Digital Financial Systems and the Transformation of Nigerian Supply Chains: Evidence from Nigerian Smes (2019–2023)

Digital Financial Systems and the Transformation of Nigerian Supply Chains: Evidence from Nigerian SMEs (2019–2023)

Timothy Shirgba Aikor , Ejem Agwu Ejem & Nnenna Nwoko

Department of Logistics and Supply Chain Management Federal University of Technology, Owerri-Nigeria

DOI: https://dx.doi.org/10.47772/IJRISS.2025.914MG00107

Received: 03 June 2025; Accepted: 07 June 2025; Published: 11 July 2025

ABSTRACT

The study investigates the impact of cashless policy implementation on the efficiency and growth of supply chains in Nigeria, using Small and Medium Enterprises (SMEs) as a case study. As Nigeria advances towards a cashless economy, digital payment systems such as NEFT and POS have reshaped how supply chains operate, especially among SMEs that form the backbone of many sectors. The study analyzes data from 2019 to 2023 using Ordinary Least Squares (OLS), ARDL co-integration, and Bounds testing to determine how cashless banking indicators influence the contribution of SME-driven supply chains to GDP. Findings reveal that while cashless systems significantly enhance supply chain performance in the long run, their short-term benefits are hindered by infrastructural deficits, low digital literacy, and regulatory gaps. The paper concludes by offering policy recommendations aimed at strengthening digital infrastructure, improving awareness, and fostering an inclusive financial ecosystem that supports resilient and adaptive supply chains through SME participation

Keywords: Cashless Economy, Supply Chain Performance, Small and Medium Enterprises (SMEs) in Nigeria, Digital Payment Systems

INTRODUCTION

In recent years, supply chain performance has witnessed a significant transformation in its financial landscape with the introduction and implementation of various cashless policies aimed at promoting financial inclusion and efficiency (Adeleye and Okafor, 2022).  Among the key stakeholders affected by these policies are Small and Medium Enterprises (SMEs), which play a crucial role in the country’s economic development. This study delves into the intricate relationship between cashless policies and the contributions of supply chains (SMEs) to economic growth in Nigeria (Ogunleye and Oyekola, 2020).

The proliferation of digital payment systems, coupled with government initiatives to reduce cash transactions, has spurred debates regarding its impact on SMEs (Oladele and Ogunrinola, 2019). According to Aderounmu and Salami (2018), while proponents argue that cashless policies enhance transparency, reduce transaction costs, and foster a more robust financial ecosystem, skeptics raise concerns about the potential adverse effects on the informal sector, financial exclusion of marginalized groups, and operational challenges faced by SMEs in adapting to digital payment platform.

Drawing on recent empirical evidence and theoretical frameworks, this paper examines the multifaceted implications of cashless policies on SMEs in Nigeria. It investigates how these policies influence access to finance, business operations, market competitiveness, and overall economic contributions of SMEs. Moreover, the study explores the role of regulatory frameworks, technological infrastructure, and institutional support in mitigating the challenges and maximizing the benefits of cashless transactions for SMEs.

By synthesizing insights from academic research, policy analyses, and industry perspectives, this paper aims to provide a comprehensive understanding of the nexus between cashless policies and SME development in Nigeria. Furthermore, it offers actionable recommendations for policymakers, financial institutions, and SMEs to leverage the opportunities presented by cashless initiatives while addressing the associated risks and barriers to inclusive economic growth.

STATEMENT OF THE PROBLEM

The last three decades have undoubtedly witnessed major advancement in payment technologies as Nigeria electronic payment (e-payment) landscape in the Nigeria monetary system through the introduction of the cashless policy. The policy is the new threshold with banks, switching and transaction companies, vendors of Automated Teller Machine (ATMs), Point of sale (POS) and third-party companies all jostling to expand the scope of market. Thus, these imply that the cashless policy is expected to result in enhanced and efficient financial intermediation thereby bringing about a reduction in cost of banking on the SMEs operations.

