In February 2023, a man in his late forties took hold of a microphone at a public gathering in Nigeria’s capital. He screamed at the top of his voice that the cashless policy was “an evil plan against the people and it will not affect anybody in attendance.”
The participants shouted “amen” in unison.
One of those at the venue narrated how she spent a day at an automated teller machine (ATM) queue to withdraw N2000. Another lamented that he spent N600 to withdraw N1000 from a point-of-sale outlet in his area.
The cashless policy is, perhaps, one of the most discussed issues in Nigeria, a country of about 200 million persons. Since the country’s Central Bank of Nigeria (CBN) announced the introduction of newly redesigned bank notes and phase-out of old currencies of N200, N500, and N1000 denominations, there have been much discomfort on the people in terms of access.
The aftermath of the policy forced the Nigerian President, Muhammadu Buhari, to announce the re-introduction of N200 old notes, but that failed to alleviate the scarcity. A Dataphyte report had noted that N200 constituted only 9.2 percent of the country’s currency in circulation in the last seven years.
A cashless policy is geared towards ensuring that there is less cash in circulation. Instead, credit cards (ATMs) and other online means of payment are encouraged.
Nigeria’s cashless policy has since cause a lot of ‘discomfort’ despite the touted advantages by the apex bank.
Nigeria struggles to implement policy
The effort towards achieving a cashless Nigeria did not start in 2022.
In 2012, Nigeria’s apex bank started “Cashless Lagos.” It would then spread to other parts of the country before a nationwide announcement of a cashless policy on July 1, 2014.
Before the latest naira redesign for N200, N500, and N1000, cash had been allowed to exist alongside the government’s cashless policy.
However, the CBN lamented that despite introducing a cashless policy as far back as 2012, the cash out of banks as of December 2022 stood at 83.3 percent.
This development, coupled with the claim of the CBN that it needed to support the country’s security architecture, led to the redesign of the naira.
The bank had asked Nigerians to return all old N200, N500, and N1000 notes to banks while stating that only the new notes should be spent.
The apex bank announced January 31, 2023, as the deadline before extending it to February 10, 2023.
Initially phasing out old N200, N500, and N1000, the bank took out an average of 37.054 percent of the total pieces of its currency in circulation.
The Central Bank also took out 94.7% of the value of the Currency in Circulation, leaving a huge gap that the CBN has been unable to fill.
The policy has become one which has received mixed reactions largely because the newly redesigned notes have been unavailable to Nigerians, meaning that unlike in previous years where Nigerians had access to cash and electronic transactions, such ‘luxury’ no longer exists.
Nigeria had recorded some progress concerning e-transactions before now but deployed cash and cashless policies side by side.
Automated Teller Machines that are a source of cash for Nigerians barely dispense same now, although many besieging ATM points with the hope of withdrawal.
Banks have often shut their doors against their customers, but the financial institutions say they are cash-strapped. Banks are even dispensing old naira notes at the moment despite that many Nigerians do not collect them. Despite a Supreme Court judgment that makes old notes legal tenders, Nigerians await President Buhari and the CBN Governor, Godwin Emefiele, to speak on the use of old notes but neither has done so.
POS business dying
Many POS operators have shut down. Dataphyte surveyed over 20 operators and found that only five opened. POS used to be a veritable alternative source of transactions in the country, but it is doubful if it is still so.
Many POS operators lack cash, with players saying that they are reliant on traders for cash. Others find it difficult to carry out operations such as transfers and deposits, making it hard for them to transit to the CBN’s cashless policy campaign on a fuller scale.
A respondent narrated how his transactions on a POS machine were declined twice, though he was debited. Before the currency redesign, Nigeria was said to have one of the highest numbers of dispensing errors, and the situation has become more chaotic since the CBN announced its naira redesign.
Lamentations galore
Despite the challenges, POS machines remain the hope of making cashless payments in the face of currency scarcity, bank shortcodes, application network failure, according to traders who spoke with Dataphyte.
“The only solace I have is that I use my POS for sales. The network can be very challenging, but I cannot shut down my business. I still struggle to ensure that I survive the current times. If not for the occasional times that POS machines work, my customers would not have been able to transfer to me when they make purchases. They always complain of poor network,” a trader in Abuja, Divine Blessing, noted.
