The current naira crunch is forcing many companies to increasingly rely on digital payment solutions, says Yele Oyekola, chief executive officer at Duplo, a payment solutions company.
Speaking to BusinessDay, he said January, which is typically a slow month for businesses, saw approximately a 34 percent increase in the use of virtual accounts, which distributors use to collect and attribute payments.
“The current shortage of physical cash has made it difficult for some businesses to transact, particularly cash-reliant businesses in the business-to-business sector,” he said.
On October 20, 2022, the Central Bank of Nigeria (CBN) announced its plans to redesign the N200, N500, and N1, 000 notes. The new naira notes were introduced into the economy on December 15.
The CBN also directed commercial banks to return existing denominations, saying the deadline for the collection of the old naira notes was January 31, 2023. But it was later extended to February 10.
But since February, Nigerians have struggled to get cash due to the scarcity of the new and old naira notes. The scarcity of naira notes has disrupted economic activities and the livelihoods of many people.
Recent data from CBN show that the amount of currency in circulation declined by 29.2 percent to N982.1 billion in February from N1.39 trillion in the previous month. It also declined on a year-on-year basis by 69.9 percent in February 2022.
Amidst the cash crisis, many Nigerians switched to using electronic payment channels to carry out transactions.
Data from the Nigeria Inter-Bank Settlement System (NIBSS) show that the total volume of NIBSS Instant Payment Platform (NIP) transactions rose by 45.6 percent to 787.9 million in February from 541.7 million in the previous month.
A further breakdown of the NIBSS data also shows that, apart from NIP transactions, the volume of mobile transfers increased by 69.9 percent to 183.7 million in February from 108 million in January. Its value also rose by 8.3 percent to 2.6 trillion.
PoS also followed the same trend, as its volume increased by 17.9 percent to 113.5 million from 96.3 million in January. In terms of value, it recorded an increase rate of 9.5 percent month-on-month from N807.2 billion to N883.5 billion.
Oyekola, who is also the co-founder of Duplo, said, “Overall, the cash shortage in Nigeria has created challenges for businesses and, in addition, highlighted the need for more robust and reliable digital payment solutions.”
Since Duplo started in 2021, the company has grown steadily and developed a range of products. In September 2022, the business raised $4.3 million in seed funding to launch new products and expand into new business verticals.
Oyekola noted that fast-moving consumer goods (FMCGs) are Duplo’s target market because a bulk of the players are used to traditional ways of making and balancing payments.
“We started with FMCGs, where our focus was on distributors within that space as they have more access to the entire ecosystem,” he said.
“They pay directly to the manufacturers and the suppliers and then collect payments from the smaller retailers.”
“If you can get one distributor, you can get like a massive chunk of the entire market,” he added.
He explained the features payment solutions Duplo offers, saying that the year-old platform can automate how a business receives income and also reconcile every entry made on the platform with Quickbooks and Microsoft Dynamics, the most popular software for automation in Nigeria.
“Beyond just facilitating payments for these businesses, we also automate how they strike and reconcile their payment flows, saving them valuable time and costs,” he said.