An efficient and modern payment system is expected to reduce the cost of banking services (including cost of credit) and drive financial inclusion by providing more efficient transaction options and greater reach and to improve the effectiveness of monetary policy in managing inflation and driving economic development. In addition, the cashless policy aims to curb some of the negative consequences- associated with the high usage of physical cash in the economy, including: high cost of cash: high risk of using cash, high subsidy, informal economy and inefficiency & corruption (CBN, 2022).  This policy has impacted the operations of the SMEs greatly.

However, Studies to provide a comprehensive understanding of the nexus between cashless policies and Supply chain performance in Nigeria are inadequate. This paper attempts at closing this gap.

REVIEW OF RELATED LITERATURE

Conceptual Review

Supply Chain Performance and Its Relevance to SMEs

Supply Chain Performance (SCP) is pivotal in determining how efficiently and effectively businesses manage the flow of goods, information, and finances from suppliers to end consumers. Key performance indicators include cost efficiency, responsiveness, flexibility, and reliability. For Small and Medium Enterprises (SMEs), especially in Nigeria, optimizing SCP is crucial for competitiveness and sustainability.

Digital Transformation and Supply Chain Efficiency

The adoption of digital payment systems has significantly influenced supply chain dynamics for Nigerian SMEs. According to the Mastercard SME Confidence Index (2025), “99% of Nigerian SMEs now accept digital payments,” leveraging these platforms to enhance operational efficiency and customer experience. This shift not only streamlines transactions but also provides SMEs with valuable data analytics for better decision-making. Similarly, a Visa report (2025) highlights that “90% of surveyed SMEs believe that card payments positively impact their revenues and footfall,” indicating a strong correlation between digital payment adoption and business growth.

Challenges Amidst Cashless Policy Implementation

Despite the advantages, the transition to a cashless economy has presented challenges. The Organised Private Sector (OPS) expressed concerns that “the scarcity of cash has adversely affected businesses, especially those in the Micro, Small, and Medium Enterprises category,” emphasizing that Nigeria’s infrastructure may not yet fully support a predominantly cashless system.Furthermore, the Fintech Association of Nigeria noted that “poor implementation of the cashless policy undermines trust in Nigeria’s financial system,” as businesses and consumers face difficulties with digital transactions .

Supply Chain Resilience in the Face of Economic Fluctuations

Economic instability, characterized by inflation and currency devaluation, has strained supply chains. DHL Nigeria (2024) reported that “inflation in Nigeria has surged to a 27-year high,” impacting the cost of raw materials and transportation. In response, SMEs are encouraged to build resilient supply chains capable of adapting to disruptions, ensuring continuity and customer satisfaction.

Inventory Management and Operational Performance

Effective inventory management is integral to SCP. Mamuda and Adamu (2023) argue that “inventory management is essential to enhancing the effectiveness and efficiency with which businesses handle their stock,” linking accurate inventory control to improved customer satisfaction and overall sproductivity. However, many Nigerian SMEs still rely on manual inventory tracking methods, leading to errors and inefficiencies. The adoption of digital inventory systems is recommended to mitigate these issues and enhance supply chain visibility.

Strategic Partnerships and Information Sharing

Collaborative relationships within the supply chain can enhance performance. Chiyem and Etomi (2024) found that “strategic partnerships with suppliers, information sharing, and collaborative governance have a favourable and significant influence on the performance of SMEs in Nigeria,” suggesting that integrated supply chain practices contribute to business success.

In recent times, Nigerian SMEs have navigated a complex landscape marked by digital transformation, economic volatility, and infrastructural challenges. While the shift towards a cashless economy offers opportunities for enhanced supply chain performance, it also necessitates robust infrastructure, effective policy implementation, and strategic collaboration. Embracing digital tools, fostering partnerships, and building resilient supply chains are essential strategies for SMEs aiming to thrive in this evolving environment

Cashless Policy

Various researchers have defined the term “cashless policy” differently. Instead of a complete absence of currency, a “cashless economy” is one in which products and services are acquired and paid for electronically. According to Woodford (2018), in a cashless economy, there are no transaction frictions that can be alleviated by using money balances, which provides a rationale for preserving such balances even when they yield a return on investment. In a cashless society, your wallet’s cash balance is basically useless.

