IMPACT OF CASHLESS POLICY ON BANKS LIQUIDITY


 IMPACT OF CASHLESS POLICY ON BANKS LIQUIDITY  

CHAPTER ONE INTRODUCTION 1.1   BACKGROUND TO THE STUDY

Cashless economy is an economy where transaction can be done without necessarily carrying physical cash as a mean of exchange of transaction but rather with the use of credit or debit card payment for goods and services. Omotunde et al (2013) posits that cashless economy policy initiative of the Central Bank of Nigeria (CBN) is a move to improve the financial terrain but in the long run sustainability of the policy will be a function of endorsement and compliance by end-users which can which can be aimed at reducing bank liquidity risks. According to Tunde Lemon, the Deputy Governor of CBN, the CBN cash policy stipulates a daily cumulative limit of N150, 000 and N1, 000, 000 on free cash withdrawals and lodgments by individual and corporate customers respectively in the Lagos state since March 30, 2012. Individuals and corporate organizations that make cash transactions above the limits will be charged a service fee for amounts above the cumulative limits. Furthermore, 3rd party cheques above N150, 000 shall not be eligible for encashment over the counter with effect from January 1, 2012. Value for such cheques shall be received through the clearing house. All Nigerian banks were expected to cease cash in transit lodgment services rendered to merchants and customers from January 1, 2012. Omotunde et al (2013) further clarified that the policy through the advanced use of information technology facilitates fund transfer, thereby reducing time wasted in Bank(s). Wizzit, a fast-growing mobile banking company in South Africa has over three hundred thousand customers across South Africa. Likewise, M-PESA was introduced in Kenya as a small value electronic system that is accessible from ordinary mobile phones. According to them, it has experienced exceptional growth since its introduction by mobile phone operator (Safaricam) in Kenya in March, 2007 and has already been adopted by nine million customers, which is about 40% of Kenya‟s adult population. Wizzit and other mobile financial services including M-PESA in Kenya are helping low income Africans make financial transaction across long-distance with their cell-phones, thereby reducing their travel cost and eliminating the risks of carrying cash and also avoiding most banking charges (Akintaro, 2012).

Banks play a central role in all modern financial systems. To perform it effectively, banks must be safe and be perceived as such. The single most important assurance is for the economic value of a bank’s assets to be worth significantly more than the liabilities that it owes. The difference represents a cushion of “capital” that is available to cover losses of any kind. However, the recent financial crisis underlined the importance of a second type of buffer, the “liquidity” that banks have to cover unexpected cash outflows. A bank can be solvent, holding assets exceeding its liabilities on an economic and accounting basis, and still die a sudden death if its depositors and other funders lose confidence in the institution.

In banking, liquidity is the ability to meet obligations when they come due without incurring unacceptable losses (Odior & Banuso, 2012). Managing liquidity is a daily process requiring bankers to monitor and project cash flows to ensure adequate liquidity is maintained. Maintaining a balance between short-term assets and short-term liabilities is critical. For an individual bank, clients' deposits are its primary liabilities (in the sense that the bank is meant to give back all client deposits on demand), whereas reserves and loans are its primary assets (in the sense that these loans are owed to the bank, not by the bank). The investment portfolio represents a smaller portion of assets, and serves as the primary source of liquidity. Investment securities can be liquidated to satisfy deposit withdrawals and increased loan demand. Banks have several additional options for generating liquidity, such as selling loans, borrowing from other banks, borrowing from a central bank, such as the US Federal Reserve bank, and raising additional capital. In a worst-case scenario, depositors may demand their funds when the bank is unable to generate adequate cash without incurring substantial financial losses. In severe cases, this may result in a bank run. Most banks are subject to legally mandated requirements intended to help avoid a liquidity crisis.

1.2   STATEMENT OF THE PROBLEM

Banks can generally maintain as much liquidity as desired because bank deposits are insured by governments in most developed countries. A lack of liquidity can be remedied by raising deposit rates and effectively marketing deposit products. However, an important measure of a bank's value and success is the cost of liquidity. A bank can attract significant liquid funds. Lower costs generate stronger profits, more stability, and more confidence among depositors, investors, and regulators. This is the first research that is examining the relationship between the cashless policy and bank liquidity in Nigeria.

1.3   OBJECTIVES OF THE STUDY

The following are the objectives of this study:

To examine the impact of cashless policy on banks liquidity. To examine the effect of cashless policy on the Nigerian economy. To find out the challenges confronting cashless policy in Nigeria.

1.4   RESEARCH QUESTIONS

What is the impact of cashless policy on banks liquidity? What is the effect of cashless policy on the Nigerian economy? What are the challenges confronting cashless policy in Nigeria?

