Olaniyi Victoria, late 30s, runs a provision store in Fadeyi, Lagos State and collects cash payments over transfers from customers.
“Transfers were more prominent during the cash scarcity, but things are back to normal with cash dominating once again,” she said.
Bethel Iwoh, a 9-5 worker in Lagos, told BusinessDay that he uses cash to pay for his daily expenses, such as transportation and buying foodstuffs from the local markets. Transfers can’t cover these expenses, as they sometimes involve smaller denominations of currency.
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According to the Access to Financial Services in Nigeria (A2F) 2023 survey report published by Enhancing Financial Innovation and Access (EFInA), despite a noticeable increase in the usage of debit cards, financial service agents, and USSD for payment of goods and services, cash remains the dominant method for payments, with 97 percent of adults using it.
It said, “This preference for cash stems from factors like familiarity, convenience, and trust issues with digital platforms. Cultural norms and habits also contribute to the slow adoption of digital payments, as people value the tangibility and immediacy of cash exchanges.”
The report further revealed the enduring preference for cash transactions, highlighted by a slight increase in the proportion of adults who primarily receive income in cash, rising from 85 percent in 2020 to 87 percent in 2023.
“Despite the widespread adoption of electronic payment methods, cash remains the most common method for receiving income in Nigeria,” it said.
This trend underscored the challenges of transitioning to digital payment methods, including perceived security concerns, limited access to banking infrastructure, and cultural norms.
“I stopped collecting transfer from my customers wherever they come to my shop to buy foodstuffs no matter the amount,” Iya Tosin, a petty trader, said.
She disclosed that the cash withdrawal limit when she goes to the bank is her biggest problem in accepting transfers, as she cannot withdraw as much money as she might need for the market. She noted frustrating bank networks are problems she tries to avoid.
Usoro Usoro, chief executive officer of MoMo PSB, recently noted that about 90 per cent of all transactions in the country are cash-based.
However, Moniepoint’s Informal Economy Report (2024), launched in partnership with the Small and Medium Enterprise Development Agency (SMEDAN) and the Ministry of Trade and Investment, disclosed that customer behaviour is changing, and digital payments and transfers are now just as popular as cash.
The report highlighted that customers of informal businesses prefer to pay with cards (24 percent), while transfers are also popular (18 percent). Cash, which has historically been king, is the third preferred payment method (15.2 percent) for customers.
For business owners, cash (53.1 percent) is just as popular as cards (23.1 percent). However, customer preferences continue to lead the way. Most businesses (80.2 percent) in Moniepoint’s report take card payments for in-person transactions, while 19.8 percent accept bank transfers.
Read also: Cybersecurity levy seen stunting e-payment growth in Nigeria
Analysts argued that low trust historically drove the insistence on cash payments, and NIBSS instant payment (NIP) tried to solve this trust issue. While instant payments became popular, many players in Nigeria’s informal economy resisted them for years because they distrusted Nigerian banks, which had their fair share of troubles in the 1990s.
According to the Nigeria inter-bank settlement scheme (NIBSS), electronic payment in Africa’s most populous country rose by 54.55 percent year-on-year to N611.06tn in 2023 from N395.38 trillion as of the end of 2022. And in the first quarter of 2024, it grew by 88 percent to N237 trillion.
Ifeanyi Caleb, a financial analyst, said Nigerians learned the hard way during last year’s naira scarcity and increasingly rely on electronic channels.
“I can tell you that out of 10 small businesses in the street, eight will conveniently accept transfers compared to previous years when some merchants preferred accepting cash,” Caleb stated.
Osaretin Victor Asemota, the growth partner at AnD Ventures and Africa partner for Alta Global Ventures, recently noted that growing online payments is dependent on digital-enabled businesses.
Similarly, according to recent data from the Central Bank of Nigeria, the amount of money in circulation increased to N3.28 trillion in January, N3.41 trillion in February, and N3.63 trillion in March.
Services dominated by cash in Nigeria
According to a survey by Afridigest in 2023 on the most challenging services to pay for without cash in Nigeria, public transportation led with 68 percent as the hardest service to pay for without cash.
Reports disclosed that this is because many parts of Nigeria, especially rural areas, lack the necessary infrastructure for electronic payment systems. This includes reliable internet connectivity and power supply, which are crucial for maintaining such systems.
Public transportation is mostly in smaller denominations, and most drivers will pay cash to accept transfers. Afridigest revealed that shopping in local markets came second with 32 percent, and instant purchases from the street or roadside vendors came third with 18 percent. Payment to other individuals (11 percent), fuel (nine percent), and utilities with eight percent.
