A combination of insider abuse in banks and hoarding by customers has been identified as the cause of the scarcity of cash in the country ahead of the festive season.
Although the Central Bank of Nigeria (CBN) has assured the public of sufficient stock of currency notes in the country, many Nigerians are still struggling to have access to enough cash from banks.
Point of Sale (PoS) operators have resorted to buying cash from traders and petrol station attendants to augment what they are able to withdraw from banks.
A banking source who spoke with BusinessDay said racketeering in banks is also responsible for the cash scarcity.
He said Nigerians pay N36,000 for freshly minted notes worth N20,000, and N63,000 for N50,000. “These guys do this business openly with their PoS machines if you can’t transfer easily to their accounts.”
“CBN staff and security agencies are in this together,” another source who works with a tier-2 bank said.
The central bank said last week that Nigerians were hoarding cash in anticipation that the government might act on the naira redesign programme, despite the Supreme Court’s ruling and the CBN’s statement that the old and the redesigned naira banknotes remain legal tender.
The country experienced a chronic shortage of cash in the first quarter of this year following the redesign of the N200, N500 and N1,000 notes by the central bank.
Read also: Nigeria’s $220b informal economy on life support because of cash shortage
FSDH Research said in a report that the banking sector suffered severe loss of trust and confidence as a result of the naira redesign policy.
Victoria Olaniyi, who owns a PoS shop at Fadeyi, in Lagos State, said the current cash scarcity has brought back the buying of cash as seen early this year.
“This past few weeks when I go to the bank to get cash for my business, the maximum I can get from the bank is N50,000, which is not enough, and sometimes they don’t have at all to give out,” she said. “Now I have to start sourcing cash from vendors at Oyingbo market.”
Some of the PoS operators in Fadeyi said they had restricted customers to a maximum of N5,000.
“I can only give you N3,000 and you pay N100. If you want to collect N5,000, you will pay N150 or N200. There is no cash again,” Ikenna Obasi, a PoS operator, said.
Igwe Caleb, a PoS agent who lives in Ogun State, also lamented the inability to get large amount of cash from banks.
“We get small amounts from N20,000-N50,000. Business hasn’t been easy; sometimes I have to get cash from other business people or buy from cattle traders. They usually have a lot of cash. N100,000 costs us N600-N700,” he said.
Damilare Akinlotan, investment and equities analyst for Risevest, said there will be some immediate effects on the economy if the cash scarcity persists.
It said it would lead to an increase in the adoption of digital payment channels, hoarding of cash, and higher costs of withdrawals, which can also translate to higher prices of goods and services in the informal economy.
Banks’ deposits with the central bank have dropped by 36.99 percent in two months, while their borrowing from it increased from zero to N39.40 billion on Thursday, data from the central bank show.
Their deposits with the CBN decreased to N32.91 billion on Thursday from N52.23 billion as of October 13, 2023.
Last month, the central bank said there was sufficient stock of currency in the banking system, warning the public against panic withdrawal.
Read also: PoS operators return to cash buying as scarcity hits banks
“While we note the concerns of Nigerians on the availability of cash for financial transactions, we wish to assure the public that there is sufficient stock of currency notes for economic activities in the country. The branches of the CBN across the country are also working to ensure the seamless circulation of cash in their respective states of operation,” the CBN said in a statement.
Olanrewaju Kazeem, group CEO of Alert Group, a micro and SME banking group, said the reason for the cash crunch could be the deadline previously set for old notes but now suspended by the CBN.
He said it coud also because of the increased spending ahead of the festive season.
“With devaluation of naira, more money is needed and hence those using cash, more cash is required for purchases. I do not have empirical evidence to support any of this, ” he said.
Onoja Usman, managing director/CEO of Lovonus Microfinance Bank Limited, attributed the cash scarcity to hoarding, which was occasioned by the expectation that the old naira notes would cease to be legal tender by December.
Read also: Business groan as cash crunch hits Banks in Abuja
“Another reason was panic withdrawal for December as our people in the rural areas spend more cash and we have many celebrations during December for which people hold cash. But now all that has eased out as CBN has advised and changed the policy,” he said.
Bunmi Lawson, managing director of Edfin Microfinance Bank Limited, said that before the announcement that both the new and old notes remain legal tender indefinitely, banks might have been preparing to return the old notes to the CBN ahead of the December deadline.
She urged Nigerians to use various cashless options when making payments.
“Most banks including EdFin MfB have mobile apps to carry out all payments a customer might need without the need to carry cash. It is this transition to reduce the use of cash that may be resulting in physical cash being scarce,” Lawson said.
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