The advancement of technology has revolutionized the way we live, work and interact with each other. The digital economy is now a major driver of growth and innovation, creating new opportunities for businesses and individuals alike. In Nigeria, this trend is rapidly gaining momentum, as the country moves towards a digital monetary society. This article will explore the progress that Nigeria has made in this direction, as well as the challenges and opportunities that lie ahead. We will examine the role of government, the private sector, and citizens in shaping the future of the digital monetary landscape in Nigeria, and the impact this will have on the economy and society as a whole. As the country moves forward on its journey towards a digital monetary society, it is important to understand the trends, challenges and opportunities that lie ahead and to identify the steps that must be taken to ensure a successful outcome.
Where are we?
Small and medium-scale enterprises (SMEs) play a crucial role in the Nigerian economy, accounting for over 90% of businesses and providing employment for a significant portion of the population. However, despite the Nigerian government’s efforts to promote a cashless economy, the majority of SMEs still rely heavily on cash transactions.
The Nigerian Central Bank’s cashless policy, introduced in 2012, aimed to reduce the country’s dependence on cash and promote electronic transactions. The policy introduced charges on cash withdrawals and deposits above a certain limit, with the aim of encouraging individuals and businesses to use electronic payment methods. However, the adoption of the policy has been slow, particularly among SMEs.
One of the main reasons for the slow adoption of the cashless policy among SMEs is a lack of awareness and understanding of the benefits of electronic transactions. Many SMEs are still unsure of how to go about setting up electronic payment systems and may be hesitant to invest in the necessary technology.
In recent weeks, the CBN had embarked on an aggressive campaign to implement the withdrawal of excess cash from the system through the redesign of the Nigerian currency. The process had been huddled by different challenges ranging from access to the new notes, policy penetration into the rural and underserved areas and overall readiness of the populace. The Nigeria CBN governor, Mr Godwin Emefiele, on the official CBN Twitter handle had said “We can no longer neglect the vast majority of the Nigerians whose daily payments needs are micropayments. We need to capture them in national statistics to further understand their transaction dynamics and properly target interventions in that sector of the economy”. In other words, there is no going back on the policy.
National Domestic Card Scheme
These whole activities also coincide with the introduction of a new payment card system by the CBN, the National Domestic Card Scheme – AfriGo. “The domestic card scheme is expected to strengthen the national payments system and deepen the usage of electronic platforms in Nigeria” Emefiele had said. Saying that the CBN’s Cash-less Policy has created value, engendered competition and attracted investment into the Nigerian banking and payments ecosystem. He expects that the card scheme will open more opportunities for the Nigerian economy to integrate the informal segment of the economy, reduce shadow banking and bring more Nigerians into formal financial services
What Must be done
To drive the adoption of the cashless policy among SMEs, the government and financial institutions should focus on educating small business owners about the benefits of electronic transactions. This can be done through workshops, seminars, and informational campaigns. Additionally, financial institutions should offer more affordable and user-friendly electronic payment solutions for SMEs.
Another barrier to the adoption of the cashless policy among SMEs is a lack of trust in electronic payment systems. Many small business owners may be concerned about the security of electronic transactions and may be hesitant to adopt them. To address this, the government and financial institutions should work to ensure that electronic payment systems are secure and reliable. This can be done through regular audits and penetration testing, as well as by providing SMEs with cybersecurity training.
The Nigerian government could also look at the examples of other African economies that have successfully driven the adoption of cashless policies among SMEs. For example, in Kenya, the government’s mobile money platform, M-Pesa, has been instrumental in increasing financial inclusion and driving the adoption of digital payments among small businesses. Similarly, in South Africa, the National Payment System has been successful in increasing digital payments among SMEs through the promotion of Electronic Funds Transfer (EFT) and Point of Sale (PoS) systems.
In order to promote the adoption of the cashless policy among SMEs, the government and financial institutions should also provide incentives for small business owners who adopt electronic payment systems. This can include tax breaks, grants, and other financial incentives.
There are different advantages of this to the economy, chief of these is that a cashless policy would also lead to increased transparency and accountability, as digital payments leave an electronic trail that can be easily tracked and audited. This would make it more difficult for businesses to engage in money laundering or other illegal activities.
Areas of Keen Attention
- Government Policy: The government plays a significant role in driving the adoption of digital monetary technology in Nigeria. Policies aimed at promoting financial inclusion and digital innovation have encouraged the growth of digital financial services in the country.
- Private Sector Investment: The private sector has been a key driver of digital monetary adoption in Nigeria, with companies investing heavily in technology and infrastructure to provide financial services to underserved populations.
- Mobile Penetration: The high level of mobile penetration in Nigeria has been a major factor in the growth of digital monetary services, as mobile phones are widely used to access financial services.
- Consumer Demand: The increasing demand for convenient, low-cost and secure financial services is driving the growth of digital monetary technology in Nigeria. Consumers are seeking new and innovative ways to manage their finances, and digital monetary services are meeting these needs.
- Technological Innovations: The rise of technological innovations such as blockchain, artificial intelligence and machine learning are transforming the financial services industry and are driving the growth of digital monetary services in Nigeria.
- Financial Literacy: Increasing financial literacy among the population is crucial in driving the adoption of digital monetary services. As more people understand the benefits of digital financial services, they are more likely to use them.
- Regulatory Environment: A supportive regulatory environment is essential in driving the growth of digital monetary services in Nigeria. Clear and consistent regulations help to foster trust and encourage innovation in the sector.
- Infrastructure and Accessibility: The availability of reliable and accessible digital infrastructure is a key factor in the growth of digital monetary services in Nigeria. Access to stable internet and mobile networks is essential for the success of digital monetary services in the country.
- Economic Environment: A favourable economic environment, characterized by stability and growth, is crucial in driving the adoption of digital monetary services in Nigeria. A strong economy provides the foundation for growth and innovation in the sector.
While the Nigerian government’s cashless policy has the potential to greatly benefit the country’s economy, its adoption has been slow among SMEs. To drive the adoption of the policy among small and medium-scale enterprises, the government and financial institutions should focus on educating small business owners about the benefits of electronic transactions, making electronic payment systems more affordable, secure and reliable, and providing incentives for small business owners who adopt electronic payment systems.