MARKET NEWS

BY   Ladesope Ladelokun

• POS agents have altered dynamics of cash management, CBN must  increase currency in circulation –  Yusuf
• Why cash crunch persists despite CBN’s threat of stringent penalties – Bankers

With Nigerians already in the festive season, the demand for cash is expected to rise amid reported economic hardships. While empty Automated Teller Machines (ATMs)  and unfavourable withdrawal limits at the counter have plunged Nigerians into another round of Naira scarcity, many are turning to Point of Sale (PoS) operators for relief. In this report,  LADESOPE LADELOKUN writes on  the frustration of Nigerians and the need by the Central Bank of Nigeria to ease their pains

At first, he  thought something had gone wrong with his account, when he was told by a teller in a tier-1 bank that he could not withdraw more than N5,000.

Despite being a fresh returnee from the United States of America, Dare Okunola, was not oblivious of the fact that Nigeria once battled a cash scarcity crisis. He had read how the issue yielded pains and deaths in the run-up to the 2023 presidential election but never knew it would still be an issue two days after he returned to Nigeria last week.

“I’ve been out of the country for some time. When I came, I didn’t know the problem had started. I entered one of the banks. I  needed money but the teller said I could only withdraw N5,000. Initially, it didn’t really mean anything to me. I was thinking something had gone wrong with my account. It was later that I heard that there was naira scarcity,” he told Sunday Telegraph.

Ghost of Emefiele

Recently, a prosecution witness, Edward Adamu,  testified at the Federal Capital Territory (FCT) High Court in Abuja that former CBN  Governor, Godwin Emefiele, failed to go through the  required approvals from the Nigerian president and the CBN Board for the redesign of Naira notes in late 2022; something observers traced to the Naira scarcity that followed.

However,despite the aforesaid disclosure, in the wake of the Naira redesign crisis, five persons reportedly died and some bank branches were razed. The  economy was said to have lost N20 trillion to the scarcity.

Although experts argue that the Naira scarcity crisis suffered by Nigerians  in the run-up to the 2023 general elections and the current one do match in severity when juxtaposed, many have turned  to PoS operators for succour, even when some have raised their charges.

With the festive season around the corner, the demand for cash is expected to climb amid reported hardship besetting Nigerians, which is exacerbated by petrol subsidy removal and floating of the Naira.

Man-hours lost in banking halls

For Kehinde Adenipekun, beyond dry ATMs, getting his money even after making his way to the banking hall remains a tall order.

He said: “My brother, getting my money in commercial banks and ATMs  isn’t an easy task. When in the banking hall for transactions, a lot of man hours are lost. You may be in the banking hall for three or four hours; yet, you may not have a successful  transaction. Getting to ATM gallery to withdraw, many times there will be no money in the ATM.

“However, when I get to POS agents to withdraw money, the charges are outrageous. Your transaction might not be successful but you have been debited. You will now be directed to your bank and face the consequences. Getting to your bank, they will tell you that the money is not in your account.”

Order from above

John Wahab, an accountant and former banker, said it was disheartening that most top banks put their daily cash withdrawal limit at N20,000 or less at the counter, even when their ATMs are left without cash.

“The ATMs have been recently empty across all banks and I felt it usually happens when the festive period is approaching as a method to control the liquidity of cash in circulation. I also noticed that the daily cash withdrawal at the counter in UBA and Zenith have been reduced to N15, 000, N20,000 and mostly, they tell us that is the order from above and they’re also giving what they have. I have seen the POS operators lament over shortage of cash, and some of them told me that their daily limits have been reviewed drastically.

“I personally couldn’t complain because I expect that we should go digital and be more convenient using electronic means in our daily transactions. Of course, the PoS operators have increased their charges by an additional N100 since we are not fully ready to go cashless. I think the CBN is trying to remind us of the  cashless policy but does it have any impact on our economy? Nigerians will adapt to whatever situations they find themselves in.”

Commenting, a commercial bus driver, Kuyoro Adeolu, said  the nature of his job gives him access to cash but he narrates how drivers solve the cash problems of Nigerians.

“I hardly get cash from the bank. Most  times, I go there to deposit because of the nature of my job. I do not feel the effect of cash scarcity and even if there is cash scarcity, it is not really affecting people like Emefiele’s era.

“Even with the bank limit, people have found a way around it in order to get enough cash for themselves.

“Some befriend fuel attendants or meet drivers,  who want to get fuel and beg them to let them use their card instead of the driver paying cash.”

