANCE OF THE STUDY

This study is primary intended to improve cashless policy

operation in Nigeria by ensuring that all mechanism is put in

place to ensure the success of the policy. It will be beneficiary it

students in relevant discipline, it will be a source of literature

review for further research work.

It will educate stake hider in the banking industry, investors,

banks management team and Nigeria at large on the benefits of

cashless policy and how it will influence the performance of the

Nigeria banks.

1.7 SCOPE OF THE STUDY

In presume of the stated objective, this study will cover the

impact of cashless policy and its challenges among financial

institutions in Nigeria (guaranty trust bank Asaba delta state).

The data to be used for this study is primary data.

1.8 LIMITATION OF THE STUDY

In the course of carrying out this research work, some

challenges were encounter which includes

 1. Time: there was limited time for me to carry out the

research work as a result of commitment on the part of my

studies and other unavoidable programmers, however I

ensuring that they little time available for this study were

adequately utilize in ensuring a reliable findings.

2. Financial challenges: this research work was limited due to

insufficient fund to carry out extensive study, however I

ensuring that the finance available for this study were

adequately utilize in ensuring reliable findings.

1.9 DEFINITION OF TERMS

 Computer: computer is electronic device which is capable to

receiving information (data) and performing a sequence of

logical operation in accordance with a predetermined but

variable set of procedural instruction (program) to produce

a result in the form of information or signal. Computer uses

micro chip processor to process data at every high speed

(ouru, 2012).

 Bank: bank is a financial establishment that uses money

deposited by customers for investment, pays it out when

 required, make loans at interest and exchange currency

(David, 2014)

 Interest: the interest uses the same software as the internet.

It is a network of computers within the same organization

with a view of enhancing data flows from one organization

and another as well as between individual and organization

(Johnson, 2012).

 Intranet: the intranet uses the same software as the internet.

It is a network of computers within the same organization

with a view of enhancing data flows from one end of the

organization to another (ifeanyi 2010)

 Automated teller mechanic (ATMS): ATMS are designed to

dispense cash to customers automatically after some form

of identification process that requires a PIN (personal

identification number) (march, 2011)

 Electronic cards: electronic cards may come in the form of

credit, debit and smart cards (Adeboye, 2009)

 Credit cards: credit card is a small plastic card issued by a

bank a building society allowing the holder to make

purchase credit (concise oxford English Dictionary 2007)

 Debit credit: A debit card allows the holder to transfer

money electronically from one bank account it another

when making a purchase. Debit card enables a customer

to make direct cash withdrawal or payment uses an ATMS

or POS terminal( concise oxford English dictionary 2007)

 Smart card: A smart card is a plastic card with a built in

microprocessor used for electronic processes such as

financial transactions and personal identification. Smart

cards are designed to be more intelligent than the ordinary

magnetic credit or debit card (concise oxford English

dictionary 2007)

 E-Banking: electronic banking is a aspect of electronic

commerce (e-commerce), which is any form of business

transaction or information exchange executed using

ICTS(baridoolle, 2012)
 Online / real- time banking: online banking allows customers

to transact business in any branch irrespective of the

branch his/her account is domiciled (baridoole, 2012)

 Intrenet banking : this involve sharing an organization data

on an international network of computers. Internet banking

enable banks to advertise their product as well as deliver

banking service, such as account opening loan request

e.t.c (onyinye 2012)

 Mobile banking: this offers customers the freedom of

banking with their mobile phone. It enables them keep in

touch with their account all the time (tunde 2012)

