Project – The Impact of POS on Cashless Policy Implementation in Nigeria
CHAPTER ONE
1.1 Background to the Study
The introduction of the cashless policy by the Central Bank of Nigeria (CBN) in 2012 represented a strategic move toward modernizing the Nigerian financial system. This policy was designed to reduce the excessive use of physical cash in the economy and to promote the adoption of electronic payment channels as a means of conducting business and personal transactions. The core objectives of the cashless policy include improving the efficiency of Nigeria’s payment system, lowering the cost of banking operations, curbing corruption and leakages, and ultimately deepening financial inclusion (CBN, 2012). The policy was initially piloted in Lagos State before expanding nationwide, targeting both urban and rural populations.
Among the several electronic payment instruments introduced to drive this policy—such as mobile banking, internet banking, and electronic fund transfers—the Point of Sale (POS) terminal has emerged as one of the most widely used tools, particularly in rural and semi-urban areas. POS machines allow merchants and agents to facilitate card-based transactions for both payment and cash withdrawals. They are compact, relatively affordable to operate, and convenient for end-users. The widespread availability of POS services has significantly transformed how individuals in underserved communities access financial services. As a result, POS terminals have become not only payment facilitators but also important conduits for cash access in areas lacking traditional banking infrastructure.
Kaura Namoda Local Government Area in Zamfara State exemplifies such a rural setting where POS terminals have increasingly taken the place of conventional banking outlets. In many cases, POS agents serve as the first point of contact for financial services, especially for people who do not possess bank accounts or who must travel long distances to access physical bank branches. These agents offer services such as cash withdrawals, deposits, bill payments, and mobile phone recharges. While this has enhanced convenience, it has also raised questions about the real impact of POS systems on reducing the dependency on cash, which is the central aim of the cashless policy.
However, despite the growing use of POS systems in Kaura Namoda, several obstacles hinder their optimal impact on cashless policy implementation. Challenges such as unreliable network connectivity, frequent transaction failures, security threats including robbery and fraud, and low levels of digital literacy among the population persist. Moreover, the high costs associated with transaction fees and system downtimes discourage many residents from adopting POS services for daily transactions. These challenges, if unaddressed, may undermine the broader goals of the cashless policy in rural contexts and perpetuate a reliance on physical cash.
While various studies have assessed the effectiveness of the cashless policy in Nigeria as a whole, most have centered on urban regions where infrastructure and financial literacy are more advanced. There is a notable gap in literature addressing the rural implementation of the policy and the specific role POS systems play in such areas. As rural communities represent a significant portion of the Nigerian population, understanding the dynamics of cashless policy implementation in areas like Kaura Namoda is essential for inclusive financial reform. Without targeted research in these settings, national financial policy may fail to reflect the lived realities of millions of rural Nigerians.
Therefore, this study seeks to fill this gap by investigating the impact of POS systems on the implementation of the cashless policy in Kaura Namoda Local Government. The research aims to determine whether POS terminals are helping to reduce the volume of cash-based transactions, improve financial inclusion, and foster trust in digital payment systems. By evaluating both the opportunities and the limitations of POS usage in a rural environment, this study will contribute valuable insights to policymakers, financial institutions, and development agencies seeking to enhance the effectiveness of Nigeria’s cashless agenda.
1.2 Statement of the Problem
Despite over a decade since the introduction of the Central Bank of Nigeria’s cashless policy, a large segment of Nigeria’s rural population continues to rely predominantly on physical cash for daily transactions. In areas like Kaura Namoda Local Government in Zamfara State, where access to conventional banking services is limited, Point of Sale (POS) terminals have emerged as the primary alternative. These systems were expected to facilitate digital payments and promote financial inclusion by reducing the need for cash. However, anecdotal evidence suggests that in many cases, POS machines are used primarily for cash withdrawals rather than for actual cashless transactions, thereby limiting their intended impact.