In the wake of technological advancements and the increasing digitization of financial transactions, many countries, including Nigeria, have implemented cashless policies aimed at reducing the dominance of cash in their economies (Adewale and Owolabi, 2019). Nigeria’s cashless policy, introduced by the Central Bank of Nigeria (CBN) in 2012, seeks to promote transparency, efficiency, and financial inclusion.

Rationale for Cashless Policy in Nigeria

The cashless policy in Nigeria is driven by several factors. Firstly, it aims to reduce the costs associated with cash handling, such as printing, transportation, and security. By encouraging electronic transactions, the government seeks to streamline the payment system and enhance operational efficiency. Secondly, the policy aims to curb corruption, money laundering, and other illicit financial activities by promoting transparency and traceability of transactions. Thirdly, it aims to expand financial inclusion by providing access to formal financial services to a larger segment of the population, including those in rural areas (Adewale and Owolabi, 2019).

The Future of Nigeria’s Cashless Policy

The future of Nigeria’s cashless policy trajectory is poised to be dynamic, driven by technological advancements, evolving consumer behavior, and regulatory initiatives aimed at enhancing financial inclusion and efficiency.

Technological Innovation: The future of Nigeria’s cashless policy is intricately linked with ongoing technological innovation in the financial sector (Obasi and Adebamowo, 2021). Hence, advancements in digital payment solutions, such as mobile money, contactless payments, and blockchain-based platforms, will continue to shape the landscape of electronic transactions. These innovations will offer greater convenience, security, and accessibility to users, driving further adoption of cashless payments.

Expansion of Financial Inclusion: A key objective of Nigeria’s cashless policy is to promote financial inclusion by providing access to formal financial services to underserved populations (Okonkwo and Nwosu, 2023). This means, the future of the policy will see concerted efforts to deepen financial penetration in rural areas and among marginalized communities through innovative digital banking solutions, agent banking networks, and targeted financial literacy programs.

Regulatory Frameworks: The future of Nigeria’s cashless policy will be shaped by regulatory frameworks that balance innovation with consumer protection and systemic stability. Regulatory authorities, such as the Central Bank of Nigeria (CBN), will play a crucial role in fostering an enabling environment for digital financial services while mitigating risks associated with cybersecurity, data privacy, and market competition (Central Bank of Nigeria, 2022).

Public-Private Partnerships: Collaboration between government agencies, financial institutions, technology firms, and other stakeholders will be essential for driving the future of Nigeria’s cashless policy. According to Ojo and Adegbitem (2024), Public-private partnerships can facilitate infrastructure development, promote interoperability among payment systems, and accelerate the adoption of digital financial solutions across various sectors of the economy.

Consumer Education and Awareness: Effective communication strategies and consumer education initiatives will be critical for fostering trust and confidence in cashless payments (Adewumi and Ogunleye, (2023). As the ecosystem evolves, efforts to raise awareness about the benefits, risks, and best practices associated with digital transactions will empower individuals and businesses to make informed choices and participate actively in the cashless economy.

In summary, the future of Nigeria’s cashless policy holds promise for driving financial inclusion, fostering innovation, and advancing economic development. By embracing technological advancements, strengthening regulatory frameworks, fostering partnerships, and prioritizing consumer education, Nigeria can navigate towards a more inclusive, efficient, and resilient cashless ecosystem

The Beneficial Effects of Cashless Policy on Economics Growth

The cashless policy implemented in Nigeria has brought about several beneficial effects that contribute to the overall economic growth of Nigeria and financial inclusion. Here are some of the key beneficial effects:

Reduction in Cash-Related Costs: One of the primary benefits of the cashless policy is the reduction in costs associated with cash handling, including printing, transportation, and security. By promoting electronic transactions, the government can significantly lower these expenses. For instance, the Central Bank of Nigeria (CBN) reported a reduction in the cost of cash management by commercial banks after the implementation of the cashless policy (Central Bank of Nigeria,2019).

Enhanced Transparency and Accountability: Digital transactions offer greater transparency and traceability compared to cash transactions, thereby reducing the opportunities for corruption, money laundering, and other illicit financial activities. The use of electronic payment systems helps in creating an audit trail, making it easier for regulatory authorities to monitor and track financial transactions (Adewale and Owolabi, 2020).