1.5   HYPOTHESIS

HO: There is no significant relationship between cashless policy and bank liquidity

HA: There is significant relationship between cashless policy and bank liquidity

1.6   SIGNIFICANCE OF THE STUDY

The following are the significance of this study: 

The outcome of this study will educate the bankers and other stakeholders in the management of banks on the relationship between cashless policy and bank liquidity. This research will be a contribution to the body of literature in the area of the effect of personality trait on student’s academic performance, thereby constituting the empirical literature for future research in the subject area.

1.7   SCOPE/LIMITATIONS OF THE STUDY

This study will cover the relationship between cashless policy and bank liquidity.

LIMITATION 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 to the research work

REFERENCES

Akintaro, S. (2012): Going Cashless. IT & Telecom Digest, Online Magazine, August, 2012.

Omotunde, M. Sunday, T and John-Dewole, A.T. (2013) “Impact of cashless Economy in Nigeria” Greener Journal of Internet, Information and Communication System. Vol. 1(2) pp 141-143.

Odior, E.S., and Banuso, F.B. (2012): Cashless Banking in Nigeria; Challenges, benefits & policy Implications. European Scientific Journal. Vol 8, pp. 12-16.

.

IMPACT OF CASHLESS POLICY ON BANKS LIQUIDITY



TYPE IN YOUR TOPIC AND CLICK SEARCH.




TESTIMONIES FROM OUR CLIENTS


Please feel free to carefully review some written and captured responses from our satisfied clients.

  • "Exceptionally outstanding. Highly recommend for all who wish to have effective and excellent project defence. Easily Accessable, Affordable, Effective and effective."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I saw this website on facebook page and I did not even bother since I was in a hurry to complete my project. But I am totally amazed that when I visited the website and saw the topic I was looking for and I decided to give a try and now I have received it within an hour after ordering the material. Am grateful guys!"

    Hilary Yusuf, United States International University Africa, Nairobi, Kenya.
  • "Researchwap.com is a website I recommend to all student and researchers within and outside the country. The web owners are doing great job and I appreciate them for that. Once again, thank you very much "researchwap.com" and God bless you and your business! ."

    Debby Henry George, Massachusetts Institute of Technology (MIT), Cambridge, USA.
  • "I love what you guys are doing, your material guided me well through my research. Thank you for helping me achieve academic success."

    Sampson, University of Nigeria, Nsukka.
  • "researchwap.com is God-sent! I got good grades in my seminar and project with the help of your service, thank you soooooo much."

    Cynthia, Akwa Ibom State University .
  • "Great User Experience, Nice flows and Superb functionalities.The app is indeed a great tech innovation for greasing the wheels of final year, research and other pedagogical related project works. A trial would definitely convince you."

    Lamilare Valentine, Kwame Nkrumah University, Kumasi, Ghana.
  • "Sorry, it was in my spam folder all along, I should have looked it up properly first. Please keep up the good work, your team is quite commited. Am grateful...I will certainly refer my friends too."

    Elizabeth, Obafemi Awolowo University
  • "Am happy the defense went well, thanks to your articles. I may not be able to express how grateful I am for all your assistance, but on my honour, I owe you guys a good number of referrals. Thank you once again."

    Ali Olanrewaju, Lagos State University.
  • "My Dear Researchwap, initially I never believed one can actually do honest business transactions with Nigerians online until i stumbled into your website. You have broken a new legacy of record as far as am concerned. Keep up the good work!"

    Willie Ekereobong, University of Port Harcourt.
  • "WOW, SO IT'S TRUE??!! I can't believe I got this quality work for just 3k...I thought it was scam ooo. I wouldn't mind if it goes for over 5k, its worth it. Thank you!"

    Theressa, Igbinedion University.
  • "I did not see my project topic on your website so I decided to call your customer care number, the attention I got was epic! I got help from the beginning to the end of my project in just 3 days, they even taught me how to defend my project and I got a 'B' at the end. Thank you so much researchwap.com, infact, I owe my graduating well today to you guys...."

    Joseph, Abia state Polytechnic.
  • "My friend told me about ResearchWap website, I doubted her until I saw her receive her full project in less than 15 miniutes, I tried mine too and got it same, right now, am telling everyone in my school about researchwap.com, no one has to suffer any more writing their project. Thank you for making life easy for me and my fellow students... Keep up the good work"

    Christiana, Landmark University .
  • "I wish I knew you guys when I wrote my first degree project, it took so much time and effort then. Now, with just a click of a button, I got my complete project in less than 15 minutes. You guys are too amazing!."

    Musa, Federal University of Technology Minna
  • "I was scared at first when I saw your website but I decided to risk my last 3k and surprisingly I got my complete project in my email box instantly. This is so nice!!!."

    Ali Obafemi, Ibrahim Badamasi Babangida University, Niger State.
  • To contribute to our success story, send us a feedback or please kindly call 2348037664978.
    Then your comment and contact will be published here also with your consent.

    Thank you for choosing researchwap.com.