 Traders, fuel stations to the rescue -POS operators

For a great number of POS operators interviewed by Sunday Telegraph, traders and fuel stations are their major sources of cash.

Speaking on how he has been able to keep his business running without visiting banks for months, Tade Ogunnaike, explained: “I’ve stopped going to banks for cash. They can never give me what I need. What I do is to buy cash from traders in the market.  There’s a market in Ogere( Ogun State). Whenever  traders are going there, I ask them to help me get cash.

“If they are getting N 200, 000 , they could get it for N2,000 or N2,500, depending on how familiar they are with the trader. Ordinarily, the fuel stations around should provide succour where banks have failed but their charges are not favourable, knowing that banks don’t have cash.  For example, to get N30,000, they charge N500. So, how do we break even?”

Another operator, Modinat Aribidesi, said :”It’s a serious situation. Throughout yesterday, I couldn’t get cash. As I am now, I have less than N60, 000 here. A customer came a few minutes ago to request for N20,000. I told him there was no cash. If I give N20,000 cash to one person in this time of scarcity, I would be short changing myself because that amount can serve five or more people with better returns. How much will he pay? The people we collect cash from are already complaining that they have no cash.”

With regular and daily supply of cash from her sister, who works in a fuel station, Tope Kolawole, has nothing to worry about.

“I don’t even know if there is scarcity. I have a sister that works at a fuel station. She brings me cash every day. She could bring as much as N300,000 sometimes. Maybe, that’s why I don’t feel the impact of the scarcity. ”

What’s CBN up to?

Dr Babatope Ogunniyi, a  senior lecturer in the Department of Economics, University of Lagos, has called on  the Central Bank of Nigeria(CBN) to communicate more with  Nigerians  in order to prevent unscrupulous elements from taking advantage of the current situation.

“I may not know whether they are trying to revalue the Naira in a way. That could be a symptom. If anything of such is not happening, then some people are taking advantage of the economy. Which  means, it could be that the bank executives are making more money through POS and as such, they will continue to fund it. In another clime, the monetary authority would have come out to tell us whether there’s scarcity or not.”

He added : “But this is yet to be declared by the monetary authority. But we need to ask: ‘do we need to have monetary authority again when you enter the bank and the bank is not giving you enough cash you need’? As of early this year, we were restricted to N40,000 per withdrawal but what we are seeing now is different. It could be that the monetary authority might have mopped up some money in circulation and pushed people to do online transactions. It could be a strategy but people should be carried along, so that others will not take advantage of this lacuna. Not only that! If  the government wants to change the currency, which and which, the old N200, are they still in circulation? If they are not, there is going to be scarcity. The old N500, are they still in circulation like before? If  they have been mopped up, then there will be scarcity. ”

Need for financial inclusion

Ogunniyi further stated that there can’t be financial inclusion if Nigerians in the hinterland can’t access banks, let alone cash.

“Unfortunately, let me add this. When  you talk of financial inclusion, it has not trickled down to the people in the hinterland. You can travel over 100kilometres without a bank. So, is financial inclusion being propagated or taken seriously? It is when the people at the corner of their villages can access their banks that you can say that there is financial inclusion.

“In my local government, there is only one bank and the bank is UBA. Others  have closed down. So, how do you want people to have access if they don’t have cash? To many, this scarcity is still not prevalent but  maybe, close to Christmas, it becomes a problem, and that will be enough to create problems for travellers and holiday makers.”

POS agents’ve altered dynamics of cash management – Musa Yusuf

Commenting, former Director General of the Lagos Chamber of Commerce and Industry, Dr Muda Yusuf, reasoned that although the current cash scarcity can’t be described as severe as that of 2023, the current situation is still worrying.

“We need to worry about the phenomenon of cash scarcity in banks. It has become an intractable problem and the CBN needs to do something about it. “Let me state that the cash scarcity situation we have today is nowhere near the kind of crisis we had in 2023. In 2023, what the then CBN governor was doing was mopping up cash and the crisis was extremely bad. What we have today is not as bad as what we had then. But that does not excuse the fact that we still have a problem to deal with. We have a situation where the POS guys are competing for cash with the  banks,” he told Sunday Telegraph.

Explaining how it is now profitable for traders  to sell cash to POS operators instead of taking them to banks, Yusuf said the presence of POS operators across the country has altered the dynamics of cash management.

