Thesis Abstract

Abstract
The cashless policy in Nigeria has been a significant initiative aimed at reducing the amount of physical cash circulating in the economy and promoting electronic payment systems. This study examines the impact of the cashless policy on the profitability of commercial banks in Nigeria. The research employs a quantitative approach, utilizing financial data from a sample of commercial banks over a period of five years. The findings indicate that the implementation of the cashless policy has had a positive impact on the profitability of commercial banks in Nigeria. The increased adoption of electronic payment channels such as mobile banking, internet banking, and POS transactions has led to a reduction in operating costs for banks. Additionally, the shift towards electronic payments has improved efficiency in the banking system, leading to increased revenues for commercial banks. Furthermore, the study reveals that the cashless policy has enabled commercial banks to expand their customer base and improve customer retention. The convenience and security offered by electronic payment systems have attracted more customers to use banking services, resulting in increased deposits and revenues for the banks. Moreover, the cashless policy has enhanced financial inclusion by providing access to banking services for the unbanked population, thereby increasing the potential market for commercial banks. Despite the overall positive impact of the cashless policy on profitability, the research also identifies some challenges faced by commercial banks in Nigeria. These challenges include the need for significant investments in technology infrastructure, cybersecurity risks, and the need for continuous staff training to support the transition to electronic payment systems. In conclusion, the cashless policy in Nigeria has had a significant impact on the profitability of commercial banks. The shift towards electronic payment systems has improved efficiency, reduced operating costs, and increased revenues for banks. However, to fully realize the benefits of the cashless policy, commercial banks need to address the challenges posed by technological investments, cybersecurity risks, and staff training. Overall, the cashless policy presents opportunities for commercial banks in Nigeria to enhance their profitability and competitiveness in the evolving financial landscape.

Thesis Overview

1.1   BACKGROUND TO THE STUDY

The importance of managing the economy efficiently cannot be over emphasized. The monetary authorities, by controlling the supply of money, maintain price stability andinfluence economic activities especially when combined with appropriate fiscal measures (Friedman, 2015). The banking system remains the major channel for monetary control by the Central Bank of Nigeria (CBN) and the monetary authorities in general. Unfortunately, it is estimated that about 65% of the cash in circulation in the Nigerian economy isoutside of the bankingsystem, thus severely limiting the impact of the CBN’s efforts at price and economic stabilization (CBN 2012). Consequently, the amount of money in the form of deposits available to banks for the creation of more money is reduced. The profitability of the banks, which to a large extent depends on the amount of money at theirdisposal for lending, is therefore affected by the large size of this informal sector. However, the breakthrough in InformationCommunication Technology (ICT) has revolutionized human society in terms of communication, efficiency in processes, general exchange of information, and in the exchangeof goods and services. Within seconds, businesses are carried out online across different geographical location making it impossible for physical cash to be used as a medium of such exchanges (Baddeley, 2004).

The Central Bank of Nigeria (CBN) in collaboration with the Bankers Committee, introduced the cashless policy designed to provide mobile payment servicesthat aim to breakdown traditional barriers hindering the financial inclusion of millions of Nigerians, secure and make convenient financial services to urban, semi-urban and rural areas across the country. However, implementing the cashless policy requires that the banks make huge investments on ICT and other technologies that would enhance the proper implementation of the cashless system. For banks that barely survived recapitalization, and several others forced into a merger and acquisition, this policy may affect their performances and productivity positively or negatively depending on the strength of the individual banks. Therefore, this study seeks to analyze the impact of this policy on Nigerian banks in relation to their profitability using Fidelity Bank as a case study.

