Economic Impact Assessment on the CHANGES in the CBN Cashless
Policy’; Initial review by Centre for Public Policy Alternatives (CPPA)
February 2013
1
INTRODUCTION
The cashless policy was introduced by the Central Bank of Nigeria (CBN) in 2012. Lagos State was
designated as the pilot state and the policy took effect on April 1st 2012. Dubbed ‘Cashless Lagos’, this
policy refers to the introduction of ‘cash handling charge’ incurred on cash-based transactions
(withdrawals & deposits) above the stipulated daily limit in banks. The policy is aimed at reducing the
amount of physical cash circulating in the economy, encouraging the use of alternative methods of
transactions such as the use of the Internet, Mobile payment, ATM and POS for payments for goods,
services, transfers etc as well as to reduce the cost of banking services.
To encourage the achievement of its objectives, the policy was been reviewed in August 2012. This
involved an increase in the daily cumulative cash withdrawal/ deposit limit for individual accounts and
the concurrent lowering of the processing fees (see the table below). The Enhancing Nigerian
Advocacy for a better Business Environment (ENABLE) project sought to conduct an Economic
Impact Assessment (EIA) of the effects of the reform to the Cashless Policy on Micro, Small and Medium
Enterprises (MSMEs) in Lagos. Findings from this survey would inform the quality policy decisions in
Nigeria for businesses and individuals.
CBN Cashless Policy – Processing Fees
Individual Accounts
Daily Cash Withdrawal/Deposit Limit (N)
Corporate Accounts
Old
150,000
New
500,000
Old
1,000,000
New
5,000,000
10%
10%
3%
2%
20%
20%
5%
3%
Withdrawal Processing Fee
Lodgment / Deposit Fee
To this end, the Centre for Public Policy Alternatives (CPPA) was contracted to carry out the field work
on a survey to measure the impact of the changes of the CBN Cashless Policy on Micro (1-10 Staff), Small
(11-49 Staff) and Medium (50-199 Staff) Businesses in Lagos State. The study focused on CASH
withdrawals and deposits only with the exclusion of withdrawals and deposits made by cheques.
2
SURVEY METHODOLOGY
The survey adopted a cross-sectional design with modified multi-stage random sampling techniques.
This was necessary to ensure every respondent within the identified sector had an equal chance of being
recruited or excluded from the survey. To achieve adequate representativeness, achieve a robust
analysis and achieve a better external validity, a large sample size was collected. The target population
comprised of businesses, which were then stratified into micro, small and medium scale enterprises, as
well as sectors.
The survey was conducted across sixteen (16) Local Government Areas (LGAs) in Lagos State viz; Agege,
Ifako-Ijaiye, Alimosho, Amuwo-Odofin, Apapa, Eti-Osa, Ikeja, Kosofe, Lagos Island, Lagos Mainland,
Mushin, Oshodi/Isolo, Ojo, Somolu and Surulere. To achieve the study objectives, data was collected
through fully structured questionnaires via face to face interaction using Pen and Paper Interview (PAPI)
method in business locations such as offices, market places, stores.
Inclusion criteria and screener questions were employed to select the appropriate businesses. Strict
quality control measures were employed to ensure quality data was collected from respondents
including rreviewing of all completed questionnaires, on-the-spot and back checking, group interviewing
where appropriate. The sample size collected was more than the quota to minimize ‘no response’ and
attrition to mitigate eventualities that may have come up during the course of fieldwork.
Overall, 586 micro, small and medium scale enterprises were sampled in the survey; comprising 475
(81%) businesses that have bank accounts used for business purposes and 111 (19%) without bank
accounts for business purposes. Of the 475 with bank accounts, 467 were validated, and incorporated
into the study, while eight were discarded due to inadequate responses.
The data collected was then processed and analysed using Statistical Package for the Social Sciences
(now Predictive Analytical Software), an analytical package and Micro soft excel.
3
STUDY RESULTS
At the end of the EIA, the study has shown some changes in the habits of business owners to cash
transactions. The survey was able to throw more light on the effect of the change in CBN’s cashless
policy on the volumes and frequency of cash (withdrawal and deposit) transactions by MSMEs.
All sizes of businesses were able to make savings in the form of reduced charges of withdrawals &
deposits as majority of their transactions fell with-in the range of the daily limits; 47% of all businesses
admitting that the introduction of processing fees influenced them to split up transactions. 38% of
respondents stated that the changes in the cashless policy resulted in increased frequency of
transactions and 37% admitted to using more cash.
SUMMARY OF FINDINGS

