The naira redesign policy of the Central Bank of Nigeria (CBN) has produced more losers than gainers as the cash crisis it brought about has yet to go away.
On October 26, 2022, the CBN announced its plans to redesign N200, N500 and N1,000 notes, with the approval of President Muhammadu Buhari.
The redesigned naira notes were rolled out on December 15, 2022 and the apex bank set a deadline of January 31, 2023 for phasing out the old notes. It was later extended to February 10 owing to the scarcity of the new notes.
Some state governments sued the Federal Government over the naira redesign policy, and the Supreme Court, in its ruling on March 3, extended the legal tender status of the old N200, N500, and N1,000 notes to December 31, 2023.
Ten days later, the CBN ordered commercial banks to comply with the court verdict by dispensing the old notes to their customers.
The withdrawal of the old naira notes from circulation ahead of the February 10 deadline and the limited supply of the new notes led to a severe cash crunch.
The cash scarcity led to long queues at banks, failed online transactions and limited business activities across the country, causing losses for individuals and businesses.
The CBN also limited over-the-counter cash withdrawal to N100,000 and N500,000 per week for individual and corporate organisations, respectively. This was subsequently increased to N500,000 and N5,000,000 respectively.
“For losers in the naira redesign, almost every bank had issues and the reason behind it is sudden increase in the volume of transactions,” said Olusoji Oluwole, president of the Association of Senior Staff of Banks, Insurance and Financial Institutions.
Oluwole had said in February that banks lost N5 billion following attacks on assets by protesters over naira scarcity. He said banks were attacked in Ogun, Edo, Delta, Oyo, and Akwa-Ibom states.
He told BusinessDay that some of the banks vandalised by angry customers were First Bank of Nigeria, Access, Sterling, Zenith, UBA, and Wema Bank, among others.
According to a report by FBNQuest, a major challenge facing e-payment channels is that banks’ payment infrastructure lacks adequate capacity to handle the recent surge in electronic transactions caused by the scarcity of naira. This has resulted in increased incidents of failed transactions across all e-payment platforms.
The big banks that recorded more transfer glitches include Zenith Bank, GTBank, Access Bank and First Bank of Nigeria.
Rasheed Bolarinwa, president of Association of Corporate Affairs Managers of Banks, said deposit money banks had taken additional measures to quicken the flow of naira notes.
“These measures include deployment of extra technical support for online payments, additional security at ATMs to ensure all-clock usage, technological back-up to reduce online downtime to the barest minimum, additional staff deployment to counters to attend to cash transactions and timely interbank and inter-branch networking to bridge any gap,” he said.
Fintech companies enjoyed more patronage as a lot of Nigerians who experienced failed, truncated transactions from deposit money banks flocked to digital banks such as Opay, Palmpay and Kuda.
Data from the Nigeria Inter-Bank Settlement System (NIBSS) show that the total value of transactions recorded under the NIBSS Instant Payments (NIP) platform increased by about 46 percent year-on-year to about N38.8 trillion in January 2023. This compares with a 39 percent y/y growth in December 2022.
Godwin Emefiele, governor of the CBN, during a press conference on the outcome of the last Monetary Policy Committee (MPC), thanked some fiintech companies that used their idle capacity to boost online payments, adding that they made money also.
“And we are happy that rather than rely on just only the banks, we have many other channels through which online banking, online payment services can be done so that Nigerians don’t have to suffer, because we are insisting that we have to go cashless,” he said.
Payments made through Point-of-Sale (PoS) machines increased by 41 percent y/y to N807.2 billion in January 2023. This follows an 18 percent y/y growth in December 2022.
Analysts speak
Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise, said: “Obviously we have more losers than beneficiaries and the losers are disproportionately much higher and the damage that has been done to the economy is disproportionately much higher than whatever benefits anybody can point to.
“We have seen loss in terms of loss of jobs. In some instances, we have seen loss of lives, livelihood of many people. We have seen major setbacks and contraction in the economy generally and a major disruption in trade. For me the experience of the last few months has been very harrowing.”
On the gainers, he said fintechs benefitted because people were coaxed into doing things online. “Even the online platforms became congested and were not functioning well.”
Taiwo Oyedele, head of tax and corporate advisory services at PwC Nigeria, said: “I wouldn’t say there are winners, and definitely not banks, given the challenges they’ve had to deal with over the period. Not even fintechs as their infrastructure for electronic payments struggled to cope with the forced demand and unexpected volumes.
