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Cash scarcity reduces transactions across Nigeria, slows economic activities down

There is an increasing slowdown in person-to-person and person-to-business transactions across Nigeria due to the scarcity of cash. And if the situation persists, it could potentially depress economic activities across the country.

Sequel to the Central Bank’s pronouncement on October 26, 2022, and the subsequent 45 days’ exercise to change the N200, N500 and N1,000 banknotes to the redesigned banknotes, there have been nationwide cash scarcity leading to the January 31 deadline; and the subsequent 10-day extension to February 10.

While the CBN has warned banks against stocking their ATMs with the old banknotes, there has been a critical scarcity of the new banknotes, coupled with traders’ refusal to accept the old banknotes and an acute dearth of cash at POS.

Consequently, this has noticeably affected business transactions among buyers and sellers across the country.

Regular Nigerians’ experiences: Chibuike Dayi, who operates a POS gallery in Ojo Local Government Area, Lagos, told Nairametrics that he had not been able to disburse cash to anyone, citing failure on the part of the banks to disburse cash. He said the situation is the same across the country.

Nairametrics contacted POS operators, Aminatu Jibrin in Abuja, Abdul Bello in Kogi, Erastus Azosiwe in Kano, Peter Ezeibe in Enugu and Justin Dressman in Port Harcourt, all of whom related similar experiences as Dayi.

  • “There is no business. All I have done today has been to transfer money and pay bills for a few people. The banks are not loading their ATMs with the new notes, so we don’t have any cash to disburse,” Dressman said.

Ifeoma Adaku, a restaurant owner in Lagos said she was unable to buy all she needed for the business day because of a lack of cash. She said the traders in the market are not open to transfers and are not accepting old naira notes as they find it difficult to change them for new naira notes.

Relating her day’s experience to Nairametrics, Amaka Echendu said she had to appeal to her boss to allow her to work from home because she could not find any POS operator to withdraw money from. She said she’s still at a loss where to find the cash to go to work tomorrow.

Bus drivers are also experiencing a lull in business activities. Moses, who operates between Mile 2 and CMS in Lagos, said passengers are not rushing for a ride as normal.

Uche Mukwuodo, a trader at ASPAMDA Trade Fair, told Nairametrics that business is at an ultimate standstill in the market. He said buyers come to his shop to buy but the transaction is difficult due to the dearth of cash. He relates that there is a perennial network problem at the Trade Fair, which makes transfer very difficult, hence, virtually no business.

Experts’ reactions: In his reaction, Professor Murtala Sabo Sagagi of Dangote Business School, Bayero University, Kano, said the cashless policy is a welcome development. He also noted some adjustments that need to be made, saying:

  • “However, the following are worth considering – bank charges on every transfer. The elites will not feel it but it’s a big concern to low-income earners. Also, security of accounts, because the yahoo boys are ahead of the banks, not many people will put all their accounts on clouds.”

He said account maintenance and alert charges apply in most banks and these reduce people’s balances. “In many remote locations, it’ll take time to be covered by e-services.

  • “Therefore, the CBN needs to reflect these realities in its approach. Otherwise, people will be forced to keep cash even if they don’t need it,” he said.

The chief executive of Anthill Concepts, Dr Emeka Okengwu said Nigeria is a transactional economy, not a productive one as many of the goods traded in the country are imported, not produced. He noted that the rural economy is not adequately captured in the banking loop, which may pass to some extent as an underground economy.

Okengwu averred that he is not against the cashless policy, but against not understanding what needs to be done to get all Nigerians in the loop. He said adopting the new system will take time. For the early stage, he said Nigerians are going to have to live in a strange way.

On the other hand, he noted that 80 per cent of the time, the best of what one may be able to get off someone is N20,000, except the person, was withdrawing daily in preparation for a particular transaction requiring cash.

Considering the foregoing, Dr Felix Echekoba, who lectures in the Department of Banking and Finance at the Nnamdi Azikiwe University, said the country is not yet ripe for the new withdrawal limit and cashless policy. He cited lag in infrastructure to support the policy. “Such a development will slow down transaction and trade velocity and ultimately, the economy,” he said.

For the record: Recall that the chief executive officer of the Centre for the Promotion of Private Enterprise [CPPE], Dr Muda Yusuf, recently expressed concern that there were glaring shortcomings of the apex bank in the process of currency change. He said failure to further extend the deadline for the currency swap could put the N100 trillion component of the national GDP at risk.

Dr Yusuf said two critical sectors are particularly vulnerable – Trade and Commerce; and Agriculture. He stated that the crippling of business transactions at the distributive trade end amid the currency swap crisis would not only undermine the trade and agricultural sectors but would have a knock-on effect on the manufacturing value chain and the services sectors. This is because whatever is produced has to be sold. He said the trading end of the chain has been greatly disrupted by this currency swap crisis.

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