While some traders say they are struggling to survive by deploying POS in the face of poor bank network, the cost of obtaining the POS machines is challenging for many micro, small and medium enterprises (MSMEs) in the country. Dataphyte findings from official sources show that getting a POS machine costs between N50,000 to N65,000.
A business operator in the Zuba area of Abuja, Daniel James, told Dataphyte how he had to borrow money to obtain a POS machine for N60,000.
“I had to borrow money to get the POS machine at the cost of N60,000. Imagine what the pepper seller or foodstuff seller will do,” he told Dataphyte while lamenting the cashless policy situation.
In Nigeria, cash is still regarded as king, with many traders preferring to be paid in cash rather than with credit cards.
This is mainly because many traders in Nigeria are in micro enterprises, according to a recently published SMEDAN report.
“How do I receive transfers when I sell items that are barely N200? Even if it was a N500 purchase, I prefer cash. I sell little things, and if you do not have cash, I rather not sell to you,” a Lagos trader, who identified herself as Elizabeth, told Dataphyte. Some traders who spoke to Dataphyte also noted that they did not have bank accounts.
An Abuja meat seller, Nasiru Abdullahi, told Dataphyte that despite making as much as N20,000 in revenue daily, he still did not have a bank account.
“I do not have a bank account, I prefer to keep my money myself, because of the challenge of collecting it after saving. I do not know how to use transfers. I do not even have an android phone to use the bank application,” he stated.
The POS operators are not the only ones affected by the poor bank network to carry out online transactions.
Nigerians have lamented the difficulty in using shortcodes or mobile applications of banks to carry out transactions.
This poor bank network is worsened by the fact that only 32.69 percent of Nigeria’s poor population have access to financial services or mobile money operators, according to the World Bank data.
Over 42 million adult Nigerians were reported to lack access to banking services as of December 2021.
The TheEFinA report noted that only one in three adults in the country’s rural areas was banked, with banking services not reaching many places in rural areas. Forty-four percent of the adult population (18 years and above) in rural areas were reportedly excluded from banking services.
The 44 percent of the total population of adults in rural areas, quoted by the EFInA, stands at 30.668 million persons excluded from banking activities in Nigerian communities.
This is asides the transaction challenges faced by people in internally displaced camps (most of whom are in rural areas) such as poor internet network, bank network disruptions, and negative perception of micro enterprises to cashless policy.
The country is also bedeviled by the poor mobile and internet network, which is hurting its cashless policy as phone networks are needed to carry out online transactions. Also, POS machines and bank applications need the internet to operate.
The country’s broadband internet penetration stood at 48.2 percent in January 2023, meaning that 51.8 percent of locations in Nigeria lack broadband Internet penetration.
The country’s internet penetration stood at 51 percent of the country’s population as of 2022, said Datareportal statistics, meaning that 49 percent of the country’s population lack access to the internet.
Nigeria want more from CBN
Nigerians who have tried to use electronic transfers as a transaction want the CBN to do more to ease the pains of the cashless policy.
A driver at Berger Park in Abuja, Tunji Sulaimon, noted that he tried to collect customer transfers but stopped due to poor bank network.
“Sometimes, when I permit people to transfer, I won’t see their money, and they will claim that they have been debited. Some will even say they have been debited twice. It is a loss of money to me, and I also need to buy petroleum. The filling stations prioritise cash over transfers, so it is very problematic. I have stopped receiving transfers,” he noted.
A survey of over 30 drivers in different parks in the country shows that they (the drivers) prefer to be paid in cash rather than transfer due to network glitches while processing payments.
Although the Supreme Court has twice asked the CBN to allow Nigerians to use the old currencies for transactions, it is unclear, as of now, what the exact position of the apex body is as Nigerians continue their daily quest for smooth transactions.
Experts told Dataphyte that the CBN might need to rethink the policy while advising a gradual phase-out of the currencies to achieve a cashless society.
A former CBN Deputy Director, Prof Jonathan Aremu, criticised the policy, saying that it was hurting many Nigerians. He said the naira redesign policy would neither raise the value of the local currency nor improve the economy, urging the apex bank governor to revisit the policy.