Cashless economy involves transactions of economic activities using an electronic form of money for payment, rather than physical banknotes or coins¹. It involves a painstaking gradual transition, rather than rushed transformation which can distort economic activities, lead to a sudden shortfall of cash, macroeconomic shocks and eventually slow down economic growth.

Benefits abound when economies operate with less cash given the pace of technology development and ongoing sophistication of the global financial system. Such development consolidates economic activities; by reducing the informal sector, it increases the precision of monetary policy on macroeconomic aggregates. Furthermore, the cash-less system reduces the cost of printing paper money, brings down transaction costs and risks, integrate the domestic economy with the outside world, increase the tax base, eliminate to some extent barriers to trade, and leads to financial inclusion amongst others. These have prompted some developing countries to explore the option despite lack of sustaining technologies.

Two countries, different approach

Lately, Nigeria and India have attempted to enforce the use of less cash in their economy. While Nigeria introduced fines on cash limit (table 1), India used demonetization. The Central Bank of Nigeria (CBN) introduced the cash-less policy in 2012 with Lagos as a pilot state. The policy was extended to selected states in 2013, and nationwide by 2014.

Table 1: CBN Cash Limits & Charges

       Source: CBN, 2017

The policy took effect nationwide on April 1^st 2017 and suspended 21 days later While currency in circulation (%GDP) fell, the objective of encouraging the use of e-payment has not been achieved as they are insignificant aside from NIP (NIBSS Instant Payment) Transfers (figure 2).  On the other hand, the “Cash-less India” approach introduced in November 2016 scrapped the old high-value currency notes of Rs 500 and Rs 1000, withdrawing about 86 percent of the country’s currency in circulation and made available several channels of electronic payment system such as Banking Card, USSD, AEPS, UPI, Mobile Wallets, Prepaid Cards, POS, Internet Banking, mobile banking and Micro ATMs. Cash (% of GDP) fell from about 12% pre-demonetization to 8.8%.

Figure 1: India currency to GDP ratio

Source: Reserve Bank of India, 2018

Figure 2: Trend in selected macroeconomic and e-payment indicators for Nigeria economy

Source: CBN, NSE

Figure 3: Impact of demonetization on India Economy.

Use of electronic payments	Stock market
Lending to MSME Source: mbauniverse, 2018	Use of mobile payments

 Non-liberal approach & Unfair Penalties-

Should the public be forced to undertake cash-free transaction through fines rather than nudging and making all the supporting infrastructure needed available? Who should be penalized when Banks’ ATMs are nonfunctional, leading its customers to withdraw from other Banks’ ATM? It is usually the customers! Who enjoys the proceeds of fines when bank electronic outlets fail forcing customers to do cash transaction and when customers lose money and time trying to resolve an unsuccessful electronic transaction?  The processing fee goes to the CBN and Banks at a ratio of 40:60. Penalizing customers for a bank’s inadequacy, while such bank also enjoys from the proceeds of the “fines”, brings the question of fairness to regulatory policy. Rather than increase adoption rate, excessive penalties might as well increase the number of unbanked public. Efficiency and nudging in the right direction are what is needed.

CBN-Commercial Banks policy mismatch

While the CBN was pushing for mass use of electronic transactions, most banks view such as a way of extracting streams of charges from customers. Bank to bank cash transfer via the online medium, phone app or USSD come with charges, while walk-in cash transactions in banks are free.  In this scenario, the only transaction cost to the customers, if they follow the cash-based walk-in transaction is time. More so, customers want to eliminate unnecessary frustration and time wasting trying to resolve an unsuccessful electronic transaction. This to most customers is more time consuming than cash-based walk-in transactions. This in itself is disincentive!

Social challenges

While CBN assumed that most Nigerians should be able to cope with cash-less transactions since they can use mobile phones, and engage in functions like recharging, PIN entry and SMS; about 91.8 million rural dwellers[1] and about 12.8.5 million elderly citizens were not adequately factored in the policy.  This calibre of senior citizens still engages outsiders’ assistance when performing the listed functions.  Hence, they are most highly susceptible to online frauds and loss of funds while trying to avoid the blanket cash transaction charges imposed by the regulator.

Workable Implementation Phases

Firstly, adequate awareness is crucial for the success of any policy.  Sufficient and wider spread of information about the policy, training and demonstration on how to use several channels is needed, as well as making known the alternative electronic channels.

Secondly, the enabling Infrastructure, financial cyber protection and security should be invested on and put in place; Internet banking, the POS, mobile banking, mobile wallets, USSD, Micro ATMs, Pre-paid cards etc. Having several safe channels might capture the interest of the banking public to go cash-less and non-banking ones to come on board.

