• Sunday, February 25, 2024
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BusinessDay

PoS operators return to cash buying as scarcity hits banks

PoS charges seen slowing Nigeria’s financial inclusion drive

Point of Sale (PoS) operators have returned to buying cash from traders and petrol station attendants as banks suffer from a shortage of naira cash.

A PoS operator in Ajah, Lagos, told BusinessDay that “there is no cash in the bank. We are back to buying cash from traders.”

Consequently, some operators have increased their transaction charges by 100 percent from N100 to N200 for cash of N5,000.

Nigerian banks are struggling to pay customers who want to withdraw their money due to a cash shortage in the banking system.

Some banks in Lagos, especially those in Surulere, Mushin, Kirikiri, Mazamaza and Ejigbo, among other areas, were seen rationing naira cash to customers.

“It’s just a bit scarce, people are hoarding the cash, and CBN isn’t releasing cash either. So we have to work with the little we have,” a banker told BusinessDay on Tuesday.

“I have been to three banks in the Onipanu area, I could not withdraw up to N200,000. One of the banks said it would pay me N50,000; another bank promised to pay N100,000. We are approaching the Christmas season, and some members of our association need cash,” one customer told BusinessDay under anonymity.

Kelechi Godwin, a customer of Access Bank, said, “I just came out from my bank at the Trade Fair, you can withdraw any amount you want.”

Read also Banks struggle to pay customers as cash scarcity bites

There was no cash at the Automated Teller Machines of Access Bank at Kirikiri. “No cash. The ATMs are not paying, ” the security staff said.

The Central Bank of Nigeria (CBN) said the seeming cash scarcity in some locations was due largely to high volume withdrawals from the CBN branches by Deposit Money Banks (DMBs) and panic withdrawals by customers from the ATMs.

“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 CBN said in a statement on November 2, 2023.

A statement signed by Isa AbdulMumin, former CBN’s director of corporate communications, said the branches of the CBN across the country were also working to ensure the seamless circulation of cash in their respective states of operation.

“Public members are, therefore, advised to guard against panic withdrawals as sufficient stock facilitates economic activities. Nigerians are also advised to embrace alternative modes of

payment, which would reduce pressure on using physical cash,” the statement said.

Muda Yusuf, chief executive officer of the Centre for the Promotion of Private Enterprise, said if the banks are getting enough from the CBN, there should be no need for a cash shortage.

He said the supply chain must have been disrupted at some point, and the problem might not be dictated unless it is properly traced.

“The CBN has gone to the Supreme Court and gotten an order that the old and new naira notes should continue to exist indefinitely. So, it is very difficult to locate where this problem is coming from. The CBN is better positioned to clarify, and they have said it.

“But something must be wrong. Why would people hoard cash? There is no reason to hoard cash now that the Supreme Court has pronounced that old and new banknotes continue to be legal tender. Something must be disrupting the chain,” he said.

Damilare Akinlotan, investment and equities analyst for Risevest, and financial analyst at Krypton Venture Studio, said, “I don’t see any long-term effects as what happened between January and February made a significant portion of the Nigerian population adopt and utilize digital payments channels.

However, as of May 2023 – 62 percent of all point-of-sales transactions were still settled in cash, according to a report by Global Payments Report.

This, according to Akinlotan, implies there’s still some form of dependency on cash to settle transactions which means there will be some immediate effects on the economy if the scarcity persists.

Immediate implications include but are not limited to an increase in the adoption of digital payment channels, hoarding of cash and higher cost of withdrawals, which can also translate to higher prices of goods and services in the informal economy.

Read also BVN and NIN: Nigerians express mixed reactions to CBN directive

Other implications include panic bank runs because people will believe they won’t get the cash they need for the festive period and slight economic contraction due to limited economic activities.

On Wednesday last week, the CBN directed all deposit money banks to issue and accept old and redesigned naira banknotes.

This followed the order of the Supreme Court on Wednesday. November 29, 2023, granting the prayer of the Minister of Justice and Attorney-General of the Federation to extend the use of old Naira banknotes ad infinitum.

Consequently, the CBN directed all its branches to continue to issue and accept all denominations of Nigerian banknotes, old and re-designed, to and from deposit money banks (DMBs).

“For the avoidance of doubt, the Supreme Court ordered that the old versions of N200, N5,000. and N1, 000 banknotes shall continue to be legal tender, alongside the re-designed versions,” Sidi Ali, Hakama, acting director of corporate communications, said in a statement.

Accordingly, in line with Section 20(5) of the CBN Act 2007, all banknotes issued by the Central Bank of Nigeria will remain legal tender indefinitely.

Public members are enjoined to continue to accept all Naira banknotes (old or redesigned) for their day-to-day transactions and handle them with the utmost care to safeguard and protect the lifecycle of the banknotes.

Furthermore, the general public is encouraged to embrace alternative modes of payment, such as e-channels, to reduce pressure on using physical cash.