“Perhaps it was more of some lessons learnt that could help the country to implement the cashless policy more effectively in the future. The real gains will come from voluntary adoption by the people in a sustainable manner driven with the right complement of a robust policy framework and investment in enabling infrastructure.”
Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited, said, “No gainer, no loser. We should commend the Central Bank of Nigeria (CBN) and the Federal Government for approving the extension of use of the old notes after seeing the adverse implications of the cash crunch of the economy.”
He said the extension should also provide an opportunity for various stakeholders in the ecosystem to invest in infrastructure and technology that will drive the cashless economy and financial inclusion.
“We should also commend the Banker’s Committee for the regular feedback given to the CBN that helped to fine tune the policy in the interest of the economy,” he added.
Read also: Naira scarcity, restrictions trigger surge in food prices – Survey
How small businesses, retailers and traders coped with the cash crisis
With the frequent cases of failed transfers, small business owners said they had to opt for PoS machines.
Many of them who did not have PoS machines said they asked customers to pay to nearby PoS operators.
Madam Mary, a petty trader in Lugbe, in Abuja, said: “Accepting payment for goods with bank transfers has not been very smooth; we do not receive most of the monies sent via transfer, so that was why I stopped accepting payment by transfers.
“Customers that do not have cash, I direct them to a PoS operator, who deduct the cost of items they buy from me. Then at the close of business daily, he transfers the total amount to my account then I pay him charges, depending on the amount. This has been the easiest way for me.”
Even though the cash crunch is gradually easing, many businesses are still reeling from the hardship and some losses they suffered during the period. Several business owners lamented that they did not only lose patronage at the peak of the crisis but also lost funds due to bank transfer glitches and even fake transfers from dubious customers.
In the Federal Capital Territory (FCT), BusinessDay observed that traders who were insisting on cash payment or making customers wait for transfers to deliver to their phones before releasing purchased items were losing customers to big malls, supermarkets and to other traders with easy payment systems.
To survive, many of them opted for PoS machines because it was judged to be safer, faster and more efficient with reduced risk of glitches or failed translations.
In Lokogoma District of the FCT and parts of Galadimawa, it was observed that more than 80 percent of business owners now own PoS machines from fintechs such as Opay and Moniepoint.
A foodstuff seller in Lokogoma known as Linda narrated how she lost some funds to failed transfers, forcing her to get a PoS machine.
She said, “When customers come, they say they don’t have cash, so I allowed bank transfers and allow them to go once they are debited. But when I try to balance my account, I always notice a shortage of money. All the money doesn’t come.
“So I had to visit the bank and spent several hours, and I understood that some of the transfers were fake and some were even reversed to the customers but they did not come back, only one person did. So, during that period I lost more than N20,000. It pained me so much I stopped transfers. I only take from my most trusted clients. But in order not to lose customers because there is no cash anywhere, I got a PoS machine.”
Another foodstuff seller said she quickly rushed to get a PoS machine after she lost more than five customers in one day due to transfer failures. “After customers price goods and buy them, they can’t transfer because of a bad network, so some of them will just leave in frustration. But since I have been using this PoS machine, even though it was expensive for me at that time, the process has been smooth and fast at least. ”
Abdul, who sells meat at Galadimawa district, said he does not own a PoS machine, but engages the services of an agent, but customers will have to bear the charges. He said he also lost some money because of a failed translation.
He said: “I allow bank transfers but customers will wait for me to confirm the alert, those who are my regular customers, I will take their numbers and allow them to go if I did not get any alert immediately. But customers who cannot wait for me to get the alert will use the PoS machine.
“I do it so because last month, one man came here with his car and bought meat for N10,000. He showed me a debit alert, but till today, I have not seen the money, and I have not seen the man.”
When asked why he did not get a PoS machine for himself, he simply said he could not bear the cost as the business was not entirely his.
The situation is not different for Emmanuel Nkechi, who sells crayfish and some other seafood in Bwari. She said bank transfer glitches were slowing down her business as she spends too much time trying to confirm and sort out transfers from clients.
“My bank was giving me too much headache,” she said. “Customers will pay for goods and I will receive it two days after. I opened an Opay account, and I have since made it my main business account for now. “
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