The effectiveness of POS terminals in driving cashless policy objectives remains uncertain. In theory, these systems should reduce cash dependency, lower transaction costs, and provide safer, faster, and more efficient means of conducting business. In practice, however, many residents of Kaura Namoda view POS agents as convenient cash outlets rather than as facilitators of digital payments. Consequently, instead of promoting a shift toward electronic transactions, the increasing number of POS agents may inadvertently be reinforcing the cash culture, especially in the absence of awareness, trust, and reliable infrastructure to support digital alternatives.
Additionally, several operational issues undermine the confidence of users in POS systems. These include frequent transaction failures due to network disruptions, delayed reversal of failed transactions, high and inconsistent service charges, and growing cases of fraud or theft. Security concerns have also made some individuals wary of keeping funds in bank accounts, further discouraging the use of digital channels. Such experiences erode trust in the system and act as significant barriers to the adoption of electronic payment platforms in rural communities.
Another major concern is the limited financial and digital literacy among rural residents. Many users are unaware of the full capabilities of POS systems beyond basic withdrawals and deposits. This knowledge gap not only limits the usage of POS machines for actual digital transactions but also restricts broader financial inclusion. Without targeted education and support, the potential of POS terminals to transform the rural payment landscape may not be fully realized.
The core problem, therefore, lies in the gap between the expected and actual outcomes of POS adoption in rural areas like Kaura Namoda. If POS terminals are not effectively reducing cash usage or integrating more people into the formal financial system, then a critical component of Nigeria’s cashless policy is failing. It is imperative to investigate whether the presence of POS systems in such localities is truly contributing to the goals of the policy or if they are simply acting as stopgaps in the absence of full banking services. This study seeks to address that gap by critically assessing the real impact of POS on cashless policy implementation in Kaura Namoda.
1.3 Objectives of the Study
The main objective of this study is to examine the impact of Point of Sale (POS) systems on the implementation of the cashless policy in Kaura Namoda Local Government Area.
The specific objectives are to:
- Assess the extent to which POS terminals are used for cashless transactions in Kaura Namoda.
- Evaluate the effectiveness of POS services in reducing the use of cash in the area.
- Examine the challenges faced by POS users and operators in implementing the cashless policy.
- Investigate the relationship between POS usage and financial inclusion in the area.
1.4 Research Questions
The study will be guided by the following research questions:
- To what extent are POS terminals utilized for cashless transactions in Kaura Namoda?
- How effective are POS services in minimizing cash transactions in the local government area?
- What challenges affect the use of POS systems in the implementation of the cashless policy?
- What is the relationship between POS usage and financial inclusion in Kaura Namoda?
1.5 Research Hypothesis
The hypothetical statement of the study is buttressed below:
H₀: There is no significant relationship between POS usage and the implementation of the cashless policy in Kaura Namoda Local Government Area.
H1: There is a significant relationship between POS usage and the implementation of the cashless policy in Kaura Namoda Local Government Area.
1.6 Significance of the Study
This study is significant as it offers empirical insights into the actual impact of Point of Sale (POS) systems on the implementation of the cashless policy in rural Nigeria, using Kaura Namoda Local Government as a case study. While the Central Bank of Nigeria (CBN) has rolled out various electronic payment tools to support its cashless agenda, there is still a limited understanding of how these tools perform in rural contexts where infrastructure, literacy, and trust in the banking system differ greatly from urban areas. By providing data-driven evidence from a grassroots location, this study helps bridge the knowledge gap between policy formulation and practical realities on the ground.
For policymakers and financial regulators, the findings from this study could prove invaluable in refining current strategies aimed at promoting financial inclusion and reducing the dominance of cash in the economy. Understanding whether POS terminals truly facilitate cashless transactions—or merely serve as cash withdrawal points—can inform adjustments in policy design, resource allocation, and infrastructural investment. It will also help the CBN identify areas requiring targeted interventions, such as agent training, consumer education, or improvements in digital infrastructure.
