Electronic Payment System and Economic Growth: A Review of Transition to Cashless Economy in Nigeria

Technological advancement has provided efficient and effective payment system devoid of ‘cash and carry syndrome’. Specifically, electronic payment system provides a medium through economic exchanges take place without visiting brick and mortal banks or with no physical presence of the transacting parties. While electronic payment system enjoys prominence in Nigeria, evidence of its contribution to economic growth has not been empirically established. Meanwhile, the current transition to cashless economy was essentially based on the prominence of e-payment system. Therefore, this study, for the first time, explored relationship between e-payment system and economic growth as means of reviewing current transition to cashless economy in Nigeria. Data was analysed using OLS and TSLS methods covering period of 7years (2005-2012). The result indicates a significant positive relationship between e-payment system and economic growth in term of real GDP per capita and trade per capita. Only ATMs was found to positively contribute to economic growth while other e-payment channels contribute negatively. Hence, current cashless policy should be tailored towards effective e-payment system and other factors which bear much relevance on successful transition to cashless economy should be prioritized.