Increased Financial Inclusion: According to Okafor and Akwaja (2019), the cashless policy has contributed to expanding access to formal financial services, particularly among underserved and unbanked populations. Electronic payment solutions such as mobile money and digital wallets have facilitated financial inclusion by providing convenient and affordable banking services to individuals who previously had limited access to traditional banking channels

Stimulated Economic Growth: By promoting efficiency and transparency in financial transactions, the cashless policy has contributed to stimulating economic growth in Nigeria. Electronic payments facilitate faster and more secure transactions, which can lead to increased consumer spending, investment, and overall economic activity (Adeleye and Okafor, 2023).

Improved Business Environment: The adoption of cashless payment systems has led to an improvement in the business environment by reducing the reliance on cash transactions, which are often prone to theft and fraud. Small and medium-sized enterprises (SMEs) have benefited from increased efficiency and security in their financial operations, allowing them to focus more on business growth and development Ajayi and Adeyemi, 2018).

These beneficial effects demonstrate the positive impact of the cashless policy on Nigeria’s economy, financial system, and society as a whole, contributing to sustainable development and inclusive growth.

DIGITAL PAYMENTS

POS terminals and use of Electronic Cards,

Williams, Olaekan, and Timothy (2018) define a point of sale (also known as POS) system as a payment tool that allows credit/debit issuers to pay at sales/purchase outlets. It requires quickly withdrawing funds from the store’s bank account using a computer terminal in a retail environment. The gadget authorizes that there are sufficient funds in the account of the client to complete the transaction.  POS, which allows for immediate money transfers and purchases at the point of sale, as well as discounts on online transactions, improves customer service. The use of electronic payment systems will benefit both parties and provides a number of advantages; providing a means of survival for certain individuals and enterprises, as well as reducing bank congestion.

Banks are benefited by reduced operational costs.

It is an extension of banking services which encourages financial inclusion.

Challenges

difficulty of reversing failed POS payments. This could lead to delay or   possibly take time.

Compromise of POS software can put consumer data at danger. The cost:

Consumers are discouraged from buying POS modern technology since it is a clear barrier fast integration.

National Electronic Funds Transfer (NEFT)

NEFT is the delivery of conventional banking services through the Internet. It is a service that banks have included as a module into the new banking software “BANKS” in order to satisfy the demands of its customers for online banking. Internet banking helps users to carry out transactions. As result of implementing a cashless system, people are able to perform transactions online without having to carry cash, reducing the amount of money in circulation.

Electronic Cards:

Physical cards that uniquely identify the holder are required for internet, ATM, and POS transactions. This category comprises both debit and credit cards; Credit cards are widely used, therefore in addition to local lines, worldwide trust schemes (such as Visa and MasterCard) frequently supply underlying infrastructures and operational principles. whereas credit cards can be used to evaluate both domestic and foreign networks, debit cards are tied to local bank accounts and provide instant payment confirmation. Credit cards are accepted in the majority of countries. Debit cards, often known as ATM cards, are the most commonly used cards in Nigeria because there are presently only a small number of POS terminals in use.

The Nigerian Interbank Settlement Scheme (NIBSS)

The NIBSS allows for instantaneous transfers of funds between banks for one or more beneficiaries with a total value of N10 million or less. It’s an online marketplace where banks are able to exchange goods and services.

THEORITICAL REVIEW

Intermediation Theory

The primary goal of intermediation theory is to explain why financial intermediaries exist. This theory contends that when markets are perfect and fully efficient, resource allocation is Pareto optimal and intermediaries cannot raise welfare. With the advent of financial innovation (which most cashless policy instruments fall under), this theory has been reintroduced as modern intermediation theory. Contemporary theory is inspired by the role of financial innovation in interpreting transaction costs and information asymmetry in the financial system (Scholtens & Wensveen, 2013). This aligns with the presumption that; traditional Arrow Deberu Model of resource allocation makes the assumption that markets, rather than financial intermediaries, are the primary means through which individuals and enterprises interact. According to the thesis, the existence of financial intermediaries stems from market inefficiencies that prohibit investors and savers from engaging in the best possible direct transaction. The largest market flaws are informational gaps between savers and investors. Financial intermediaries, primarily banks, operate as agents and delegated monitors, closing the knowledge gap between ultimate savers and investors. This is because they have a greater comparative informational advantage than savers or investors. They research and manage investors on behalf of savers. They can charge parties the transaction fees because this is their main goal.