Nine in every ten businesses operated bank accounts with ‘deposit money banks’, only 1% operated
with microfinance banks.

There were changes in the average frequency of deposits transactions among businesses with
individual bank accounts. This was however not the same in the frequency of withdrawals.

There were no changes in the average frequency of withdrawals and deposits in businesses with
corporate bank accounts.

47% of businesses split transactions in terms of cash withdrawal and deposits after the changes in
the policy, compared to 35% that would do the same if the lower free daily limits and higher charges
for cash withdrawals and deposits were to be in place.

More businesses started to use more cash after the change in the cashless policy (35%), compared
to 31% (if the old policy were to be in place).

By overall analysis, 96% of the respondents affirmed that they were aware of the Cashless Policy in
Lagos state.

83% of business owners with corporate bank accounts, and 58% of businesses with individual bank
accounts were aware of the changes in policy free daily limits for cash withdrawals & cash deposits.

76% of business owners with corporate bank accounts compared to 44% with individual bank
accounts were aware of the changes in the charges for withdrawals & deposits above the free daily
limits.

Across all the business sectors in general, cash withdrawals (60%) and deposits (33%) were mostly
distributed between 2 – 5 transactions.

Higher frequency of withdrawals and deposits were observed in Small and Medium Enterprises than
the Micro Businesses.

