Market News

•As rely on fewer customer deposits, ration old notes

•Confusion over code to deposit old notes

•Cash trading continues as PoS operators reduce charges

•Experts decry cash withdrawal limit, CBN deposit code

By Babajide Komolafe, Economy Editor; Peter Egwuatu, Asst. Business Editor and Elizabeth Adegbesan

As the compliance by the financial sector regulators and operators with the Supreme Court ruling on cash policy of the Central Bank of Nigeria, CBN, enters its second week, the scarcity of the banknotes appear unabated as multiple pressure points in the circulation of both new and old notes emerge.

Financial Vanguard’s findings at the weekend indicate that the scarcity will linger for weeks as the factors limiting the circulation remain much present in the system.

The key factors, according to industry sources include low volume of cash deposits by bank customers, lingering controversy over the requirement of  codes to deposit old notes, limited cash supply from the apex bank and huge unmet demand currently existing in the banking public.

Bank front desk officers who spoke to Financial Vanguard said over 98 percent of cash transactions since last week were for customer cash withdrawals while cash deposits were less than two percent. According to them, before the cash restrictions they usually have over 40 percent in cash deposit transactions.

Financial Vanguard findings also show that some banks were still demanding deposit code for old banknote as required by the CBN before the Supreme Court ruling.

The bank officials said the CBN directive last week did not vacate the requirement and their management has not directed that the requirement should be waived. Consequently, many depositors of old banknotes were turned back in the banking halls of some banks.

However, in some of the banks visited they were receiving the old notes without requesting for the CBN code.

But at all the major banks visited, Financial Vanguard was told that the banks did not receive any fresh supply of cash from the CBN last week in both old and new notes. They said they were only rationing the little deposits from customers and also little cash supply they received from the CBN previous week.

The rationing is also affecting the Point of Sales, PoS, cash businesses, with most of them saying that they  are still buying cash and trading Naira notes though now at reduced rate of N200 for N1000  from the previous N400 for N1000.

Customers, bankers express frustration

Meanwhile, more customers continued to troop to the banks Automated Teller Machines, ATMs, and banking halls following CBN’s directive early last week hoping to satisfy their long lingering quest for cash.

At the backdrop of the supply crises, the customers were disappointed that the situation has not improved much.

Ag Director, Corporate Communication, CBN, Dr. Isa AbdulMumin, had in a statement last Monday, said: “The CBN met with the Bankers’ Committee and has directed that the old N200, N500 and N1000 banknotes remain legal tender alongside the redesigned banknotes till December 31, 2023. Consequently, all concerned are directed to conform accordingly.”  

Following the directive, widespread rejection of the old notes was replaced with acceptability while access to cash improved as banks began to pay out the old notes to customers.  

But  the improvement in access to cash experienced by bank customers was temporary and did not last beyond Wednesday. The cash crunch reemerged on Thursday and worsened on Friday.

“The last time I had cash was on Wednesday”, said Okelele Wunmi, a PoS agent in Alimosho, Lagos.  

Speaking to Financial Vanguard, she said: “I got the cash from a neighbourhood  retailer that services two other PoS agents. Since then I have moved around searching for cash but to no avail. I was at Zenith Bank  today, and I could not get cash after spending three hours on the queue.   I was number 210 on the queue. The bank gave N10,000 per customer but the money finished before it was my turn”.  

Bankers who spoke to Financial Vanguard on condition of anonymity attributed the situation to low cash supply from the CBN.  

“We have only received N1 million in my branch this week. And we rationed it to customers over-the-counter. We are not loading ATMs because there is no cash,” said a banker who heads one the branches of  Tier-1 bank in Akowonjo, Lagos.  

Another senior banker confided in Financial Vanguard, saying, “We are not receiving cash to meet up with the demand. Before the CBN directive on Monday my branch received N10 million which we exhausted by Wednesday as customers started accepting the old notes. After that N10 million, we received another N1.5  million and that was the last for the week. The cash needed by my branch before the crisis was about N120 million per week. So the N11.5 million received this week was grossly inadequate”.  

Similarly, a political and development economist, Ayobami Oyalowo, said on his Twitter handle on Friday: “I spoke with three  bankers today, I needed some cash. The three  of them work in different banks and the least is a regional manager. None of the banks has received one naira from the CBN all week.”

Confusion over CBN code

The above situation is worsened by the refusal of banks to allow customers to deposit the old notes into their accounts without the CBN’s Cash Return Portal reference code. According to a banker who spoke on condition of anonymity, “The CBN has not directed banks to allow free deposit of the old notes without the code and no bank wants to risk sanction from the apex bank. Until we see a circular saying that the Cash Return code has been suspended, the banks will continue to request for it”.  

Experts react  

Experts in the financial industry have lamented that the cash crunch and Naira notes selling around the country will continue even after the governorship election except the supply of new and old Naira notes by the  CBN to the banks increase.

Prof, Uche Uwaleke, President, Association of Capital Market Academic of Nigeria, ACMAN said: “The reason is for the continuous cash crunch and queues at banks is because the banks do not have sufficient volume of the old 500 and 1000 naira notes to dispense. The bulk of these were mopped up by the CBN and what is currently in circulation are the ones that were not taken out.  

The cash scarcity is likely to persist even after the elections. The only way it can be eased is if the CBN is able to issue sufficient quantities of the new naira notes through the banks, re-circulate a large chunk of the already withdrawn old notes as well as ease the cash withdrawal limits.

“In view of the Supreme Court ruling on the matter, I think the practice of generating codes from cyber cafes before deposits can be made should be scrapped as it is not encouraging widespread acceptability of the old naira notes.”

In his own reaction, Managing Director/CEO, APT Securities and Funds Limited, Mallam Garba Kurfi said: “The queues at the banks  is because the cash deposited with CBN is yet to be released by CBN to the banks for re-circulation to the general public.

“It will be difficult for the queue to disappear from the banks and ATMs even after election. The immediate solution is for the  CBN to release old notes concurrently with the new notes.

“The CBN should equally instruct the banks to discontinue the cash withdrawal limit as it violates the Supreme Court ruling.”

Commenting as well, Tajudeen Olayinka, Managing Director/CEO,  Wyoming Capital and Partners said: “Cash scarcity will continue as long as the CBN do not pump in more money to the banks and cancel the cash withdrawal limit.

“The fact that CBN did not release sufficient amount of new notes to replace the old ones, and could not also provide near cash alternative in lieu of insufficiency of cash, the cash crunch will remain even after the general elections”.