 Telephone banking: this enables customers to the freedom

of banking with their mobile phones. It enable them keep in

touch with their account allthe time (Tunde

 Telephone banking: this enables customers to make

business transactions through the telephone from

anywhere where there is access to telephone. As a result,

direct credit or debit instruction, as well as funds transfer

can be made without actually entering a bank’s premise

(obina 2008)
 Central bank: a national bank that provide financial and

banking services for its country’s government and

commercial banking system and issues currency (nweke,

2015)
 CHAPTER TWO

2.1 LIERATURE REVIEW

CONCEPTUAL FRAME WORK

The evolution of conventional money has been well

documented in economics literatures. However, recent

developments in information and communication technology

have influenced the role of money in economic activities. As a

result, we can now talk of electronic money and hence electronic

banking. Empirical studies have attempted on estimate of private

and social costs of payment instruments (Humphrey and Barger,

2008; Defrauder 2010), patterns in the use of E-payment

instrument (Humphrey 2012; carrot and Staten 2010), the

cashless and monetary economy (Gali and Gambetti; 2009,

krinoluzk and stoitenbery, 2010), and the role of central bank ina

cashless economy (cluadia and Dcrraawe 2001, marco and

banchiera 2004). While there is an avalanche of studies on these

difference stand of the empirical studies are yet to focus on

developing countries of African. Only recently, odior and banuso

(2012) attempted an evolution of the implication of cashless

banking in regards to monetary policy in Nigeria while

obumneke,(2014) looked at the effectiveness of cashless policy

in attracting foreign direct investment in Nigeria. In this

connection, more studies focusing on African in general and

Nigeria in particular are warranted.

Electronic banking is an important element in the Nigeria

financial sector. With has manual banking reduced drastically,

but also, the culture of keeping ledgers and recording

transactions by hand has reduced. Now banking as become very

fast, customers get their services more ;quickly and salable, local

and international transactions require little time as compared to

before (Sana 2011). According to business dictionary. Com,

electronic banking is the use of computers to carry out banking

transaction, such as withdrawals through cash dispensers of

transfer of funds at point of salse (pos) in other words, it is

banking transactions conducted through fund transfer by

automated teller machine, intended to speed operation and

reduce cost.

2.2 CASHLESS ECONOMY

Adeyemo (2005) see cashless economy as a shift from cash-

based transactions to electronic based transaction.

Nigeria economy is money or cash based economy where

transaction are done mainly with physical cash. The central bank

Nigeria (CBN) want to shift from money or cash based economy

to cashless economy where transaction with be made through

electronic digital and smart card

2.3 CASHLESS SOCIETY

Wikipedia (2012) cashless society can be describe as an

economy state where by financial transaction are not conducted

with money in the form of physical bank notes or coins, but

through the transfer or digital information (usually an electronic

representation of money) between the transacting parties.

Nweze (2009) see cashless society as society in which

purchases of goods or services are made by credit cards or

electronic fund transfer rather than with cash.

Okafor (2010) noted that cashless society have existed,

based on barter and other method of exchange and cashless

transaction have also become possible using digital currencies

such as bit coin

 Ifeanyichukwu (2012) over that cashless society is a move

from cash based society to electronic based.

In other work cashless society is a society in which cash is

replaced with, it digital equivalent.

Today the word is experiencing a rapid and increasing use

of digital method of recording managing and exchanging money

in commerce investment and dirty life. In many parts of the world

some countries now set limit on transaction and transaction

valve f6or which non-electronic payment may be legally .used

(ibe, 2013).

The friend toward the use of non cash transaction and

settlement began in daily life. During the 1990. When electronic

banking became popular. By 2010 digital payment method were

widespread in many countries (Wikipedia 2012).

2.4 THE CENTRAL BANK OF NIGERIA (CBN) CASHLESS

PROJECT

The central bank of Nigeria (CBN) introduced a new policy

on cash based transactions

The policy prescribed a cash handling charges on daily

withdrawal above five hundred thousand naira (N500,000.00) for

individual and three million naira (N300,000.00) corporate

bodies. (amire and omo are, 2012)

Nwachukwu (2014) assert that, the new policy on cash

based transaction (withdrawal) was enforced not to criminate the

use of cash but to reduce the volume of cash in circulation in the

economy and encourage more electronic based transactions

(pay for goods services, transfer e.t.c)

Wikipedia (2012) report that, the operation of the policy

started in Lagos state on 1st of January 2012. The service

charges were with held till 30th march of the same year to allow

seamless migration from the manual to electronic devices.

The second stage of the policy started in river, Anambra,

Abia Kano state, ogun and federal capital territory on 1 st July,

2013. While the program, nationwide gospel stated exactly a

year after 31st July, 2014.

