The World Bank has pointed out that Nigeria’s digital and financial infrastructure is inadequate to support a swift transition to a cashless economy.
The bank stated that this was one of the reasons the Central Bank of Nigeria, CBN’s naira redesign policy failed.
It disclosed this in its UNE 2023 report.
The global lender affirmed that the policy led to a scarcity of cash and negatively impacted economic activity in the early months of 2023.
It explained that the short transition period of the naira redesign was insufficient for the CBN to replace the demonetized old notes with new ones, leading to a cash scarcity.
It also said the lack of adequate digital and financial infrastructure and processes to support a swift transition to a cashless economy— coupled with the fact that only 40 per cent of adults have a bank account—further exacerbated the situation.
It said the cash shortage resulted in a black market for new notes, inflating overall transaction costs.
The Washington-based bank noted that the adverse shock to economic activity was further intensified by reversals in policy decisions and conflicting positions between states, the Federal Government, the CBN, and the Supreme Court.
It highlighted that non-oil-non-agriculture GDP declined from an average quarterly growth rate of 6.0 per cent in 2022 to 3.9 per cent year-on-year in the first quarter of 2023.
It said many firms reported that the inability to secure regular funding and operating cash for expenditures, combined with rising prices and fuel shortages, led to a decline in demand.
According to the global bank, the naira redesign policy had no desirable effect as it failed at easing forex rate pressures and reducing inflation that it was predicated upon.