The era of cash crunch is here again. For weeks, Nigerian banks have been implementing capped cash withdrawals. Meanwhile, the Automated Teller Machines (ATMs) appear to be turning into displays in aesthetic galleries. Indeed, cash withdrawal limits have become the rule in most bank branches for over-the-counter and ATM transactions.
Now, mobile money agents, who have become familiar sights across Nigeria with handy Point-of-Sale (POS) machines, have come to be the major sources of cash. It used to be the refuge of the millions of unbanked citizens, especially in the rural areas. Now, it is the go-to for the majority of people in Nigeria.
Generally, the cash crunch is negatively affecting small businesses, artisans, and daily wage earners, leaving individuals struggling to meet basic needs amidst soaring inflation and high cost of living.
But the frustrating thing is that this is becoming the norm. Nigerians have gone through this before. And it seems that no lesson has been learnt.
The Central Bank of Nigeria’s (CBN) announcement of the redesigning of the N200, N500 and N1,000 notes and substituting the outdated ones with the updated versions on October 22, 2022 was the trigger of the initial major cash crunch. This precipitated a shortage of cash, which led to extensive street protests in mid-February 2023.
Today, a resurgence of widespread and intense cash rationing by banks have compounded the severe economic challenges confronting Nigerians. With the accompanying high prices of goods and services, this is adding to the pressure of hardships that citizens and non citizens alike are experiencing. This circumstance is undoubtedly another reflection of dysfunction within Nigeria’s financial system.
What has emerged now is that most POS operators get cash to run their businesses from traders, petrol filling stations and bureaux de change, driving up the commission. And the cash squeeze is defying all the utterances, directives or threats by the CBN.
The House of Representatives had asked the apex bank to urgently address the situation. CBN Governor Olayemi Cardoso had issued warnings, urging “Full regulatory compliance by all stakeholders, including mobile money operators and PoS agents, to promote digital transaction channels and improve service delivery.”
Cardoso’s riot act issued in Lagos at the Chartered Institute of Bankers of Nigeria’s (CIBN) dinner that banks and other financial institutions must provide cash to customers as from December 1, 2024 or face sanctions has fallen on deaf ears. Most of the ATMs are still empty. Even the promise of conducting routine “spot checks” at ATMs to ensure there is cash in them has remained mere proclamation.
What is most worrisome is that the cash crunch is making a mess of the 2013 CBN drive to improve access to financial services across the country. According to Enhancing Financial Innovation and Access (EFInA), a non governmental organisation (NGO), by the end of last year, at least 74 per cent of adults in Nigeria had access to financial services. Just over half (52 per cent) used traditional banks.
Yet, this push for a cashless economy has not offered the full options as it is still bedeviled by long-standing challenges like unstable electricity and related poor infrastructure. To make matters worse, Nigerians are still sceptical about bank transfers, especially as the situation is being compounded by network glitches, which prevent access to bank accounts.
And with the festive season and year-end almost here, there has been absence of seamless cash flow for Nigerians. This is not only frustrating for customers who have funds in the banks, but it is destroying the trust and stability in the nation’s financial system.
We at Daily Trust call on the CBN to act decisively in resolving this unfortunate situation, which is akin to a return to the early 2023 haranguing days of cash crunch. They must outline specific measures being implemented to address the crisis and pursue transparent and regular open discussions with the banking public on ways to ensure that this does not repeat again.
The situation calls for further urgent interventions and thus, we call on the National Assembly to intensify its oversight as the failure of such exacerbates the hardships that the banking public is facing over this issue.
We also call on President Bola Ahmed Tinubu to intervene immediately to restore normalcy in order to stop the slide and loss of confidence in the banking system. This is already in the horizon. Two months ago, the CBN said that total currency in circulation had reached N4.14 trillion with N3.87 trillion of this amount currently outside the banking system. This indicated that 93.34 per cent of the nation’s currency is in the hands of individuals and businesses, while only 6.66 per cent remains within the banking sector.
The CBN data revealed that currency in circulation in Nigeria had added N1.48 trillion or 55.8 per cent Year-on-Year (YoY) to N4.14 trillion as of August 2024, from N2.66 trillion in August 2023. Yet, there is no cash for the customers. This is a vote of no confidence in the nation’s banking system as Nigerians still heavily rely on cash for daily transactions, despite the rise of digital banking services.
The CBN and other banks should not leave Nigerians in the hands of POS operators and fintech companies as it is a clear abdication of responsibilities. And this is unacceptable.
Moreover, agencies of government must learn from experience, anticipate challenges and ensure that citizens and non citizens alike are not plunged into avoidable frustrations and hardships. The suffering of Nigerians in this cash squeeze is fueling uncertainty and frustrations.
We fear that if the current cash crunch continues, Nigeria’s informal economy will be squeezed out. Therefore, there must be immediate restoration on the ease, availability and use of cash in Nigeria.
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