The policy, seek turn a money economy to what can be

regarded as a cashless economy. A cashless economy is a shift

from cash based transaction to electronic based transaction

( nweze 2012).\

2.7 CASHLESS POLICY AND LITERACY

 Wikipedia (2012) literal is the ability to identify, understand,

interpret, and create, computer and communicate using visual

audible and digital material s cross disciplines and in any

context.

Nwachukwu (2010) assert that the ability to read write and

communicate connect people to one another and empowers than

to achieve things they never thought possible. Communication

and connection are basics of who we are and how we live

together and interact with the world.

Osakwe (2010) see literacy as the ability to read and write.

Bayem (2012) view literacy as competence or knowledge in a

specified area. The level of awareness on cashless policy will

enable the policy to be effective. Chukwuma (2014) posit that

literacy is the process of been educated or knowledgeable. No

programmer or policy can be effectively implemented what the

people (society) been educated on the that policy (omik, 2008).

Cashless policy literacy refersto the level competency on issues

bordering the development use and implementation of the policy

(Nwosu, 2014). The role of banks are cent8ral any discussion on

cashless policy bounce bank to bank on how they Have help

to .effectively implement this policy.

Policies of this kind failed as a result of the fact that, it was in

trusted in the hands of incompetent implementer who lack what it

take translate this policy, from paper policy to seal life policy

(Adesina,2015)

Odor (2014) noted that cashless policy in Nigeria have not

been effectively as a result of lack of awareness/education of all

a sundry on the important of the policy in our day today business

an d embrace by all a sundry will help to reduces the rate of

high rust of carrying physical cash and other benefit attach to it

(sakpaide, 2014).

CASHLESS POLICY AND MOBILE BANKING

Baridoole, (2014) mobile banking offers customers the

freedom of banking with their mobile phone. It unable they

keep in touch with their account all the time. Through mobile

banking, transactions alert are delivered to a customer’s

mobile phone, as well as other necessary information on the

state of his/her account. okafor, (2015) noted that mobile

banking her help in checking fraudulent actives on an

account, because customer can quickly remedy un-

authorized transactions mobile banking has made

transactions easy less costly and more efficient.

Ifeanyichukwu (2016) noted that banks has develop

different apps codes to facilitate money banking he said that

customer can now check their account balance, register,

open account, pin/password reset, BVN update, buy air time

transfer funds from that mobile phone, with mobile banking,

banking system or service has improve significantly thereby

making life simple for her customers.

OBJECTIVE

High cost of cash: there is a high cost of cash along. The

valve chain from the CBN and the bank to cooperators and

traders everyone bears the high cost associated with volume

cash handling.

High risk of using cash: cash encourage robberies and

other cases related crimes it also can leads to financial loss

in the case of five and flooding incidents

High subsidy CBN analysis showed that only 10 present of

daily banking transaction above 159k, but 10 percent

 account majority of the high valve transaction. This suggests

that the entire banking population subsidizes the cost that

tiny majority 10 percent incur in term of high cash usage.

THE NEED FOR CASHLESS POLICY

Umeamo (2013) said that cashless policy was meant to

discourage excessive use of cash in the economy. And the

use of cash has nagetive consequence such as high cost of

printing and attendant risk of holding cash.

According server(2012) note cashless Nigeria project is

intended to drive improvement and modernization of payment

process, minimizing the charges for banking and credit service

and driving financial addition by offering a more effective

transaction system and better reach.

The new cashless policy was introduced for a number of key

reasons including.

1. To drive development and modernization of our payment

system in line with Nigeria’s vision 202. An efficient and

modern payment system in positively correlated with

economic development and is a key enable for economic

growths.
IMPORTANTS OF CASHLESS

A Variety of Benefits Are Expected to be drive by various

stakeholders from an increased utilization of payment systems

these includes

 For consumers: increased conveniences more service

options reduced risk of cash related crimes, cheaper

access to (out of branch) banking services, access to credit

and financial inclusion.

 For corporation: faster access to capital reduced revenue

leakage, and reduced cash handling costs.

 For government increased tax collection greater financial

inclusion, increased economic development increased tax

collections; greater financial inclusion increased economic

development.

PROBLEM OF CASHLESS POLICY

 Cashless policy carries some problems particularly in a

country like Nigeria that’s susceptible to infrastructure,

instability; unstable power supplies and network failure

hinder smooth running cashless economy.

