BY KAFILAT OLAGUNJU
As of July 2024, Nigeria “boasted” a remarkable 3.05 million active Point of Sale (PoS) terminals and 4.06 million registered ones, according to the Nigeria Interbank Settlement System Plc, a figure climbing with each passing day.
Behind these statistics lies a complex reality, where the booming PoS in-dustry serves as both a lifeline and a glaring indictment of the nation’s cash crisis.
Globally, cash is fast losing its crown to digital transactions, with many nations sprinting toward a cashless future but in Nigeria, cash still reigns supreme, holding on with the grip of a monarch reluctant to abdicate. Blame it on the cultural romance with crisp naira notes or the country’s sluggish embrace of technology, but this affection peaks during festive seasons when cash flows as freely as the celebratory cheer.
Nigerians, regardless of tribe or creed, have an unrivalled knack for spending lavishly during holidays, invigorating both the micro-economy and the festive spirit. Yet this year’s holiday season is poised to be differ-ent, marred by an excruciating cash scarcity that could dampen celebrations nationwide. The festive euphoria is likely to clash with the harsh reality of a cash crunch that knows no boundaries, affecting Christians and non-Christians, urbanites and rural dwellers alike.
The PoS system was introduced to ease access to cash, sparing Nigerians the misery of long queues at banks. However, this convenience has been complicated by economic policies that limit cash circulation.
In October 2022, the Central Bank of Nigeria (CBN) announced a cur-rency redesign initiative, ostensibly to combat terrorism financing, curb counterfeiting, and stabilise the fiscal system. Alongside this, the CBN capped daily and weekly cash withdrawals: ₦20,000 per day or ₦100,000 per week, with Automated Teller Machines (ATMs) restricted to dispensing smaller denominations.
The Central Bank of Nigeria’s measures to reduce excess cash in circula-tion have had unintended consequences, plunging Nigerians into deeper financial distress, particularly during the festive season when cash is indispensable. Withdrawal limits and cash shortages have not only disrupted everyday transactions but also led to skyrocketing charges at PoS outlets, leaving many scrambling to secure funds for transportation, gifts, and celebrations.
For PoS agents like Mrs. Rashidat, the cash scarcity cuts both ways. “Transportation costs to the bank have skyrocketed because of high fuel prices. Collecting just ₦20,000 in cash now costs me ₦1,000 in transport alone,” she laments. This rising overhead has forced many agents to transfer the burden to their customers, significantly increasing withdrawal fees.
Meanwhile, some agents exacerbate the issue by hoarding cash. Many withdraw large sums using multiple ATM cards, limiting availability for individuals. Across Nigeria, PoS operators have raised withdrawal charg-es, with fees climbing from ₦100 to ₦150 or even ₦200 for every ₦5,000 transaction.
The operators attribute the hike to the ₦50 electronic money transfer levy introduced by the Central Bank of Nigeria (CBN) on fintech companies. Since September, fintechs have implemented this levy on transactions of ₦10,000 and above, citing compliance with Federal Inland Revenue Ser-vice (FIRS) regulations.
A PoS operator in Okpanam, Delta State, Mr. Ajua Chukwunalu, explained how these charges have compounded his challenges. “Initially, when we send money to agents, there were no charges, but now they charge both ways, when I send and when I receive. Data costs have risen, shop rents are high, and daily taxes pile up. To stay afloat, we’ve had to increase our charges.”
He elaborates: “For example, if a mobile bank charges ₦200 for ₦10,000 and the central bank deducts ₦50, the remaining ₦150 must also cover merchant fees from platforms like Moniepoint or OPay. On top of that, we buy data and maintain operational costs. It’s impossible to absorb all these expenses without increasing service fees.”
Similarly, a PoS operator in Asaba, Mary Okotie, highlighted how the festive season amplifies the scarcity. “The ₦50 levy began on 1st December, but we only started passing the charge to customers on 15th Decem-ber. Coupled with cash shortages due to the holiday rush, it has been dif-ficult to source cash from banks. Hopefully, prices will normalise after the festive season.”
In some cases, PoS operators turn to unconventional sources for cash. Favour, a PoS agent, revealed that she often obtains naira notes from filling stations and wholesalers. Despite the challenges, she manages to make a daily profit of ₦10,000 – ₦15,000. However, her withdrawal fees reflect the harsh reality of the situation: “The current rates are ₦100 for every ₦1,000, ₦200 for ₦5,000, and ₦700 for amounts above ₦10,000.”
