The Idiocy of Nigeria’s Cashless Policy

With inflation rates marching into their twenties, the 2022 fiscal year has been unkind to Nigeria as well as other emerging markets around the world. Several factors are responsible for this trend, some international, others domestic. On the international front, the economic disruption of COVID-19 to the global value chain lingers especially as China, the world’s factory maintains some of its strict lockdown policies. Again, with the trend of climate catastrophes across the globe coupled with the war between Russia and Ukraine, prices of everyday essentials like food and energy have drastically risen especially for the world’s poorest.

On the domestic side of things, climate catastrophe still features, with flooding decimating farmlands and reducing yields in various parts of Nigeria. Further, Nigeria’s import-dependent economy suffered as the dollar, the currency of international trade appreciated exponentially against the naira. The drivers of inflation in Nigeria are plentiful and to dwell on them would change the course of this write-up.

However, in response to the inflationary trend that has caused suffering to millions in the country, the Central Bank of Nigeria has turned to its war chest to fight the phenomenon. Amongst other measures like currency redesign, the CBN has announced its plans to restrict the amount of money in circulation in Nigeria by implementing a cashless policy. This cashless policy aims to limit the amount of physical cash each citizen has access to while encouraging the use of mobile payment options for economic transactions within the country.

This plan sounds perfect on paper, but far from workable in reality. The plan is fated to doom and to cause more suffering than relief. Why do I say this? The answer is there for anyone that cares enough to know how Nigeria functions. First, the plan is plagued by the single most powerful adversary that bedevils Nigeria and Africa at large, an infrastructure deficit. If you have a simple conversation with anyone that has attempted a mobile transaction in Nigeria, the one-word summary you would be given is “unreliable.” I have been disappointed several times by the unavailability of network infrastructure to complete a mobile transaction. It’s a pain in the ass.

The reason for this is pretty straightforward. Nigeria lacks the network infrastructure to undertake the current demand for mobile transactions, talk less of the projected increase that will follow the implementation of the cashless policy by the government. The Nigerian government did not take into consideration the fact that the internet penetration rate of the country remains at a measly 51 percent.

Then again, another reality that the Nigerian government is negligent about is the fact that around 70 percent of Nigeria’s businesses are stuck in the informal sector. These are the petty traders, drivers, tailors, and shoemakers who all trade with physical cash and not mobile transactions. Heck, some of these individuals even lack access to a bank account or a phone, both of which are essential to conclude a mobile transaction.

Now, my question for the Nigerian government is this: “Are you ready to contain the fallout that will follow this miscalculated policy?”