CBN Headquarters, Abuja
By Obinna Chima
The move by Nigeria and some other developing countries to reduce the dominance of cash in the system by deployment of cards and other payment system will help increase the countries taxable income, a report by Moody’s, an international Rating Agency has said.
The report titled: “Payment Cards and Economic Growth,” sponsored by VISA, made available to THISDAY at the weekend, argued that with cash payments, income by retailers are sometimes left undeclared.
It also said that card payments would also enhance developing countries move to embrace electronic audit.
According to the Moody’s report card payment will help achieve, “less “cash under the mattress” – most cash transactions create spare change that often leaves the economic system, driving down consumption. Card payments keep this money in consumers’ accounts to be spent at a later date.
Digital currency (electronic payment) is at a critical point in its development, having moved from the margins to the mainstream, particularly in developed economies. With almost 40 percent of global consumer spending remaining on cash and checks, the economic implications of moving to a more efficient, secure and transparent method of payment are important considerations for policymakers around the world.”
The study found that, on average, increasing card usage by just 1 percent translates to a 0.024 per cent increase in Gross Domestic Product (GDP). This it said, equates to $15 billion in additional GDP globally for every 1 percent increase.
“Digital currency - in the form of debit and credit products - is an increasingly important part of daily life for consumers, businesses and governments around the world. In 2008, almost 25 percent of worldwide consumer spending was through some form of payment card, up from 16 percent in 2003. Digital currency - credit and debit card usage - delivered an additional $1.1 trillion to the global economy cumulatively in the six years from 2003 through 2008. On average, that represents a 0.5 per cent increase in total annual GDP.
The migration from paper to electronic payments is a positive phenomenon and the study supports the adoption of policies that encourage and accelerate this shift.
This study looked at how increases in card penetration impact consumption in 51 countries over six years. Real private consumption was modelled as comprising three main factors – real disposable income, interest rates and card penetration as a percentage of overall consumers spending.