Nigeria Is Going Cashless  

Nigeria is joining the ranks of Sweden and India in transitioning to being Nigeria cashless society. This move could aid the economy.

Nigeria is joining the ranks of Sweden and India in transitioning to a cashless society, a move that could significantly impact the country’s economy. In modern times this will be called Nigeria cashless society.

Conducting business with cash is often costly and inconvenient. However, as many legislators have discovered, transitioning to what we call, Nigeria cashless society and it is more challenging than it seems. The Nigerian government is introducing innovative measures to reduce reliance on physical currency and promote digital trade. The success of this gamble remains to be seen. 

Nigeria cashless society, Sweden, and India are leading the way in reducing their reliance on cash for economic growth and commerce. In a notable move, the Nigerian government announced in late 2022 a weekly cap on cash withdrawals for both individuals and corporations, imposing fines for exceeding these limits. 

In line with this, a new domestic card program has been introduced to rival international players like Visa and Mastercard, further encouraging digital payments. Understandably, this rapid shift has faced objections due to its impact on consumer and business behavior. The nation’s recently redesigned paper currency has seen depleted cash reserves, and the traditional banking system is experiencing stress, resulting in longer settlement times. Nevertheless, the Central Bank of Nigeria (CBN) has largely resisted slowing down its pace of economic transformation, despite growing domestic concerns. 

Why Cash Could Be Obstacle Towards Economic Growth

Although cash has been in use since the time of the Mesopotamian shekel over 5000 years ago, its relevance in the modern economy is decreasing. Cash transactions are slow, unreliable, and complex compared to the array of digital payment options available today. In markets with high potential like Nigeria cashless society, an excessive dependence on cash is a major impediment to growth. It limits the volume of business transactions and obstructs open, cross-border trade. This reliance on cash also prevents the accumulation of working capital needed for growth and carries significant risks, including the potential for fire, flood, and theft. 

Most importantly, the cost of dealing in cash is usually highest for smaller retailers and merchants. Reconciling cash by hand is difficult, which slows down transactions and creates uncertainty. Additionally, when cash is tied up in transactions, it is not being used effectively. 

It is logical that policymakers are advocating for digital payments, particularly in light of the significant untapped potential for growth that microbusinesses and entrepreneurs contribute to the domestic economy. 

Challenges that Arise with B2B  

Undoubtedly, there is still an excessive reliance on cash within Nigeria’s B2B retail distribution chain, and several factors contribute to this. Firstly, some major brands are reluctant to change a business model that has successfully kept smaller competitors at bay. Secondly, larger distributors have little incentive to modify a system that allows them to control the intermediary relationship between brands and merchants, enabling them to charge significant margins. 

Sadly, this reliance on cash is inefficient for consumers, retailers, and the numerous brands and distributors who seek to compete fairly in a system known as “open commerce.” Distribution based on cash always reduces options and drives up costs. It reduces the availability of reliable sales data and customer insights, which reduces the ability of local markets to effectively balance supply and demand. This would be a push for Nigeria cashless society.

Even when companies have attempted to eliminate cash from their Nigerian distribution operations, they have often created exclusive, closed-garden digital ecosystems that only facilitate the purchase of their specific goods. This approach fails to align with the goals and needs of distributors and retailers. These entities frequently deal with multiple brands on a weekly basis. To encourage them to abandon cash transactions, it will be necessary to provide a significantly superior digital alternative. This could be an accessible trade platform where they can purchase a wider variety of goods to meet the demands of their local clients. 

Nigeria’s Economic Overview  

In recent years, the Nigerian economy, like many worldwide, has experienced a downturn. 

Millions in Nigeria live in poverty due to persistent inflation, which reached a 17-year high of 25.8% in August 2023, fueled by weak economic fundamentals and slow growth. 

With an administrative change occurring in May 2023, there is an opportunity for Nigeria to recover and rise, although this phase presents its challenges. 

The pressing question now is whether transitioning to a cashless economy will help Nigeria emerge from its current state or further contribute to its decline. 

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