Open Access Journal Article

Examining the Response of Currency Outside the Banking System to the Rise in E-Payment Systems in Nigeria

by Innocent Chile Nzeh a,* orcid Hycenth Richard Oguejiofoalu Ogwuru b orcid Ifeoma Sandralyn Obiukwu c orcid Irene Olanma Onwuemeka d orcid  and  Kelechi Chibueze Abamara e orcid
a
Department of Cooperative and Rural Development, University of Agriculture and Environmental Sciences, Imo State, Nigeria
b
Department of Economics, Novena University, Delta State, Nigeria
c
Department of Economics, Alvan Ikoku Federal University of Education, Imo state, Nigeria
d
Department of Economics, Renaissance University, Enugu State, Nigeria
e
Department of Economics, Nnamdi Azikiwe University, Anambra State, Nigeria
*
Author to whom correspondence should be addressed.
Received: 11 July 2024 / Accepted: 22 December 2024 / Published Online: 13 January 2025

Abstract

This study investigated the response of currency outside the banking system to the rise in the use of the e-payment outlets in Nigeria. The study is motivated by the recent rise in the use of e-payment systems and their likely tendency to reduce the currency outside the banking system. Using monthly series over the period from 2012M12 to 2022M12, the study applied the VAR model. The study found that currency outside the banking system responded negatively to shocks in the three e-payment channels included in the study, even though such responses were short-lived. The study equally revealed that while bank reserves responded positively to shocks in e-bills payment only in period one, its response to shocks in both NIP and POS was positive up to periods six and eight, respectively. These outcomes found support in the results of the variance decomposition. On grounds of the findings, the study concludes that the e-payment system led to a reduction in the currency outside the banking system with the likely implication of causing much liquidity in the banking system. It is the view of the study that the monetary authorities should encourage the use of the e-payment systems in order to reduce the currency outside the banking system, but should monitor the various e-payment channels to avoid financial instability.


Copyright: © 2025 by Nzeh, Ogwuru, Obiukwu, Onwuemeka and Abamara. This is an open-access article distributed under the terms of the Creative Commons Attribution License (CC BY) (Creative Commons Attribution 4.0 International License). The use, distribution or reproduction in other forums is permitted, provided the original author(s) or licensor are credited and that the original publication in this journal is cited, in accordance with accepted academic practice. No use, distribution or reproduction is permitted which does not comply with these terms.

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ACS Style
Nzeh, I. C.; Ogwuru, H. R. O.; Obiukwu, I. S.; Onwuemeka, I. O.; Abamara, K. C. Examining the Response of Currency Outside the Banking System to the Rise in E-Payment Systems in Nigeria. Review of Economic Assessment, 2024, 3, 36. https://doi.org/10.58567/rea03030003
AMA Style
Nzeh I C, Ogwuru H R O, Obiukwu I S, Onwuemeka I O, Abamara K C. Examining the Response of Currency Outside the Banking System to the Rise in E-Payment Systems in Nigeria. Review of Economic Assessment; 2024, 3(3):36. https://doi.org/10.58567/rea03030003
Chicago/Turabian Style
Nzeh, Innocent C.; Ogwuru, Hycenth R. O.; Obiukwu, Ifeoma S.; Onwuemeka, Irene O.; Abamara, Kelechi C. 2024. "Examining the Response of Currency Outside the Banking System to the Rise in E-Payment Systems in Nigeria" Review of Economic Assessment 3, no.3:36. https://doi.org/10.58567/rea03030003
APA style
Nzeh, I. C., Ogwuru, H. R. O., Obiukwu, I. S., Onwuemeka, I. O., & Abamara, K. C. (2024). Examining the Response of Currency Outside the Banking System to the Rise in E-Payment Systems in Nigeria. Review of Economic Assessment, 3(3), 36. https://doi.org/10.58567/rea03030003

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