Thirdly, although the CBN took more of a bottom-up approach, there can be CBN-CAC-Banks collaboration. Through this, all incorporated organizations with CAC can be mandated to have at least two forms of electronic payments. With businesses falling in line, it would be easy for the public to follow suit, after all, they spend the cash by patronizing these businesses.

Fourthly, there should be real incentives for cash-less transactions. Not necessarily a reward-based, but the cost of cash dealing should be higher than Cash-less transactions, even for low-income earners; otherwise, it will not be attractive to the public. Therefore, the unnecessary and exorbitant online charges placed on Cash-less medium should be removed. Hence, rather than using expensive third-party platform for electronic transactions, CBN might need to set up its own and add more varieties of channels by working with NCC and the banks, whichever is cheaper.

In addition and most importantly, demonetization of higher Notes; Elimination of higher notes at least makes huge physical cash transaction uncomfortable, nudging the public towards the cashless transaction.  This was India's approach- the country recorded successes both on the policy and on the macroeconomic aggregates- after some challenges caused by the abrupt removal of higher currency. Gradual demonetization with elongated time frame is therefore likely to be smooth.

Conclusion

Cash-less system has its enormous benefit on the macro-economy and is achievable if properly implemented. But it will be wise to nudge or allow the populace to go cash-less willingly while providing adequate, easy and secure channels of electronic payments.

[1] https://data.worldbank.org/indicator/SP.RUR.TOTL.ZS?locations=NG

The 8^th African Policy Circle (APC) meeting which was hosted by the Centre for the Study of the Economies of Africa, in collaboration with Konrad Adenauer Stiftung (KAS) and Global Public Policy Institute (GPPi), focused on the theme: “Forced Migration within and out of Africa: Innovative Solutions from African Civil Society and Think-tanks”. The meeting provided a platform for African think tanks and civil society organizations to share knowledge, discuss strategies and develop actionable recommendations for policymakers to meaningfully address the problem of forced migration within and out of Africa. Deliberations were centred around the causes, consequences, local perspectives, and solutions to conflict-induced forced migration. However, while many people are forced to migrate because of conflict and violence, many more, particularly young people, migrate for economic reasons. In light of this, the APC deemed it appropriate to further deepen deliberations and discuss Africa’s economic migration in the 9^th APC meeting which will hold on November 29-30, 2018 in Dakar, Senegal. The APC will meet on the central theme “Migration and Demography: Shaping Migration Policies for Demographic Dividend in Africa”.

MOTIVATION FOR AFRICA’S ECONOMIC MIGRATION

Individual motive(s) for economic migration vary, and many ‘economic migrants’ take to the road because of a number of different factors; but the most commonly cited reason for Africa’s economic migration is the ‘search for better economic opportunities and jobs’. There is an increasing realization that a large number of people are leaving Sub-Saharan Africa for economic reasons, they migrate with ideologies that life is easier across the frontier. In 1990, about 40 percent of migrants moved for economic reasons, this share more than doubled to 90 percent in 2013[1]. According to the European Commission, 6 out of 10 of those heading for Europe are not refugees fleeing war or persecution, but economic migrants in search of better lives, many of which are from peaceful countries in North Africa. Underlying these and many more statistics are baseline problems such as bad governance and inadequate job creation, which has resulted in a range of economic difficulties, including increase in unemployment and underemployment. Every year, the continent creates only 3.7 million jobs, but between 10 and 12 million people join the African labor force annually[2], disproportionately higher than the jobs created.

THE NEXUS BETWEEN DEMOGRAPHY AND ECONOMIC MIGRATION: COST OR BENEFIT?

Africa’s population growth is extremely rapid, with almost all countries growing at over 3% annually. The increasing rate is necessary evidence needed to show that there may well be a surge in economic migration in the next decade or two. By 2050, Africa will account for the highest population spurt, which will more than triple the current 650 million, to reach an estimated 2.3 billion[3]. An increasing number of young and energetic people, who are willing and probably able to work, would make up a huge part of the population boom, and local labor markets may not be able to absorb them. At the same time, the aging population in some advanced economies and segmentation of their labor markets, would create demand for skilled and unskilled labor from Africa’s young population.

On one hand, a mis-management of Africa’s increasing young population will worsen unemployment, and could form the basis for other economic and social issues such as trafficking, conflicts and brain drain. On the other hand, if properly harnessed, there could be increase in remittance flows and knowledge transfers, which will serve as drivers for growth and development in the African region.

WHY DISCUSS AFRICA’S ECONOMIC MIGRATION?

