Despite the scarcity of the naira notes which occurred in the first quarter of 2023, majority of Nigerians still have confidence in the country’s financial system, a new report has said.
The report titled ‘Strapped: Impact of the Cash Scarcity on Individuals and Businesses by SBM Intelligence, an Africa focused geopolitical research and strategic communications consulting firm, surveyed individuals and businesses across five of the country’s six geopolitical zones to see if there was any lasting damage from the naira redesign policy the Supreme Court defined as breaching the fundamental rights of Nigerians.
“Only a small percentage of those interviewed (15.5 percent) said they would keep their money out of the banking system. The majority (84.5 percent) said they would continue to trust the bank with their funds,” it said.
It said of the preponderant number, 36.7 percent said they would domicile a greater portion of their finances outside banks. “If a wider survey is done on the country’s banked population, there may be at least a one or two percent drop in those with bank accounts as an outcome of this policy.”
Last October, the Central Bank of Nigeria (CBN) announced that the N200, N500 and N1, 000 notes would be redesigned and introduced into the economy from December 15, 2022.
The apex bank also said the deadline for the collection of the old naira notes was January 31, 2023. But it was later extended to February 10.
But between February till March, banknotes, both old and new, have been scarce in the country, with many Automated Teller Machines not dispensing money to customers.
This made many bank customers who needed small cash to pay for transport fares and other urgent needs to patronise Point of Sale agents, most of whom are charging higher fees. They charge between N1, 000 and N2, 000 for N10, 000.
“With nearly 40 percent of the adult population being excluded from the financial system, the challenges emanating from the cash crunch following the redesign, will amplify the trust deficit in the financial system,” the Nigerian Economic Summit Group said in a recent report.
It added that hence, many more people will resort to stacking up cash. “This will be against the cashless policy agenda of the CBN and will defeat the essence of the naira redesign policy.”
The SBM report also revealed that 76.1 percent of the 46 businesses surveyed in the country were impacted by the cash shortage.
From egg producers stuck with their produce to rice traders who had to bring down their prices to make sales, most of the business owners interviewed said they were negatively affected by the cash shortage, according to SBM.
“Thirty-seven percent from the 46 businesses interviewed, had to lay off staff or reduce working hours to weather the cash shortage.”
Data from the CBN revealed that the currency in circulation dropped to the lowest level in 14 years and five months to N982.1 billion in February from N1.39 trillion in the previous month.
But it picked up by 71.4 percent to N1.68 trillion in March after the CBN moved naira notes from its vault to deposit money banks in response to the Supreme Court order to extend the legal tender status of the old N200, N500, and N1, 000 notes to December 31, 2023.
SBM recommends the CBN to rethink its policy and set the goals of its cashless initiative in line with internet penetration
“It has become clear to many Nigerians that the CBN perhaps has capacity challenges,” it said.
It added that if internet connections were more dependable, more people would have utilised them frequently, and the policy would not have been detrimental to individuals in the formal sector.