POS operators and financial service providers also stand to benefit from the study. By identifying the key operational challenges facing agents and users, the research offers insights into service gaps and areas for improvement. It can inform business strategies, including pricing models, customer support enhancements, and technological upgrades. For new entrants into the financial technology space, the study can guide market penetration strategies tailored to the unique dynamics of rural environments like Kaura Namoda.
In addition, the study contributes to academic and professional discourse on the evolution of financial technology (fintech) in developing economies. With the rise of agent banking and digital financial services across Africa, there is a growing need for localized research that contextualizes global trends. This study enriches the body of literature on rural banking, digital transformation, and public policy implementation, offering a case-based perspective that future researchers and scholars can build upon.
Furthermore, the study holds relevance for non-governmental organizations (NGOs), donor agencies, and international development partners interested in promoting financial inclusion and economic empowerment in rural communities. Understanding the enablers and barriers of cashless policy success at the grassroots level can support more targeted financial literacy campaigns, infrastructural support programs, and capacity-building initiatives. It can also help in aligning development goals with national financial reforms.
Finally, for residents and local stakeholders in Kaura Namoda, the research could serve as a mirror reflecting the actual state of financial services in their community. It can raise awareness about the benefits and limitations of POS systems and potentially stimulate dialogue on how to better engage with financial services. By providing a platform for local voices and experiences, the study enhances community involvement in the nation’s financial evolution and supports inclusive policy development.
1.7 Scope of the Study
The study is limited to Kaura Namoda Local Government Area of Zamfara State, focusing on POS operators, users, and selected financial stakeholders. It explores their experiences, challenges, and usage patterns in relation to the cashless policy from 2020 to 2025. The study does not cover other digital platforms like mobile banking apps or internet banking unless used through POS.
1.8 Limitations of the Study
Possible limitations include limited access to reliable records, reluctance of respondents to provide accurate information due to security or confidentiality concerns, and potential language barriers when interacting with rural respondents.
1.9 Definition of Key Terms
Point of Sale (POS): A Point of Sale (POS) system is a technology-enabled platform or terminal that allows customers to make financial transactions using debit or credit cards. POS machines are widely used by retailers, service providers, and independent agents to accept electronic payments directly from customers. In Nigeria, especially in rural and semi-urban areas like Kaura Namoda, POS terminals are often operated by agents who also provide basic banking services such as cash withdrawals, deposits, airtime recharge, and bill payments. POS systems have become crucial in extending financial services to areas with limited banking infrastructure and are seen as a key component in the drive toward a cashless economy.
Cashless Policy: The Cashless Policy refers to a financial reform initiative introduced by the Central Bank of Nigeria (CBN) in 2012 to reduce the volume of physical cash in circulation and promote the adoption of electronic payment methods. The primary goal of this policy is to enhance the efficiency of the payment system, reduce the cost of banking services, improve transparency, and encourage financial inclusion. It encompasses various digital payment platforms, including mobile banking, internet banking, electronic fund transfers, and POS systems. The policy is particularly significant in rural areas where cash remains dominant, and its successful implementation depends on the availability and reliability of alternative digital payment systems.
Financial Inclusion: Financial inclusion is the process of ensuring that individuals and businesses, particularly those in underserved and rural areas, have access to useful, affordable, and sustainable financial products and services. These include savings accounts, credit, insurance, and digital payment systems. The concept aims to eliminate barriers to accessing formal financial systems and empowers people to make informed financial decisions, improve their livelihoods, and contribute to economic growth. In the context of this study, financial inclusion relates to how the availability of POS systems in Kaura Namoda enables or limits access to banking services for residents who would otherwise remain excluded from the financial system.
Transaction Failure: Transaction failure refers to the unsuccessful completion of a financial transaction through a digital or electronic payment channel. This can occur for several reasons, including poor network connectivity, system outages, power interruptions, insufficient funds, or technical errors within the banking platform. In the case of POS usage, transaction failures often result in customer frustration, delayed reversals of debited amounts, and loss of trust in electronic payment systems. Such failures are a major barrier to the successful implementation of the cashless policy, especially in rural areas where digital literacy and access to customer support may be limited.