Africa’s economic migration is set to continue its expansion as it will be shaped by the demographic transition already ongoing in the region. Therefore, the subject has steadily risen on the agenda of the international community. Also, the APC’s strategic stance - on providing policy advise and frameworks for stakeholders and governments - is crucial towards addressing issues surrounding this hot topic. The 9th APC meeting aims to provide a platform for African CSOs and think tanks to share knowledge and discuss strategies for policymakers to meaningfully harness the benefits and counter the challenges of economic migration amid demographic transition in Africa. Panel discussions will more in-depthly focus on a range of topics: Profile of economic migrants, drivers/causes, as well as demographic/population growth trends and implications for African migration; the impact of African migration; and the European Perspective of Africa’s economic migration. The workshop will also feature a panel discussion to develop an agenda on African economic migration that South Africa can advance at the United Nations Security Council (UNSC).

We encourage you to join discussions online by connecting with us via twitter (@csea_afric and @africanpolicyO). Please use the following hashtag for related tweets: #9thAPC #Migration.

You can also download the outcome of the meeting below.

[1] Gonzalez-Garcia J, Hitai E, Mlachila M, Viseth A, Yenice M. ‘Spillover Notes: Sub-Saharan African Migration Patterns and Spillover’. 2016. Washington D.C. International Monetary Fund.

[2] Chatterjee, S. and Mahama J.D (2017). ‘Promise Or Peril? Africa’s 830 Million Young People By 2050’. United Nations Development Programme.

[3] Ahmed, M. and Gough, K. (2018), ‘African Migration to Europe is Not a Crisis. It’s an Opportunity’, Centre for Global Development.

Although Nigeria has been generating electricity in commercial quantities for over a century, the pace of electricity infrastructure development in the county is very slow and power supply remains highly inadequate. In 2013, two segments of Nigeria’s power sector (generation and distribution) were privatized to resolve the challenges associated with the prior monopoly of government in power generation, transmission and distribution. However, privatization only changed the dimensions of the challenges and power supply remains largely inadequate, unaffordable and unreliable in the country.

Presently, seventy-six million Nigerians or 40.7% of the Nigerian population (more than twice the population of Canada) are not connected to the national power grid[1]. For those connected, power supply is a serious problem as about approximately 90% of total power demanded is not supplied. Here is the problem: Presently, total installed generation capacity is 12,522 MW^[2], but average operational generation capacity is just 3,879MW of which 7.4% is lost in transmission, and up to 27.7% load is rejected at distribution. This leaves Nigeria with just about 2,519MW. Yet, Nigeria’s electricity demand is estimated at 24,380 MW in 2015. As a result, Nigerians self-generate a significant portion of their electricity with highly polluting off-grid alternatives and at a cost that is more than twice the cost of grid-based power. How can the Nigerian people and industries be globally competitive without access to affordable and reliable power?

In the coming years, electricity demand is expected to rise significantly. Household electricity demand, which has the largest share, will rise due to growing urbanization (at a rate of 4.23% per annum) and population growth (estimated at 2.7% per annum, while global growth rate is 1.1%), at rates more than twice global averages. Industrial and commercial demand is also expected to increase as Nigeria slowly rise from the recent recession (with projected gross domestic product rates trending between 4.50% and 7%. A GIZ study estimates electricity demand to rise to 45,490 MW by 2020 and by 213,122 MW by 2040. Although the results of electricity demand studies vary widely, they all conclude that the current gap between supply and demand is already very substantial and that, it will become more entrenched under a ‘business as usual’ scenario.

Some of the key challenges in the NESI include:

• Infrastructure Constraints across the entire value chain from fuel to power distribution chain, including undiversified energy sources for electricity (80% thermal and 20% hydro), insufficient gas pipelines, obsolete generation plants and equipment, as well as inadequate and poorly maintained transmission and distribution networks. All worsened by vandalism
• Insufficient End-User Tariffs/Pricing: Due to rising supply cost (associated with inflation, currency devaluation, unexpected infrastructure constraints) that have not been accompanied by timely adjustments to tariffs.
• Inability to Reduce Aggregate Technical, Commercial and Collection (ATC&C) Losses: The design of the power sector reform makes the viability of the distribution companies (DisCos) critical to the long-term sustainability of the sector. However, DisCos are unable to recover cash shortfall on account of the lack of investment in network rehabilitation and metering (partly due to low tariffs and inability to obtain loans from Nigerian banks due to unpaid debts).
• Sector’s Cash Shortfalls: Total cash shortfall in the sector between 2015 and 2016 is estimated at $1.3 billion. Out of which $1.2 billion accounts for deficits caused by tariffs being lower than the cost of service delivery, and the remaining $100 million caused by DisCos inability to reduce ATC&C losses.
• Debts, Electricity Theft, and Non-payment Culture of the Public: Especially government ministries, department and agencies who owe the industry an estimated $72 million as at the end of 2016; contributing to the sector’s cash shortfall.
• Sector governance: Inconsistent enforcement of rules and policies reinforces aforementioned challenges.

