Impact of Introduction of Cashless System on the Nigerian Economy (a Case of First Bank Plc Afikpo)



This study focuses on the impact of introduction of cashless system on the economy. The objectives of this work is to find out on the impact of cashless system in Nigeria, especially in the rural banks, and in so doing would enhance conveniences and savings on the part of Nigerians in the rural areas, it would also reduce the cost of processing and managing cash in the rural areas of the country. In carrying out the work the researcher consulted several work ranging from internet textbooks, Newspaper, course work and journals. They also sought the opinion of practitioners through interviews and questionnaires. The data collected were analyzed, tabulated and presented using average and simple percentage. The method used was descriptive method. The findings made during the study was that the cashless system would be difficult to apply in the rural banks in Nigeria because the rural dwellers do not understand the meaning of cashless system and what it is all about. It is recommended that government should provide a cheap and secured internet service, constant electricity and all necessary platforms in the rural areas and Nigerian economy at large. The government should also organized seminars and workshop to educate rural inhabitants on the operational system and impact of cashless system on Nigeria economy.




1.1   Background of the study

        The central bank of Nigeria (CBN) has introduced a new policy on cashless based transaction. Which stipulates or cash deposited that exceed #560,000 for individuals and 30,000 for corporate bodies.

        The new policy on cash based transaction (individuals and deposited in banks, aims at reducing (NOT ELIMINATING) the amount physical cash (coins and notes circulating in the economy, and encouraging more electronic based transactions)

(Payment for goods, service transfer, etc). This new cashless policy was introduced for a number of key reasons, including:

  1. To give development and modernization of out payment system in line with Nigeria vision 2020 goal of being amongst the top 20 countries by the year 2020. An effective and modern payment system is positively corrected with economic development, and is a key enable for economic growth.
  2. To reduce the cost banking service (including cost of credit and drive financial inclusion by providing more efficient transaction option and greater reach.
  3. To improve the effectiveness of monetary policy in managing inflation and driving economic growth. In addition, the cashless system policy aims to curb some of the negative consequences associated with high usage of physical cash in the economy including:
  1. High cost of cash: There is a high cost of cash along the value chain from the CBN and the banks to corporation and traders; every one bears the high cost associated with volume of cash handling.
  2. High risk of using cash: cash encourages robberies and other cash related crimes. It can also lead to financial loss in the case of fire flooding incident.
  3. High subsidy: CBN analysis showed that only the percent of daily banking transaction are above, but the pursuit accounts for majority of the high value transaction. This suggests that the entire banking population subsidizes the costs that the tiny minority percent incur in terms of high cash usage.
  4. Inefficiency and corruption:  High cash usages enable corruption, leakages and money laundering, amongst other cash related fraudulent activities.  

A cashless system is a system in which money is spent without being physically carries from one person to the other. The first issue in the cashless system is the issue of electronic purse. This is electronic information about how much a person has stored in the bank and how he can spent. Cashless system according to Ikechukwu and Alexandra (2011) is a system where no one used raw cash and all purchases made are by credit cards, cheques or direct transfer from one account to another through mobile banking.

Cashless system was first introduced as SUIC (super urban intelligent card) which serves as debit card. The root of the Japanese cashless system originated not in Japan but rather in Hong Kong in 1997 when the mass transit railway (MTR) corporation, operator of the city’s rapid transit railway introduced the octopus to streamline fare collection, the octopus card was the world first smart card unlike the provisions cards that transmitted data when their magnetic strips were swiped (the way most credit cards are swiped) the smart card utilized radio frequency identification (RFID) technology.

A micro chip on the card would transmit information when activity by a wireless receiver located at transmits system entry and exist points. While same industry watchers believe that Nigeria is not ripe for cashless system due to poor infrastructure and a number of risk associated to it, other stakeholder argue that the country has gathered sufficient especially telephone banking to bring the informal sector into the formal and facilitate Nigerians transformation from cash bases to cashless system. It is most suitable in operation where activities consist of series of movement transfer of cash from one place to account to another.

        Also, it has benefits to both rural banks and the government. To rural banks, it reduces cost of operation and increase customers satisfactory by rendering personalize service to than. To government, it helps in the area of taxation, budgeting, planning and accountability and improves government services. This work will also look at the following;

  1. The history of cashless system of Nigeria economy.
  2. The objective of the cashless system of Nigeria economy
  3. The meaning of Nigeria economy
  4. The effect of cashless system on Nigerian economy.
  5. The pre- conditions of cashless system on Nigerian economy.
  6. The impact of cashless system on Nigerian economy.


First bank of Nigeria is a Nigerian bank and financial services firm. It is the country’s third biggest bank. First bank traces its ancestry back to the first major financial institution founded in Nigeria; hence, the name. The current chairman is Prince AJIBLOA AFONJA. The bank is the largest retail lender in the nation, while most banks gather funds from consumes and loan it out to large corporations and multinationals, first bank has created a small market for some of its retail clients. First bank of Nigeria maintains a subsidiary in the United Kingdom FBN bank (UK), which has a branch Paris.

The bank also has representative offices in South Africa and china. In October 2011, the bank acquired banquet infrastructure de credit (BIC), a leading bank in the democratic republic of Congo (DRC), the company was named the best bank in Nigeria by Global finance magazine in September 2006. The firm auditors are price water house coopers (chartered accountants). The firm has solid short and long term ratings from Fitch and the global credit rating company partly due to its low exposure to non performing loans. The firms compliance with financial has also strengthened with economic and financial crime commission giving it a story rating.