The total cost of business in 2012 varies among the business groups; between less than N10, 000 to
over N100 million.
4
A. SOCIO – DEMOGRAPHIC INFORMATION & BUSINESS INFORMATION
49% of the businesses surveyed were micro Enterprises, 48% were small and 3% were medium Scale
Enterprises.
Table 1. Summary of the sampled businesses by groups (micro, small and medium scales)
Business Groups
Type of Business
Micro-enterprise
Small enterprise (10 - 49 employees)
Medium enterprise (50 - 199 employees)
TOTAL
Frequency
228
225
14
467
(%)
49
48
3
100
For business registration, 77% of the businesses stated that they were CAC registered; with nine in every
ten small and medium enterprises, compared to six in every ten micro enterprises.
Bank Accounts
Nine in every ten businesses operated bank accounts with ‘deposit money banks’; where 44% of them
operated individual bank accounts, 48% corporate bank accounts, and 8% operated both. 68% of the
micro businesses compared to 21% of small and medium enterprises operated individual bank accounts.
Seven in ten (70%) small and medium enterprises, compared to one in every four of micro businesses,
operated corporate accounts.
5
Gender
68% of the businesses were owned by males, while 32% were owned by females.
 There was a skew in the gender ownership of businesses across the business groups. This
observation widened with business size (39% of females in micro enterprise, compared to 24%
and 21% for small and medium scale businesses respectively).
6
Sector and LGA
A summary of the sampled businesses by business groups (micro and small/medium scales), sectors and
local government areas are highlighted in the tables below.
Sampling by business sectors
Table 2: Business groups across Sectors
Sectors
Agriculture, Forestry And Farming
Mining And Quarrying
Manufacturing
Electricity, Gas Steam And Air Conditioning Supply
Water Supply, Sewage, Waste Management And
Remediation Activities
Construction
Wholesale And Retail Trade, Repair Of Motor Vehicles And
Motorcycles
Transportation And Storage
Accommodation And Food Services Activities
Information And Communication
Financial And Insurance Activities
Real Estate Activities
Professional, Scientific And Technical Activities
Administrative And Support Service Activities
Public Administration And Defence, Compulsory Social
Security
Education
Human Health And Social Work
Arts, Entertainment And Recreation
Other Service Activities
Activities Of Household As Employers, Undifferentiated
Goods
TOTAL
7
Micro
9
26
3
1
SME
Small
Medium TOTAL
4
0
13
3
0
3
60
7
93
1
0
4
3
0
8
0
32
0
6
14
15
11
10
4
2
1
1
0
3
0
0
0
1
0
7
5
7
18
1
19
25
1
6
1
1
0
0
0
0
228
225
14
6
72
10
14
13
3
6
12
11
4
4
14
104
17
29
28
17
16
16
13
5
27
31
8
24
1
467
Distribution of business groups by LGAs
Table 3: Business Groups by LGAs
Frequency
LGA
MicroSmall
Medium
enterprise enterprise enterprise
Agege LGA
18
13
3
18
0
Ajeromi-Ifelodun
16
Percentage
MicroSmall
Medium
TOTAL enterprise enterprise enterprise
34
52.9
38.2
8.8
0.0
52.9
47.1
34
64
51.6
46.9
1.6
10
50.0
50.0
0.0
Alimosho
Apapa
33
5
30
5
1
0
Amuwo-Odofin
7
8
1
16
43.8
50.0
6.2
Eti-Osa
6
6
3
15
40.0
40.0
20.0
Ifako-Ijaiye
Ikeja
9
28
14
14
0
2
23
44
39.1
63.6
60.9
31.8
0.0
4.5
Kosofe
Lagos Island
Lagos Mainland
14
8
9
19
15
8
1
0
1
34
23
18
41.2
34.8
50.0
55.9
65.2
44.4
2.9
0.0
5.6
Mushin
Ojo
19
20
11
16
1
0
31
36
61.3
55.6
35.5
44.4
3.2
0.0
Oshodi/Isolo
Somolu
14
7
25
13
0
0
39
20
35.9
35.0
64.1
65.0
0.0
0.0
Surulere
13
12
1
26
50.0
46.2
3.8
TOTAL
228
225
14
467
8
B. ASSESSMENT OF PROCESSING FEES FOR CASH WITHDRAWALS & DEPOSITS
On the whole, six in every ten businesses made cash withdrawal between 2 – 5 times monthly. Three in
every ten businesses made cash deposits between 2 – 5 times monthly. Except for frequency of 2 – 5
times monthly, more small and medium than micro enterprises made more monthly cash transactions
as the frequencies of cash transactions increased. Across all the business sectors in general, cash
deposits were closely distributed between 2 – 20 transactions.
Table 4: Frequency of monthly cash operations by businesses
CASH WITHDRAWAL
CASH DEPOSIT
Micro (%)
Small/Medium
(%)
Overall (%)
Micro (%)
Small/Medium
(%)
Overall (%)
1
2–5
6 - 10
5
69
21
5
52
23
5
60
22
5
47
29
20
34
2
33
32
11 - 20
21 - 50
4
1
17
3
11
2
16
3
34
11
25
7
51 -100
>100
-
1
-
0
-
0
-
1
-
1
-
Q17a: How many times do you make a CASH WITHDRAWAL, monthly? Q18a: How many times do you make a CASH DEPOSIT, monthly?
Frequency of Cash Transactions for Individual Accounts (THAT ARE BEING USED FOR BUSINESS PURPOSES) only
Cash withdrawal: there was significant difference in the average frequency of cash withdrawals within
the businesses with individual bank accounts, before and after the changes in the cashless policy;
especially for cash operations less than N150, 000. However, there was no significant difference for
transactions between N150, 000 - 500,000; N500, 000 - 1,000,000 N; and N1, 000,000 - 3,000,000. There
was no transaction at all for cash operation more than N3, 000,000.
