The value of the Nigerian Naira has drastically fallen over the past four years, with $1,000 increasing from ₦360,000 in 2020 to ₦1.6 million in 2024. This devaluation has made carrying cash impractical due to the sheer volume and weight required for transactions. Consequently, there has been a significant rise in electronic payments, pushing Nigeria towards a cashless economy.
This shift has exposed discrepancies in government revenue from electronic transactions, as many small transactions now fall below the fee threshold. Inflation has exacerbated the situation, making it challenging for people to withdraw sufficient cash for everyday expenses. The Central Bank of Nigeria's long-standing push for a cashless economy is now being realized through economic necessity rather than policy.
While the move to electronic payments offers potential benefits such as streamlined banking operations and better economic oversight, it also presents challenges like increased vulnerability to digital fraud. The transition away from cash could disrupt businesses reliant on physical currency and change criminal activities like ransom demands.
Ultimately, the difficult economic conditions driving this change might lead to significant improvements in Nigeria's financial system if managed effectively.