“People go to businessmen that generate cash and buy up the cash. So, they pay to collect cash. So, there’s a bigger incentive to give the cash to the POS people than to take it to the bank. So, it is looking more like a competition between POS operators and the banks. And, for many citizens now, it is even more convenient to collect cash from POS providers  than the banks. And, for many citizens now, it is even more convenient to collect cash from POS rather than worry themselves about going to banks for cash. That’s a new phenomenon, which has altered the whole dynamics about the management of cash or the distribution of cash in the economy.”

On what the CBN can do to tackle cash  scarcity, Yusuf said: ” The way to deal with this is for the CBN to increase the amount of currency in circulation, so that more cash will be available for both the POS agents and the banks and of course their ATMs. I think that is perhaps the way to deal with this issue because it is a supply and demand issue. But the reality is that one can easily get cash from the POS people, unlike what we had in 2023 , when you couldn’t get it from the POS agents. Even  when you could get it, it was at an exorbitant  rate.The thing about the POS is that they create a lot of convenience. They  save you  the trouble of going to the bank and they are everywhere. So, in a sense, they are also providing a payment service. So, we can’t completely ignore them.”

CBN determines cash to banks; many converting savings to dollar – Bankers

In an interview with Sunday Telegraph, a banker, Tayo Awolusi, said the CBN plays a crucial role in determining what a bank can release for withdrawals. According to Awolusi, the portfolio of each bank with the CBN determines what each bank can give out in a day.

“In a day, there is a normal gauge that all banks have as regards withdrawal. It’s meant to check them too. It is a mechanism to gauge their spending . So, what bank A releases, bank B may not release it. There is what we call a portfolio. In a day, there is a limit to what can be released in cash to an ATM. Once, it is reached, no more money goes there. Depending on the portfolio of each bank with the CBN, there is a gauge on the amount each bank can give out. That’s why what a bank can give out, for instance, other banks may not be able to do so because they  are not financially buoyant like the bank. CBN determines how much cash that goes out in a day.  The CBN gives an order on what Bank A , for example, can give out. It  trickles down to branches; meaning, the bank distributes what can be given out per branch.

“If a branch now decides  that 20 per cent of the withdrawals for a day will be through the  ATM, it won’t go beyond that.”

He, however, expressed worries that banks no longer have cash like they used to do. He added that Nigerians, especially politicians, now convert their money to Dollars because of the fallen value of the Naira.

“But the truth is banks don’t have cash like before. Most people are converting their Naira to Dollar because  the Dollar is having more value. Our physical currency is not much. People, especially politicians, are converting to hard currency. Three issues are involved. It’s affected by FX trade exchange, CBN’s directive and internal policy of the banks on the amount they can give out in a day. Then, there is security issue involved too. Someone can steal your card and come and withdraw someone else’s money. At  the counter, there are questions they will ask you if you want to withdraw from someone else’s account.

Most banks are folding up because they are spending the way they are not supposed to spend. Last month, three banks folded up. The  CBN will be the one to cover for those losses.”

Reacting, a First Bank branch manager, who pleaded anonymity, said the current scarcity, despite its pains, cannot be blamed on banks. He, however, added that there was a need by Nigerians to fully embrace electronic transactions, just like the practice in advanced countries.

“We don’t hoard cash. Look around, you find more people withdrawing cash than people bringing cash. We can only give what we have. If  we got N100 from the CBN, for example, and we now get N30 that’s not even regular, what do we do? Now, this is an unpopular opinion. Do you know I like what’s happening now? When you travel to advanced countries, people don’t carry cash like we do here. We need to fully embrace cashless transactions here. We will get there one day.”

We’re doing our best – CBN

According to the Acting Director of Corporate Communications of the CBN, Sidi Hakama Ali, there is enough cash in circulation but a lot of panic withdrawals and hoarding are going on.

“The CBN is giving to banks except that most of this cash is in the hands of individuals. All these panic withdrawals, hoarding are ongoing.”

For his part, the CBN Governor, Olayemi Cardoso, said the apex bank was doing everything possible to ensure an end to cash scarcity.

In a bid to tackle the cash scarcity crisis faced by Nigerians, Cardoso,  during the 2024 annual bankers dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos,  asked bank customers to report difficulties experienced in withdrawing cash from bank branches or ATMs from December 1.

“Effective December 1, 2024, customers are encouraged to report any difficulties withdrawing cash from bank branches or ATMs directly to the CBN through designated phone numbers and email addresses for their respective states,” the CBN governor said.

“I repeat, financial institutions found engaging in malpractices or deliberate sabotage will face stringent penalties.”