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Crisis as cash shortages surge in Nigeria

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By Abiodun Okunloye

People panic as the old notes deadline nears and ATMs run out of new notes.

Days before the deadline that will make high-value money invalid, Nigeria, Africa’s largest economy, is heading toward the brink of chaos as ATMs in the country run out of new notes. The naira redesign stranded hundreds of people at a major electronics market in Lagos and other states. Many ATMs weren’t dispensing cash, even though residents could only withdraw 20,000 naira ($43). Commuters are feeling the effects of the cash scarcity, including computer technicians like 25-year-old David Aghamelum, who did not have cash and spent hours not finding ATM dispensing new naira notes; worshippers tithing at churches; cars waiting hours at petrol stations; and businesses and customers being impacted throughout the nation. As users also choose online transfers, transactions take hours or fail.

In light of the “hardship” that Nigerians are experiencing, President Muhammadu Buhari has pledged to end the currency crisis in one week. In a statement sent via email, he stated that the problem was caused by the “selfishness and greed” of the nation’s banks. Even though scenes of instability have erupted all over Nigeria, the great bulk of transactions are still conducted in cash; the Central Bank Governor Godwin Emefiele has justified his decision to substitute 2.7 trillion naira ($5.85 billion) of cash out of the banking system.

30,000 agents deployed to collect old notes, even after their deadline.

To facilitate the exchange of old cash for new, the central bank has announced the deployment of an additional 30,000 agents, most of whom will be stationed in rural areas. After February 10, when they are no longer considered legal tender, the institution will nevertheless accept the old notes at all of its branches across the country. Mosope Arubayi, an economist with IC Group, said that for the time being, the poor and those operating in Nigeria’s enormous informal sector are indeed the most likely to suffer, with consequences seen throughout the economy. She said over the phone that the CBN should fix the system’s problems. Financially, it makes no sense for people to be denied access to their own funds.

With the intention of retrieving more of the older series of 1000, 500 and 200 naira notes, the Central Bank of Nigeria has extended the deadline for their return from January 31 to February 10, 2023. The administration has stood by the decision. The government hopes that the increase in digital payments, decrease in inflation, and reduction in corruption brought about by the project, which Finance Minister Zainab Ahmed has deemed a “success.” She emphasized that the sole negative aspect was the suffering it has caused to the populace.

People now experience a tough time accessing their funds.

Also, in Kano, the economic hub of the north, hundreds of individuals waited in line at an ATM at an FCMB Group Plc local bank to get their hands on some of the few new notes being made available. A 35-year-old trader named Nura Ismail, claimed he waited seven hours to withdraw 20,000 naira, which would only get him through the first few days of the week. When he went to the bank in the morning, he was given the number 595. He claimed he hadn’t even eaten yet, and that he’d wait in line until 12 am if necessary to get money for the milk he needed to feed his newborn baby.

Daniel Sodimu, a FrontierView analyst specializing in sub-Saharan Africa, said the situation would likely affect growth in the first quarter. He said it would disproportionately affect the cash-based informal economy and that those with lower incomes would be particularly hard affected. According to the country’s statistics office, only 35% of Nigerian women and 47% of Nigerian men have a bank account. Most people who do not have a bank account are located in rural areas with a scarcity of bank locations. Based on the statistics agency, about two-thirds of Nigerians save money at home.

Bank agents now charge 10% to 20% for cash transactions.

Because it’s hard to get cash from financial institutions, bank agents, who are basically human ATMs (POS) throughout the country, have raised their transaction fees on cash to 10% to 20%. One of the top candidates accused the naira redesign plan of sabotaging or delaying the presidential election in three weeks. According to Cheta Nwanze, a lead partner at SBM Intelligence, without prompt action from the government to ease the suffering, it may harm the chances of the incumbent All Progressives Congress winning this month’s election and possibly spark social instability. Recently, local media reported that little protests had started in a few places.

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