They also help to bridge the maturity gap between savers and investors and ease payments between economic parties by offering payment, settlement, and clearing services. They thus pursue actions concerning the transformation of qualitative assets. Modern financial intermediation theory assumes that intermediaries minimize transaction costs and informational asymmetries. According to the financial intermediation theory, intermediation is no longer necessary due to advancements in information technology, regulatory reform, and the depth of the financial market, which have reduced informational asymmetries and transaction costs.

When markets are ideal, intermediaries are not required since savers and investors have access to all the information they need to connect without any delays or costs, transact at the best rates, and connect promptly.

Empirical Review

These empirical studies contribute to the understanding of the impact of cashless policies on SMEs’ contribution to economic development in Nigeria, providing valuable insights for policymakers, financial institutions, and small business owners.

Oladele and Ogunrinola (2020) explored “The Impact of Cashless Policy on Small and Medium Enterprises (SMEs) in Nigeria” in the Journal of Economic Development. Through empirical analysis, they examined how SMEs in Nigeria have been affected by the implementation of cashless policies, shedding light on the changes in transaction patterns, financial management practices, and overall business performance.

Adeleye and Okafor (2021) conducted a study titled “Cashless Economy and SMEs Growth: Evidence from Nigeria” published in the International Journal of Business Studies. Their empirical research investigated the relationship between the adoption of cashless payment systems and the growth trajectory of SMEs in Nigeria, providing insights into the mechanisms through which digital transactions influence SME development.

Adediran and Ajao (2019) contributed to the literature with their study on “Assessing the Effects of Cashless Policy on Supply Performance in Nigeria,” published in the Journal of Finance and Economics. Through empirical analysis, they examined how the implementation of cashless policies has impacted various aspects of SME performance, including sales revenue, cost management, and market competitiveness.

Ogunleye and Oyekola (2022) conducted empirical research titled “Impact of Cashless Policy on SMEs Financing: Evidence from Nigeria,” published in the African Journal of Business Management. Their study focused on how cashless policies have influenced SMEs’ access to financing, exploring the changes in lending practices, credit availability, and financial inclusion for small businesses.

Salami and Aderounmu (2024) investigated “The Role of Cashless Policy in Enhancing SMEs Competitiveness: Empirical Evidence from Nigeria” in the Journal of Small Business Management. Through empirical analysis, they examined how the adoption of cashless payment systems has influenced the competitiveness of SMEs in Nigeria, highlighting the implications for market positioning, innovation, and growth strategies.

Taiwo, Ayo, Afierdoho, and Agwu (2016) The implementation of the cashless policy and its role in the contribution of SMEs to the Nigerian economic system were examined using a descriptive study approach. Data were collected from 120 First Bank, Zenith Bank, and United Bank of Africa employees who randomly completed a questionnaire. The data were presented and analyzed using the Statistical Package for Social Sciences (SPSS), which included descriptive statistics and a one-sample t-test. According to data research, the cashless policy has simplified financial transactions, positively impacted banking activity, and improved bank operational performance. The findings enabled the researchers to conclude that cashless policies have a variety of benefits since they aid in the fight against corruption and reduce the prevalence of carrying cash. However, great efforts are implemented; the regulation will only produce the intended results. It was suggested that the public be adequately informed about the policy and that rigorous security should be maintained in order to reduce online fraud.

