No cash in banks, is undermining confidence in our banking system

Recent headlines about the unavailability of cash in ATMs and even banking halls, coupled with the near-total replacement of banks’ cash functions by POS operators, are becoming a cause for concern. This situation is creating a crisis of confidence in our banking system.

The Central Bank of Nigeria (CBN) and the cash crisis
The sanctioning of several banks in the past week for failing to stock their ATMs with cash underlines this concern. Since the ill-fated attempt by the last CBN administration to change the naira’s design and force cash deposits back into the banking system, severe cash shortages have become the norm. While the POS innovation has helped expand banking services to underserved areas, it has also introduced problematic elements into the system.

POS operations, though beneficial in many cases, have led to unintended consequences. The convenience of providing cash services for a small fee has evolved into a booming business—one where people are now forced to buy their own money at exorbitant prices.

Predictably, people take advantage of opportunities when they arise. The last cash shortage, which resulted in riots and fights in banking halls nationwide, demonstrated that when people desperately need cash, they will pay excessive fees to access it. There are allegations that some bank employees in branches and cash management centers are exploiting this situation by reserving cash for POS operators while ensuring scarcity at ATMs. This forces desperate customers to patronize POS operators, who somehow always have cash available. There are also claims that many POS operators are either owned by bank staff or operate in collaboration with them, making access to cash easier and allowing them to profit immensely from the situation.

The financial gains for these bankers are so lucrative that they earn more from selling cash than from their official salaries. In some cases, they charge up to 1% of the cash they supply to POS operators. This situation creates perverse incentives, worsening cash shortages and exacerbating public frustration.

Addressing the issue
Unless deliberate measures are taken to normalize the situation, the current trend could have dire consequences for the future. The CBN’s sanctions, alongside its strategy of naming and shaming non-compliant banks, are steps in the right direction. However, more needs to be done to curb this disturbing development.

Until the CBN’s recent intervention, it was becoming normal for people to visit ATMs or banking halls only to be told there was no cash—after which they were directed to a nearby POS operator to purchase cash at a premium.

Two recent incidents illustrate the severity of the situation:

1. A friend visiting from Washington, D.C., narrated an experience in Warri, Delta State. He went to withdraw cash from an ATM at one of the banks recently sanctioned by the CBN but found it empty. Assuming he would have better luck inside, he walked into the banking hall. To his shock, the cashier casually informed him there was no cash and directed him to a POS operator outside. He was further astonished when two other customers received the same response and walked away without protest. He could not understand how Nigerians so easily adapt to abnormal situations. He remarked that if such an incident occurred in a U.S. bank, there would likely be a run on the bank and multiple lawsuits.
2. Another incident involved a coordinator for a social engineering experiment I am running with friends in microcredits. She needed to withdraw cash deposited into her account to transfer funds to our main account for disbursement. Despite visiting the bank multiple times over two days, she struggled to withdraw just ₦350,000. To avoid returning the next day, she requested a transfer of the remaining ₦75,000 to another bank. Shockingly, she was told that the bank does not transfer amounts below ₦100,000. This was a first-generation bank—one of those recently sanctioned by the CBN. Such frustrating experiences will undoubtedly discourage petty traders from banking their money, as they can no longer be sure of accessing their funds when needed.

The growing resistance to banking
Another troubling trend is that traders in various markets are now refusing to deposit their daily sales in banks. Traditionally, cash earned during the day would be deposited at the bank at the end of each trading day. However, this practice is becoming obsolete as traders increasingly prefer POS operators. These operators visit markets at the close of business, collect traders’ cash, and deposit it directly into fintech accounts such as Opay or Moniepoint. The convenience of avoiding bank queues and having immediate digital deposits makes this an attractive alternative.

These emerging disruptions have long-term implications, including eroding public confidence in the banking system. The persistent circulation of large amounts of cash outside the banking system makes economic control difficult.

The role of politicians in cash hoarding
The situation is worsened by politicians who rely on cash for election-related transactions and bribery. A politician once confided in me that they now gradually stockpile cash in containers at home to avoid large bank withdrawals near election periods, fearing restrictions.

Imagine 360 National Assembly members hoarding ₦50 million each in their homes. Add to this the governors, who have an even greater appetite for cash, and the CBN’s concerns about vast sums of money remaining outside the banking system become evident.

The way forward
All these abnormalities contribute to an inefficient economy. We must acknowledge them as serious problems requiring urgent solutions. One possible intervention is for the CBN to take over the direct funding of POS operators, bypassing banks that have exploited the system. A structured approach to cash distribution, with controlled access for POS operators, would reduce banking sector corruption and restore normalcy.

The issue of cash hoarding by politicians can be addressed if the EFCC refocuses its efforts on tackling serious financial crimes instead of chasing young people with laptops or acting as debt collectors. The EFCC should leverage modern technology, embedding agents in key financial institutions and equipping them with surveillance tools. For banks, a “follow the money” strategy would be highly effective. Today, virtually every financial crime involving money can be solved by tracking the source and movement of funds. The evidential quality of such methods would make convictions easier.

Ultimately, no problem is insurmountable if there is the political will and strategic focus to address it.

Victor Ogiemwonyi is a retired investment banker and writes from Ikoyi, Lagos.