Following the scarcity of naira triggered by the Central Bank of Nigeria (CBN) currency redesign policy, the total value of cheque transactions in the first two months of 2023 dropped to N482.5billion, a decline of 2.9 per cent Year-on-Year (YoY) from N497.1billion reported by the Nigeria Inter-Bank Settlement Systems (NIBSS) in the first two months of 2022.
The data released by NIBSS showed that values of cheque transactions in January 2023 stod at N244.02 billion, a 2.83 per cent YoY increase when compared to N237.29 billion in January 2022.
In February, it dropped to N238.49 billion, a 8.2 per cent YoY decline from N259.81billion in February 2022 as commercial banks in the period under review closed some of their branches following disruption of business activities by rioters who were protesting scarcity of new N500 and N1, 000 banknotes.
According to the NIBSS data, the value of cheque transactions reached record low in February 2023 following the CBN’s policy.
The data also revealed that volume of cheque transactions between January and February 2023 dropped to 653.33million, representing a decline of 2.37 per dent YoY from 669.22 million in prior period of 2022.
Investigation revealed that trend in cheque transactions between 2018 and 2021 continued to show contraction as most commercial bank customers embraced the cashless policy of the CBN.
Specifically, the total value of cheque transactions dropped by 11.45 per cent to N4.13 trillion in 2019 from N4.66 trillion reported by NIBSS in 2018. It further dropped to N2.99 trillion in 2020 and closed 2021 at N2.95 trillion.
The CBN in December 2001, introduced the cashless policy in a move to reduce the amount of physical cash in circulation thereby encouraging the use of electronic platforms for settlement or payment for goods and services.
The apex had introduced cash-based transactions which stipulates a cash handling charge on daily cash withdrawals that exceed N500,000 for individuals and N3,000,000 for corporate bodies.
The policy on cash-based transactions (withdrawals) in banks, aims at reducing the amount of physical cash (coins and notes) circulating in the economy, and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.)
The pilot was run in Lagos State from January 2012 while the policy took effect in Rivers, Anambra, Abia, Kano, Ogun and the Federal Capital Territory (FCT) on the July 1st, 2013.
The policy was implemented nationwide on July 1st, 2014.
On the flipside, the data showed whopping N238.7 trillion NIBSS Instant Payments (NIP) transactions carried electronically in the last 8 months, representing an increase of 42.15 per cent YoY from N167.893 trillion in eight months of 2021.
The surge in electronic transactions shows that more Nigerians bank customers are embracing the cashless policy and dumping cheque transactions.
The NIBSS NIP is an account-number-based, online-real-time Inter-Bank payment solution developed in the year 2011 by NIBSS. It is the Nigerian financial industry’s preferred funds transfer platform that guarantees instant value to the beneficiary.
Analysts attributed the steady decline in cheque transactions to individuals and Corporate bodies adopting Instant Payment platform (NIP) championed by the apex banking regulating body,
The President, Bank Customers Association of Nigeria (BCAN), Dr. Uju Ogubunka in a chat with THISDAY attributed the decline in cheque transactions to scarcity of naira, stressing that bank customers were impacted by the CBN policy.
He added that with the latest development that N500 and N1,000 banknotes remained legal tender till December, 31 2023, more bank customers would fall back to their normal cheque transactions in March, and going forward.
He added that, “Cheque transactions will never go out completely from the banking sector. In advanced economies, people are still using cheques and there are certain transactions bank customers will want to do that required cheques.
“The law on cheque in Nigeria is very strong. We have the Bill Exchange /Cheque Acts and both are fundamental laws that can never be repel from the banking sector.
“The old generation still cherish their cheque books and transact businesses with it as long as banks are offering them. We await a day bank will totally suspend cheque transactions and I do not see that happening very soon. Cheque transactions will gradually be phasing out in the system but not completely until the generation familiar with cheque transactions are out of the system.”
He added, “It is not a surprise that cheque transaction between 2018 and 2021 has dropped amid the CBN policy of cashless policy. There has been shift in ways bank customers transact business and the decline in cheque transactions is another change everyone must embrace.”
On his part, the Vice President, Highcap Securities Limited, Mr. David Adnori stated that business activities were disrupted in Lagos, Ogun states where most bank customers use cheques to transact business.
“The decline was expected in February 2023 and it is a reflection of the CBN currency swap, ”he added.
He expressed further that “cheque transactions is an obsolete transfer of funds in the banking sector and electronic transfer expands, of course, we will have the phase out of cheque transactions in the banking sector.
“There is cap on electronic transfer and that is why cheque transactions are still much relevant in the banking sector. By the time Nigeria’s economy extends beyond that cap, especially with digital currency, cheque transactions will witness massive phasing out in the banking sector.
“As you likely know, the digital transactions do not required third-person transactions. It is a traditional practise that cheque transactions will exceed to exist due the technological advancements in digital transactions,” he added.