Siyanbola (2013) investigated the effect of cashless banking on the SMEs and its attendant effect on Nigerian economy using a descriptive research design. Chi-square was used to examine the data after it had been collected via a questionnaire. The analysis’s conclusions show that cashless banking and the Nigerian economy have a strong economic relationship, that it has a favorable effect on the economy and employment in that nation, respectively, and that there are best practices for adopting cashless banking. The paper also stated that government support, availability to power and communication networks, and the provision of appropriate security will all contribute to the improvement and expansion of cashless banking in Nigeria. Ejiro (2012) expressed optimism about the potential effectiveness of this policy and said that “in the long run sustainability of the policy will be a function of the endorsement of, and compliance by end-users.” The scheme is expected to reduce the costs of running a cash-based economy by 90% after it has been fully implemented. Oyewole (2013) analyzed the electronic payment systems and their impact on economic growth in Nigeria. According to his research, e-payment systems positively affect economic growth in terms of real GDP per capita as well as trade per capita. More specifically, it was found that, in contrast to other types of e-payment systems, the introduction of ATMs into financial transactions had a direct impact on economic growth.

Newstead (2012) researched on the effect of cashless transactions on economic growth, the result of the study shows that, there is a positive association between the number of cashless transactions and economic growth. In particular, it was shown that poor countries had twice the growth in cashless transactions as developed countries. The essential statistical data, which would have shown the rate of cashless growth in developing countries relative to rich economies, were not used to support this assertion by Newstead.

Finally, Osazevbaru, Henry Osahon & Yomere, Gabriel O. (2015) researched on the benefits and challenges of Nigeria’s. the result shows that, banks’ income is higher in a cashless setting than in a cash-based arrangement. Therefore, it is advised that necessary infrastructures and legal support be provided to facilitate the policy’s religious execution because the cash- less policy gives the banking industry enormous benefits.

In another study of the empirical assessment of the effects of cashless policy on financial inclusion in the Nigerian emerging economy

METHODOLOGY

The methodology adopted for this study is mixed methods research design; use is made of both quantitative and qualitative methods for data collection. The quantitative data is analysed using multiple regression analysis and ordinary least-square. The viability test of the model design is determined with the use of unit root tests, while the relevance of the data is examined using the Ordinary Least Squares (OLS) approach. Quantitative research design is very well suited to establishing cause-and-effect relationships, to testing hypotheses and to determining the opinions, attitudes and practices of a large population. For the qualitative methods; use is made of statistics from the National Bureau of Statistics (NBS) and the Annual Reports of the Central Bank of Nigeria; In addition, the approach is used because of its characteristics and relative importance, also the number of observations is short and employing more dynamic approach will not yield robust results due to insufficient lags. Data was analysed using multiple regression analysis utilizing the ordinary least-square (OLS) approach. The regression in the study is done using the e-View statistical tool, and the percentage growth was calculated using an excel worksheet. The Central Bank of Nigeria’s (CBN) Annual Report showing the contribution of the SME sector to the national economy were the main sources of the secondary data.

SMEs contribution to Economic growth (SME to GDP), which serves as the study’s primary dependent variable, is compared to the independent variables Automated Teller Machines (ATM), Points of Sale (POS), and NEFT (Mobile banking). Multiple regression analysis is used in this study(GDP alone is not a valid measure of supply chain performance, but sectoral contributions to GDP like SMEs can help evaluate the economic impact of supply chain efficiency or inefficiency) and the structural expression of the functional link is as follows: SME to GDP = f (ATM+POS+NEFT)         (1)

SME to GDP = (β0+β1ATM+β2POS+β3NEFT+µ)   (2)

Data derived from secondary sources was evaluated using the Augmented Dicky Fuller test in a unit root test. To identify the traits of the research variables, a descriptive test was conducted.

RESULTS AND DISCUSSION OF FINDINGS

The unit root test, which uses the augmented dickey fuller (ADF) test to check the stationarity of the variables, is the first point of examination in this session. The table below shows the augmented dickey fuller findings, which include the test static and the critical values as they were initially generated.

Table 1. Unit Root Result

Source: Author’s computation with E-views 10

Table 2. Regression Result

Source: Author’s Estimation using E-views 10.

Regression Result

The estimated and the available data for SME to Gross Domestic Product (GDP), Automated Teller Machine (ATM). Point of Sales (POS) and Mobile banking (NEFT) were collected and analyzed using multiple regression models.

In this study, mathematical relationship between variables were used to capture the assumed relationships among the variable.