Cash deposit: there was a significant difference in the average frequency of cash deposits for cash
operations between N150, 000 - 500,000; and N500, 000 - 1,000,000 N; but not for operations less than
N150, 000; N1, 000,000 - 3,000,000. There was no cash transaction at all for operation more than N3,
000,000.
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Frequency of Cash Transactions for Corporate Accounts only
Overall, in terms of frequency of withdrawals and deposits, there was no significant difference in the
average frequency of cash withdrawals and deposits for businesses with corporate bank accounts,
before and after the changes in the cashless policy. However, the frequency of transactions differs for
the different range of cash operations viz: less than 150,000 N; 150,000 - 500,000 N; 500,000 - 1,000,000
N; 1,000,000 - 3,000,000 N; and more than 3,000,000 N.
 Changes in the cashless policy have significantly impacted businesses in Lagos state in terms of
the average frequency of withdrawals and deposits for businesses with individual bank accounts,
than for businesses with corporate bank accounts. The average frequency of cash withdrawals
and deposits by businesses with corporate bank accounts showed little to no change before and
after the changes in the policy.
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C. CBN CASHLESS POLICY ASSESSMENT
In general, 96% of the respondents affirmed that throughout 2012, they were aware of the Cashless
Policy in Lagos, initiated by the central bank of Nigeria; with 52% claimed they were very aware, while
24% and 23% were moderately and somewhat aware respectively. Awareness of the changes in the
cashless policy was quite high among the sampled businesses; as 83% of business owners with corporate
bank accounts compared to 58% with individual bank accounts was aware of the increase in free daily
(accumulated) limits for cash withdrawals & cash deposits from 150,000 to 500,000 Naira. 83% of
business owners with corporate bank accounts compared to 58% with individual bank accounts were
aware of the increase in free daily (accumulated) limits for cash withdrawals & cash deposits from
150,000 to 500,000 Naira.
76% of business owners with corporate bank accounts, compared to 44% with individual bank accounts
were aware that the associated charges for withdrawals & deposits above the (accumulated) free daily
limits were reduced from 10% for both withdrawals and deposits, to 3% for cash withdrawals and 2% for
cash deposits.
11
Effects of the cashless policy on businesses, AFTER the increase of free daily limits and reduction of
charges for cash withdrawals and deposits, on March 30, 2012
Yes (%)
No (%)
Did the introduction of processing fees lead you to split up your transactions, to avoid
charges?
47
53
Did that mean that you started to do more transactions?
38
62
To avoid charges, did you start to use more cash?
37
63
Table 5
Q27. What has been the effect of the cashless policy on your business, AFTER the increase of free daily limits and reduction of charges for
cash withdrawals and deposits, on March 30, 2012?
47% of all businesses admitted that the introduction of processing fees influenced them to split up
transactions. 38% and 37% admitted that the changes in the cashless policy resulted in increase in their
frequency of transactions, and to use more cash, respectively.
Assumed effects of changes in the cashless policy if the lower free daily limits and higher charges for
cash withdrawals and deposits would have been in place
Yes (%) No (%)
Table 6
Would you split up your transactions, to avoid charges?
35
65
Would you as a consequence start to do more transactions?
39
61
To avoid charges, did you start to use more cash?
31
69
Q28. If the lower free daily limits and higher charges for cash withdrawals and deposits would have been in place, how would it potentially
had affected your business?
On the potential effects on business if the lower free daily limits and higher charges for cash
withdrawals and deposits would have been in place: only 35% of the sampled businesses responded
they would split up transactions. 39% affirmed it would consequently result in increase in their amount
of cash transactions. 31% said they would start to use more cash, to avoid charges.
 The changes in the cashless policy have impacted businesses to split up transactions in terms of
cash withdrawal and deposits (47% ‘after the changes in the policy’ compared to 35% ‘were the
old policy to be in place). Splitting of cash transactions was observed more among the small and
medium size businesses. This probably could account for the observed difference in proportions
(47% after the change and 35% before the change).
 There was also an increase in the volume of cash used by businesses (35% ‘after’ the change in
the policy compared to 31% ‘were’ the old policy to be in place), businesses resorted to using
more cash after the changes in the policy.
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