One of the mandates of the Central Bank of Nigeria (CBN) as provided in Section 2 of the Act which established it is to ensure price and monetary stability. To ensure this stabilization, the CBN is also empowered by the same Act to regulate money supply in the economy. One of the corrals built around any economy is the quality and resilience of its monetary and financial systems to macroeconomic shocks. When the financial system, which is the body of banks and other non-bank financial institutions operating in the economy, is vulnerable to any internal and external shocks, what I should call macroeconomic vagaries, the entire economy could suffer. For instance, let us recall what happened during the implementation of the Structural Adjustment Program (SAP) during the Gen. Ibrahim Babangida era.
Majority of the banks in the economy had become unable to withstand the endogenous shocksthat were associated with the implementation of the program; and we had crises in the banking sector as many of the banks folded up. By that time, our financial system could be said to be weak and vulnerable. In fact, SAP had threatened both monetary and financial stability. Our currency was losing its purchasing power every now and then. Consequently it failed to play one of its major functions: which is that of being the store of value.
So much money could circulate outside the banking system if savers find it difficult to access financial services easily.
The same goes for the monetary system, which is the collection of our currency and how they are denominated as well as the quality of the material and the technology used in printing them. If the quality of our currency could not be guaranteed, the currency could be easily imitated and counterfeits will be circulating side by side with the genuine ones in the economy. This phenomenon could then threaten the stability of the monetary system in that it would become difficult to control the supply of money. Also, if the paper used in printing the currency is of poor quality, the durability of the currency could be eroded.
Economic activities are lubricated and facilitated by stable financial and monetary systems. Commercial activities are driven by the extent of availability of money and how it is easy to access financial services. The CBN, therefore, in ensuring price and monetary stability has to regulate money supply.Other than counterfeiting the currency, instability can also be engendered if there is so much money circulating outside the banking system. So much money could circulate outside the banking system if savers find it difficult to access financial services easily. Many would not want to put their monies in the bank. To bring more people into the financial services network and improve the quality of financial services and financial service providers, the CBN has to come up with a strategy called Financial Inclusion which also involves protection and enlightenment of financial service consumers.
Financial Inclusion, therefore, reduces crime and inflation; but at the same time, it lubricates the machinery of production and consumption
The strategy also articulated both the demand and supply sides of the money market. The National Financial Inclusion Strategy (NFIS) adopted in 2012 by the CBN is, therefore, to ensure that many players in the economy irrespective of their status and location are well informed and made to access financial services without any difficulties. The technologies introduced in implementing the financial inclusion strategy include PoS, e- Payment, Agent banking regulations, national financial literacy strategy, etc. However, these technologies could lead to a cashless situation, where goods and services would not circulate alongside cash on the street; what we call a cashless economy. In fact, the CBN is aiming at introducing a cashless economy.
This is a very fascinating development. It would reduce crime and the rate at which money is demanded to be held, called transaction demand for money in economic literature, could be curtailed. Transaction demand for money has the potency of fueling inflation. But with the coming of the financial inclusion strategy with its technology,purchases could take place without holding physical cash. Financial Inclusion, therefore, reduces crime and inflation; but at the same time, it lubricates the machinery of production and consumption. Any policy initiated by the government has the interest of the citizenry as its objective. The financial inclusion strategy is one of those policies that have the interest of the common man in mind.