According to (Cobb, 2005), “electronic payments can thus lower transaction costs stimulate higher consumption and GDP, increase government efficiency, boost financial intermediation and improve financial transparency”. She further added that “Governments play a critically important role in creating an environment in which these benefits can be achieved in a way that is consistent with their own economic development plans”. Fidelity Bank, also known as Fidelity Bank Plc., is a commercial bank in Nigeria. It is licensed as a commercial bank, by the Central Bank of Nigeria, the central bank and national banking regulator. In 2011, the bank was ranked the 7th most capitalized bank in Nigeria, the 25th most capitalized bank on the African continent and the 567th most capitalized bank in the world. As of December 2013, Fidelity Bank Plc. was a large financial services provider in Nigeria with total assets estimated at over US$6.318 billion (NGN:1+ trillion), and shareholders' equity in excess of US$1 billion (NGN:158 billion). At that time, the bank served 2.3 million customers at about 220 branches nationally (Wikipedia, 2015). The current enlarged Fidelity Bank is the result of the merger with the former FSB International Bank Plc and Manny Bank Plc (under the Fidelity brand name) in December 2005. Fidelity Bank is today ranked amongst the top 10 in the Nigerian banking industry, with presence in all the 36 States as well as major cities and commercial centers of Nigeria. Fidelity continues to rank among Nigeria's most capitalized banks, with tier-one capital of nearly USD1 billion (One Billion US Dollars).

1.2   STATEMENT OF THE PROBLEM

The quest for global relevance and sustainable development had led to wide exploitation of the benefits of cashless policy in payments system of Nigerian banks. The study examines the impact of cashless policy on the profitability of banks in Nigeria using Fidelity Bank Plc as a case study. It has become necessary for researchers to make use of values and figures obtained in the cashless services such as Automated teller machine (ATM), Point of sale (POS), and wCP based transaction (WBT) to examine its impact on the aggregate return on equity (ROE) of deposit money banks in Nigeria with a view of identifying the effect of this cashless policy on profitability of Nigerian Banks.

1.3   OBJECTIVES OF THE STUDY

The following are the objectives of this study:

1. To examine the impact of cashless policy on profitability of commercial banks in Nigeria.

2. To examine the overall effectiveness of the CBN’s cashless policy.

3. To determine the level of acceptance of the cashless policy by Nigerians.

4. To identify the limitations in the implementation of cashless policy by commercial banks in Nigeria.

1.4   RESEARCH QUESTIONS

1. What is the impact of cashless policy on profitability of commercial banks in Nigeria?

2. What is the overall effectiveness of the CBN’s cashless policy?

3. What is the level of acceptance of the cashless policy adopted by commercial banks in Nigeria?

4. What are the limitations in the implementation of cashless policy by commercial banks in Nigeria?

1.5   HYPOTHESIS

HO: There is no significant relationship between the cashless policy and profitability

HA: There is significant relationship between the cashless policy and profitability

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study:

1. The outcome of this study will educate stakeholders in the banking industry on how the cashless policy has influenced the profitability in the Nigerian commercial banks.

2. This research will also serve as a resource base to other scholars and researchers interested in carrying out further research in this field subsequently, if applied will go to an extent to provide new explanation to the topic.

1.7   SCOPE/LIMITATIONS OF THE STUDY

This study on the impact of cashless policy on profitability of commercial banks in Nigeria will cover the level of profit made by commercial banks before and after the implementation of the cashless policy in Nigeria

LIMITATIONS OF STUDY

Financial constraint- Insufficient fund tends to impede the efficiency of the researcher in sourcing for the relevant materials, literature or information and in the process of data collection (internet, questionnaire and interview).
Time constraint- The researcher will simultaneously engage in this study with other academic work. This consequently will cut down on the time devoted for the research work.

REFERENCES

Baddeley, M. (2014). Using E-Cash in the New Economy: An Economic Analysis ofMicropayment Systems, UK Cambridge. Journal of Electronic Commerce Research, 5(4) Central Bank of Nigeria (CBN) Statistical Bulletin. (2012).

Cobb Anne. (2005). http://www.ameinfo.com/50050.html.

Friedman, B. (2015). The Future of Monetary Policy: The Central Bank as an Army withOnly a Signal Corps? International Finance, 2, 3(321-338)
Wikipedia, 2015: www.wikipedia.com