  To increase fraudulent activities, despite efforts and country

mechanism put in place fraud have been on the increase

over the years. The level of fraud future been heightened by

automation of most operation and transaction.

Low bandwidth the challenges witnessed with electronic

transfer on cashless policy can be attributed to how bandwidth

by the telecom operators.

 Unemployment cashless policy has led to less human

employees, less human are now needed to operate bank

transactions. Since most of the work is now being done by

machines. While some argued this lead to a rise in

unemployment in Nigeria.

 Cashless policy has increase in lave of fear of possible loss

of money through fraud, charges for service not successfully

rendered.

SUMMARY OF REVIEW

The transaction of the financial sector of the Nigeria economy

has always occupied a archival position in the economic policies

of all political admistration in Nigeria using electronic banking as

a platform; the cashless policy was introduced to further deepen

the financial market micro structure Nigeria has taken a bold

vision of being one of the twenty world economic by 2020 and

one of the proactive step they have taken to get there is the

cashless Nigeria project, with cashless policy payments can be

mad via mobile banking, online transaction credit and debit card,

wire transfer and chick.

In our increasingly mobile era, this just makes sense,

financial transactions can now be completed from anywhere at

any time, using mobile devices and computers.

The implantation of cashless policy is intended to drive

improvement and modernization of payment process, reduction

in money lauding, checking on terrorist financing, greater

convenience on the part of both customer’s and staffs

decongestion of banking hall, ease communication through ICT,

larger customers’ coverage, increase in customer’s satisfaction

and personalized relationship with customers and easier

documentation in transaction tracking minimizing the charges for

banking and credit service and deriving financial addition on by

offering a more effective transaction system and better reach.

 CHAPTER THREE

RESEACH METHODOLOGLY

INTRODUCTION

This chapter is a concern with the procedure used in

collecting and analyzing the data for this study. It is organized

under the following sub-headings.

1. Research design

2. Population of the study

3. Sample and sampling techniques

4. Research instrument

5. Reliability of the instrument

6. Method of data collection

7. Method of data analysis

8. Validity of the instrument

3.1 RESEARCH DESIGN

A research design is a structure and stagey used as a

guide in collecting and analyzing data for a research study. It is

used to obtain accurate, objective and valid empirical test the

relationship of the variable of the study.

3.2 POPULATION AND SAMPLING TECHNIQUES

 Population refers to the groups that are included in the

sample. That target population for this study is the financial

institution in Nigeria (Guaranty trust bank (G.T) ASABA DELTA

STATE)

3.3 SAMPLE AND SAMPLING TECHNIQUES

The sampling design considered appropriate was stratified

sampling method.

3.4 RESEARCH INSTRUMENT

The instrument used in this research is questionnaire

method. This procedure helped to elicit relevant information

needed in answering the research question.

3.5 VALIDITY OF INSTRUMENT

The instrument was validated by the research supervisor

and other experts

In the field of test construction. The supervisor approved it for the

research work.

3.6 RELIABILITY OF THE INSTRUMENT

The reliability of instrument was determined through test –

retest method. A quoted bank that is financial institution was

used for pilot study carried out at interval of two weeks.

3.7 METHOD OF DATA COLLECTION

The research visited guaranty trust bank and administered

the questionnaire for The purpose of data collection.

The research explained thoroughly the aim of the

questionnaires and the purpose of the study. The method used

was direct collection of existing data such as newspapers and

other publications which helped me to gather valid and reliable

data which are relevant to the issue under investigation.

3.8 METHOD OF DATE ANALYSIS

The method of data analysis means the statistical

techniques employed on processing the data collection with a

view to determining a convincing conclusion (Eliedu 2012)

The data collected from the structure questionnaire will be

analyzed using simple percentage.

Percentage = number of response x 100

Total number of respondent 1

The researches adapted the chi-square (x2) techniques

because the researches intends to test hypothesis raised

whether there is a functional relationship or significant impact

between the two variables formula for chi-square (x2)

X2 =£ (o – E)

Where

£ =summation

O = frequency observed

E = frequency expected

X2 = chi –square

The final decision rule is to reflect null hypothesis if the

calculated valve of chi- square than the critical or tabulated

valve.
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