Even with these difficulties, some agents seize the opportunity to charge exorbitant fees, leveraging the festive period to maximise profits. This practice further deepens the financial strain on customers, many of whom already struggle to afford basic transactions.
The ripple effects of this cash crunch extend beyond festive inconven-iences. Mrs. Joy Harry, another PoS operator, describes the current state of cash withdrawals as a “luxury many can’t afford.” She notes that long queues at banks have forced agents to limit ATM withdrawals to one or two cards per trip, exacerbating the scarcity.
Experts trace Nigeria’s cash crisis to the failed currency redesign policy introduced under former Central Bank of Nigeria (CBN) Governor Godwin Emefiele. What was initially intended as a reformative economic strategy inadvertently spawned a lucrative underground trade in naira notes, enriching opportunistic Point of Sale (PoS) operators and their collaborators within the banking sector.
A year after the policy’s debacle, its ripple effects persist. ATMs frequently run dry, banks uphold stringent withdrawal limits, and inflation remains unchecked. The resulting scarcity of cash has disrupted daily transactions, curtailed consumer spending, and slowed economic activity, a triple blow to an economy already strained.
Small businesses, heavily reliant on cash, have been particularly hard hit. Many struggle to manage inventory, sustain cash flows, and meet operational demands. Meanwhile, the scarcity has inadvertently nudged a segment of the population towards digital transactions. While this transition enhances efficiency and transparency, it risks excluding those unfamiliar with digital payment systems or lacking access to requisite technology.
In Nigeria’s extensive informal economy, where cash remains king, the shortage has exacerbated tax collection challenges and undermined regulatory compliance. In some areas, barter systems have made a comeback, with goods and services exchanged directly in the absence of cash.
The crisis has disproportionately impacted vulnerable populations, espe-cially rural dwellers, the elderly, and others with limited access to bank-ing services. In some Northern villages, where over 98% of transactions rely on cash, the effect has been particularly devastating, leaving many unable to meet basic needs.
Widespread financial stress has fuelled dissatisfaction with both the government and financial institutions, occasionally erupting into social un-rest. Managing cash scarcity requires strategic, well-implemented policy-making, something the CBN has conspicuously failed to deliver. The apex bank’s explanations, which blame hoarding and panic withdrawals, offer little solace to Nigerians enduring daily economic struggles.
In a bid to promote a cashless economy, the CBN recently introduced stringent policies under its “Circular on Cash-Out Limits for Agent Bank-ing Transactions,” signed by Oladimeji Yisa Taiwo on behalf of the Director, Payments System Management Department. These measures im-posed sweeping restrictions: PoS agents are now limited to daily transac-tions of ₦1.2 million, while individuals face a cap of ₦100,000 per day and ₦500,000 per week.
These restrictions, aimed at encouraging electronic payments, have amplified frustrations in a country deeply dependent on cash. The CBN has accused PoS operators of colluding with banks to hoard cash, a claim that underscores the institution’s lack of preparedness and oversight. Instead of addressing these malpractices decisively, the CBN has resorted to reactive measures, further eroding public trust.
The economic implications are far-reaching. Families struggle to afford daily essentials, businesses falter, and consumer spending continues to shrink. This crisis is particularly ill-timed, coinciding with the festive season, a period traditionally marked by heightened economic activity. The scarcity threatens to dull the vibrancy of Christmas and New Year’s celebrations, leaving Nigerians with a sense of frustration rather than fes-tivity.
The CBN’s ill-conceived interventions have compounded the issue. Poorly communicated policies and a failed currency redesign have left citizens in a state of uncertainty, while businesses face shrinking profit margins in an already hostile economic environment.
As Nigeria grapples with the fallout, it is imperative to draw a line under the failed naira redesign experiment and transition to a cashless economy with minimal adverse impact. Policymakers must ensure that the transition is inclusive and secure, addressing the unique challenges of all de-mographic segments. Robust public awareness campaigns, enhanced digital infrastructure, and strong cybersecurity measures will be essential to rebuilding trust and fostering economic stability.
Ultimately, the cash scarcity threatens to deal a devastating blow to pub-lic confidence, not just in the banking system but in the broader economy. This festive season risks losing its sparkle, not only for those strug-gling to put food on the table but also for those who, despite having money, face punitive barriers to accessing it.
The irony of wealth rendered inaccessible underscores the urgency for strategic leadership and decisive action to steer the nation out of this quagmire and restore a semblance of normalcy. Without swift interven-tion, the season of goodwill may become a grim reminder of systemic failure.