        The bank traces its history back to 1894 and the bank of British West Africa. The bank originally served the British shipping and trading agencies in Nigeria. The founder, AIFRED LEWISJONES was a shipping magnate who originally has the monopoly on importing silver currency into west Africa through his Elder Demister Shipping company. In 1957, bank of British West Africa (BWA). After Nigeria’s independence in 1960, the bank began to extend more credit indigenous Nigerians. At the same time, citizens financial control mechanism and more citizen began to patronize the new bank of West Africa.

In 1971, standard bank of Nigeria listed its shares on the Nigeria stock exchange and placed 13% of its shares capital with Nigeria investors. After the end of Nigerian civil war, Nigeria military government sought to increase local control of the retail banking sector. In response, new standard bank Nigeria to 38%. Once it has lost majority control, standard chartered wish to signal that it was no longer responsible for the bank and the bank has re organized and had more Nigerian directors than ever. In 1982, first bank opened a branch in London, than in 2002 it converted to subsidiary, FBN bank (UK); it had become a commercial bank in 2002.

As the case study, first bank plc Afikpo, first bank Nigeria plc deployed a new operating structure or model in 2010,in which we made important change to both our marketing and operation, structures. For the market facing business units, we moved from geographical structures to a customer segments, enabling each business units to deepen its understanding of its customers and to develop targeted products and services. We believe that this approach will enable us to increase our share of wettest share, and also improve profitability. The service which first Bank of Nigeria plc, AFIKPO branch render to the customers; to issue bills and utilities payment. The power holdings company of Nigeria (PHCN) bill telecom subscriptions, TV subscription, water rates, and waste bills.

The collection; churches/mosques, hospitals, petrol sales, Nigeria Immigration services, and FRSC drivers license collection. First online: internet banking that allows you access your account online real time 24hrs a day, 7 day a week.

First mobile: first mobile from first bank means you have access to your account, anytime, anywhere, via your mobile phone.

Trade alert: is an alert designed for trade financial customers who wants to monitor their foreign trade transaction automated teller machine (ATM) is a self service machine that dispenses cash and perform some human teller functions like balance enquiry, mini statement.

1.3                PROBLEM ANALYSIS

The counting and handling of paper money, coins and cheques is an essential and very time consuming part of every bank business. Also there are many security problems to be considered when financial institution handle and transport physical currency. This requires the employment of a number of people to perform this task. Smaller amounts of cash are counted manually, while large sums of money are counted by machine. Machines are faster and generally more accurate in the counting of money. There is the task of moving large bundles of money or bags of money within the bank. In the cashless system, the risk due to employee handling money is completely eliminated since there is no physical money to be counted, moved or physically handed in any way. Cash – based system many risks, including accidents involving the carries vehicles accidental lost of money, armed robbery or even the murder or abduction of employee.


  1. To determine the effect of cashless system on Nigerian economy.
  2. To study the adoption of cashless system in the rural areas.
  3. To study the precondition of the introduction of cashless system in the Nigeria economy.
  4. To study the workability of the cashless system in the Nigerian economy.
  5. To determine the possible solution to anticipated problems.
  6. Relevant research questions.
  1. What is the effect of cashless system in the Nigeria economy?
  2. What impact would adoption of cashless policy have in the rural areas?
  3. What are the pre- conditions in the introduction of cashless system in the Nigeria economy?
  4. What is the workability of the cashless system in the Nigerian economy?
  5. What are the possible solutions to anticipated problems?


The study focused on the cashless system of banking services with special reference to the first bank of Nigeria (plc). It examines the level of commitment of banks to the cashless system services with emphasis on customer identification, the quality of service rendered and the viability of and success of the venture.

The study however, could have covered other banks in Nigeria which have engaged in the cashless system of banking services, but for the inaccessibility of some banks and due to financial constraints, it was limited to first bank of Nigeria plc.

1.6       ASSUMPTION

It is assumed that limited time, finance and other resources would be hindrance to the timely completion of the project. The researcher also assumed that the staff and managers of Nigeria economy would cooperate with the researcher in completing and returning the completed questionnaires. Finally, the researcher also assumed that the necessary information on the study will be gathered from different sources as mapped out.


This research work definitely has a lot to contribute the field of knowledge and to the Nigerian economy. So many people will benefit from this work in different ways for instance. This work would provide information for take –off researcher who would want to find out more on how possible it is for cashless system to improve the economy of Nigerian system.


Accountancy students in higher institution would benefit much from this study because it provides an insight on rural banking system. Also it follows a format for project writing, hence would be guide for many students writing their academic projects.


Managers in the principles of management are in the form of pre-determined solution for reportedly occurring problems.

It would be a guide to managers in the optimum utilization of resources and effective administration, in every organization. Physical (material, machines, money, e.t.c) and human (manpower) resources are used. The functions of management in cashless system are nothing but to put them to optimum use or avoid wastage of resources and this is possible only when a manager make use of the principles of management.

Every government wants the development of its economy of which Nigeria is not an exception fortunately this work reveals an essential ingredient for the impact of cashless system on rural banking system.


Cashless system: According to VAIDYA (2011) mobile banking is a terms used for account transactions payments, credit applications and other banking transactions through a mobile device such as mobile phone or personal digital assistant.

(PDA) E – Payment: according to Geberemicheal (2011) E-payment involves every financial transaction that is done without the physical cash. It is also the transfer of money from one account to another either within a single financial institution or across multiple institutions through computer based system Nigeria economy. This brief describes the types of economy including the degree of market orientation the level of economic development, the most important natural resources and the unique areas of specialization.




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