The intercept, which can be calculated from the results above, is 9.499284, indicating that, all other things being equal, SME to GDP will be 9.499284. The coefficient of ATM is – 0.197746 and P = 0.6546; which shows that; ATM and SME to GDP have a negative relationship and that a unit rise in ATM would result in a N1977 decrease in SME to GDP. The coefficient of POS is -0.131105, and P = 0.0001 indicates a substantial influence and a negative association with SME to GDP. As shown by the NEFT coefficient of 0.215764 and P value of 0.0003, there is a positive association between NEFT and SME to GDP, with a rise in NEFT increasing SME to GDP by N2157.

The better the R2 of the regression plane is to the sample observation, the more variation in the dependent variable there is. Conversely, if the R2 is closer to zero, the goodness of fit is worse. The closer a value is to 0 or 1, the worse it is since R2’s value is between 0 and 1. According to our findings, fluctuations in SME to GDP caused by ATM, POS, and NEFT may be accounted by 47% of the coefficient of determination (R2), while the remaining 53% of variations must be explained by external variables. The adjusted (R2) value of 37% further supports how well SME to GDP serves as a proxy for the dependent variable on the regression plane. At a 5% level, the explanatory variable’s combined contribution is substantial. At the 5% level of significance, Durbin Watson for Autocorrelation (2.1) indicates the presence of positive autocorrelation in particular.

Following a thorough review of the data utilized in this study, we conclude that, as shown in Table.2, Mobile banking (NEFT) and Point of Sale (POS) have considerable impact on Nigeria’s SME to GDP because the probability value is less than 5%. The result follows that of other studies on related topic; Newstead (2012) and Ogbeide (2019) all found the impact of cashless banking on the economy positive. Same as studies carried out by Taiwo, Ayo, Afierdoho, and Agwu (2016) on the implementation of the cashless policy and its role in the contribution of SMEs to the Nigerian economic system were examined using a descriptive study, where the result showed that; cashless policies have a variety of benefits since they aid in the fight against corruption and reduce the prevalence of carrying cash. However, great efforts are implemented; the regulation will only produce the intended results. It was suggested that the public be adequately informed about the policy and that rigorous security should be maintained in order to reduce online fraud.

Table 3. ARDL Bounds Test for Co- integration analysis

Source: Author’s computation with E-views 10

The study investigated the long – run relationship among SME to GDP and other independent variables under using the ADRL Bounds test. Table 3 presents the results therein, where the computed F- statistic is 6.527458and the upper and lower critical bounds at 10%, 5%, 2.5% and 1% are

(2.37, 3.2), (2.79, 3.67), (3.15, 4.08) and (3.65, 4.66) respectively. Since the calculated F-statistic is greater than the critical value for the upper bound I (1), the null hypothesis is rejected and we conclude that there is co-integration. That is, there is a long-run relationship between SME to GDP and cashless banking products.

CONCLUSION

Various findings emanating from the link between cashless banking and SMEs Contribution to economic growth, are diverse, while some economies report positive and significant relationship, others report otherwise. Following the debate, we sought to provide further empirical evidence on the impact of cashless banking on the economy of Nigeria from 2019 to 2023. Using the Ordinary Least Square regression methods, this study has helped to show the specific impact of cashless banking on the economy of Nigeria within the years under review. The major indicators of cashless banking were employed as independent variables while the SME to GDP was employed as a proxy for economic growth. The study applied ordinary least square regression, ARDL co- integration approach and ARDL Bounds test to evaluate and analyse the impact of cashless banking systems on economic growth in Nigeria. The results shows that NEFT and POS have significant effect on SME to GDP in the long run. It therefore, suggests that cashless banking products do not contribute directly to economic growth in the short run. The study concludes that; the prevailing situation of Nigeria’s cashless policy reflects a mixed landscape characterized by progress in digital adoption alongside persistent challenges in implementation and adoption due to low awareness and poor infrastructure.

In summary, the future of Nigeria’s cashless policy holds promise for driving financial inclusion, fostering innovation, and advancing economic development. By embracing technological advancements, strengthening regulatory frameworks, fostering partnerships, and prioritizing consumer education, Nigeria can navigate towards a more inclusive, efficient, and resilient cashless ecosystem

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