Drivers of Economic Growth in a Cashless Era: Evidence from Five West African Countries

Abstract

Shifting from a cash-based to a cashless economy represents a major financial policy change in West Africa. This move aims to cut costs related to physical cash management and boost the effectiveness of monetary policies. Although countries like Nigeria have pushed for this policy aggressively, there's still limited research on its economic growth impact across the region. This study looks into how cashless policy tools like automatic teller machine (ATM), point of sales (POS) terminals, mobile money, and cheque transactions etc., affect economic growth in five West African nations (Nigeria, Ghana, Gambia, Liberia, and Sierra Leone) from 2012 to 2022. Using an ARDL model, the study analysed data for both short-term dynamics and long-term relationships, with pre-estimation tests for robustness. Findings show a notable long-term link between cashless policies and economic growth. Specifically, ATM transactions and mobile money had a statistically significant positive effect on GDP overall. Country-specific results varied: Ghana's growth was driven by ATMs and cheques, Gambia, Liberia, and Sierra Leone saw impacts from POS transactions, Nigeria's growth was influenced by POS usage, and Gambia showed no short-term significance. The study highlights the potential of cashless policies, especially through ATMs and mobile money, to drive economic growth in West Africa.