Naira scarcity seen slowing financial inclusion drive – Experts

Experts in the financial industry have said the new naira notes scarcity in Africa’s most populous nation, could slow its financial inclusion drive if the situation persists.

Taiwo Oyedele, West Africa tax leader at PwC Nigeria, said rather than achieve more financial inclusion and widespread adoption of e-payment, the country may inadvertently be pushing many Nigerians into the stone age of trade by barter given the epileptic bank transfers being experienced over the past few days.

“It is counterproductive to seek to implement a cashless economy abruptly at the same time the new naira notes are being rolled out in limited quantities within a very limited timeframe,” he said in a post on social media.

He said the focus at this time should be not to lose the support of the masses for the new policy while collecting data about those who are withdrawing unusually large sums for necessary actions subsequently.

“The Central Bank of Nigeria (CBN) needs to supply sufficient new notes, one for one with the old notes being withdrawn from circulation to meet all demands,” he said.

On January 29, the CBN extended the deadline by 10 days from January 31 to February 10, to allow the collection of the old 1000, 500 and 200 naira notes.

Godwin Emefiele, the CBN governor in a statement, said the sensitisation exercise on the naira redesign by the apex bank has achieved a success rate of over 75 percent of the N2.7 trillion held outside the banking system.

But since last week, cash, including old and new naira notes, were unavailable from banks’ Automated Teller Machines (ATMs) and over the counters.

Read also: New naira crisis exposes Nigeria’s weak minting capacity

Bank customers who needed small cash to pay for transport fares, and other urgent needs could not find money to withdraw from the ATMs. However, a few ATMs that were dispensing cash were crowded.

More worrisome to Nigerians is the fact that some banks’ ATMs only dispense N1, 000 per transaction with N35 charges for other bank’s ATM cards. Point of Sales (PoS) operators charge N1, 000-2,000 to exchange N10, 000 old notes to new naira.

These developments pushed Nigerians to sort unconventional steps to secure cash such as sleeping at the ATM terminals, running half naked in banking halls, fighting bank staff, protests and destroying properties at the banks.

Trying to get cash now is expensive especially for average Nigerians, said Damilola Adewale, a Lagos-based economic analyst.

“So, they would most likely prefer to hold cash because of the high charges on PoS transactions coupled with bank transfer issues, till the situation improves,” he said.

Ayodeji Ebo, managing director/chief business officer at Optimus by Afrinvest limited added that financial inclusion is about trust and culture in having bank accounts. “But the scarcity of naira notes has affected that trust.”

He said once the new notes are available and in large supply, it would build peoples’ trust back in the system.

According to the World Bank, financial inclusion is when individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered in a responsible and sustainable way.

The importance of financial inclusion, which is a key enabler to reducing extreme poverty and boosting shared prosperity, has made it to be identified as an enabler for seven of the 17 Sustainable Development Goals 2030.

This is why the CBN has been finding ways to reduce the unbanked population by introducing initiatives capable of bringing more people into the financial system.

In 2020, Nigeria’s financial inclusion rate grew to 64.1 percent in 2020 from 63.2 percent in 2018, according to Enhancing Financial Innovation and Access (EFInA).

The 2020 figure is below the Central Bank of Nigeria (CBN)’s 80 percent financial inclusion target for the year 2020.

And although the inclusion rate dropped marginally from 36.8 percent in 2018 to 35.9 percent in 2020, the excluded adult population of 38.1 million reported in 2020 was higher than the 36.6 million recorded in 2018, meaning 1.5 million adults fell into the exclusion circle in the last two years to 2020.

The EFInA report added that while 71 percent of urban adults have bank accounts, only 40 percent of those in rural areas have a formal account.

“More than 60 percent of rural communities surveyed don’t have a bank branch, agent or ATM,” it said.

This development pushed the Federal Government to set another target of 95 percent financial inclusion rate by 2024.

It aims to achieve this target through these policy frameworks and initiatives such as Revised National Financial Inclusion Strategy, National Strategy for Leveraging Agent Networks for Women’s Financial Inclusion, National Fintech Strategy, Nigeria Financial Services Maps, and Payment System Vision 2025.