While multilaterals (through initiatives with the World Bank and Power Africa) as well as the Nigerian government and private sector are making efforts to address key challenges in the Nigerian Electricity Supply Industry (NESI), the efforts are slow-paced and insufficient. For instance, the government has inaugurated a several projects aimed at expanding thermal and hydro sources as well as extended two intervention facilities to GenCos and DisCos to ease their financial constraints. DisCos have also embarked upon mass metering of customers, as well as implemented maintenance and upgrades on their network by installing new transformers and building dedicated lines to commercial and industrial customers over the past years to reduce these losses and enhance service delivery. However, the investments are marginal compared to existing deficits and targets.

To enhance the effectiveness of service delivery in NESI, several interventions are needed to attract significant private sector capital, improve baseline power supply with data-driven innovations, and enhancing sector governance. Specifically, Operational and Technical and Interventions are needed to improve baseline power supply (using data-driven, innovative on- and off- grid solutions); improve transmission wheeling capacity and redundancy; as well as improve grid design and electricity demand estimation. Governance Intervention is also necessary to improve sector governance and transparency, to make contracts fully effective, as well as to improve sector communication, coordination and monitoring. A clear and concise contractual, regulatory, and financial framework is a critical requirement for attracting private sector capital to the NESI. Lastly, Regulatory/Policy Interventions, especially related to tariff that balances the protection of electricity customers with the interests of investors, outlines a trajectory to cost-recovery tariff, and is implemented in a timely manner is essential. Well-enforced policies that incentivize improvement in DISCOs performance, as well as fiscal and monetary policies aimed at encouraging private sector investments are needed.

[1] See 2016 World Bank statistics on population and electricity access.

[2] Despite having a far larger population, Nigeria generates less electricity relative to other major African economies and failed to expand its power generation along with its growing population. For instance, South Africa with a population of 48 million generated 35,000MW out of an installed capacity of 52,000MW in 2015.

Six research projects were chosen for the first “Southern Voice on the State of the Sustainable Development Goals” (SVSS) report. The Southern Voice “State of the SDGs” initiative will provide evidence-based analysis and recommendations to improve the delivery of the Sustainable Development Goals (SDGs). As a collaborative initiative, the program will compile a broad range of perspectives to fill an existing knowledge gap that will also enrich the discussions on the SDGs and level the playfield with new voices from the Global South. OVERVIEW

Nigeria has the largest number of out-of-school children in the world. According to UNICEF, 10.5 million primary school age children were not enrolled in school. Certain factors continue to determine the underperformance and achievement of quality of education in Nigeria. They can be regional and/or gender and economic factors. There has been notable improvement in the quantity of people with access to education, especially at the basic education level, for example thanks to the Millennium Development Goals (MDGs) and the domestic Universal Basic Education (UBE) Scheme. But unfortunately the same cannot be said of the quality of education, which has seen little or no improvement.

THE RESEARCH

In the proposed research titled: “Educational Performance in Nigeria: The Dimensions, Drivers and Implication for SDGs”, CSEA’s goal is to identify the key drivers of exclusion in quality education outcomes. The idea is to provide policy implications that point to what needs to be changed and the prospects of achieving quality education goals. The project aims to strengthen inclusiveness in Nigeria’s educational system, particularly in achieving SDG4(Quality Education). Exclusion is a multidimensional challenge. But we can make further progress in education if we identify the various groups that face the risk of being left behind. The study will provide an analysis of progress towards reaching SDG 4. CSEA will compare national progress with a particular focus on the most marginalized groups. Exploring the nature and dynamics of the underlying causes of marginalization will shape the design of policy interventions that can eventually bridge gaps in education quality. Our analysis will draw on possible trade-offs between SDG 4 and other goals in the 2030 Agenda. We will also analyse drivers of educational exclusion and evaluate the role of economic and social factors.

THE IMPACT

The research will provide empirical evidence on the dimension and drivers of exclusion, while also evaluating the adequacy of various means of implementation to achieve SDG 4. Although the Nigerian government is keen on achieving SDG 4, emphasis has been on quantity, rather than quality of education. Luckily, policymakers have recognized this and are making efforts to correct this. For instance, the Nigerian government had planned to declare a state of emergency in the educational sector in April 2018, meant as a measure to revitalize the quality of education. But the declaration by the government is yet to be put into motion. Meanwhile, little progress can be made without evidence-based research. It is needed to unpack the issues around poor quality of education in Nigeria and to identify proactive measures to address them. This is an important gap that our study seeks to fill. It will provide policy makers with insights on the method of delivery of the SDG programme to ensure that “no one is left behind”.