In terms of getting cash, many Nigerians had a rough week last week. Long lines formed in banking halls, ATMs, and POS businesses as people sought cash, and they still couldn’t obtain any by the end of the day. Many distressing viral videos and photographs of Nigerians standing in lines for hours and sometimes assaulting each other emerged online, all in a desperate quest to withdraw cash. Many POS operators have began demanding increased fees for cash withdrawals, whether old or new notes. Some POS providers charge N200 for each N1,000 old note withdrawn, while others charge N300 for each N1,000 new note. This equates to a premium of at least 20% and up to 30%.
According to Nairametrics findings in various markets in Lagos, Ogun, and Oyo states, market vendors have refused to accept payments via transfers or POS payment and have insisted on cash only. This has also had a knock-on effect on the level of corporate activity in the country, as most Nigerians are now more cautious with their monetary outlays. Meanwhile, despite CBN efforts to promote Nigeria’s cashless policy, the country’s continuing demand for cash poses the question of why Nigerians prefer cash over mobile transactions.
Currently about 133 million of Nigerians are multidimensionally poor.
Understanding Nigerians’ demand for cash requires taking into account the country’s demographics as well as the socioeconomic level of the majority of residents. This will help to provide a clearer picture of why Nigerians prefer to spend their time getting cash rather than using mobile transactions or other forms of internet banking. According to the National Bureau of Statistics (NBS), over 133 million Nigerians are multidimensionally poor, owing to, among other things, a lack of access to basic healthcare, food insecurity, and a lack of education.
Nigerians who are multidimensionally poor account for 63% of the total population. The World Bank, on the other hand, believes that around 95.1 million Nigerians are poor based on their income, with many Nigerians living below the poverty threshold of $1 per day. Because of the country’s high degree of poverty, most people will engage in petty trades involving little quantities, which cannot be easily done through the use of an app. A sachet of water, for example, costs N20 on average, as do fish and a variety of other minor staple foods. Transfers have become a tough sort of transaction for Nigerians.
85% of total cash not at the bank but being held by many Nigerians.
Cash has historically been the default method of exchange for the majority of Nigerians. The majority of currencies in use at all times, according to a quick study of statistics from the Central Bank of Nigeria, have never come from the banking industry. According to recent data, as of December 2022, N2.57 trillion—or over 85% of the total amount of cash in circulation—was not kept in bank vaults. According to a recent statement from the CBN governor, the sum decreased to N900 billion in January as a result of the apex bank’s cash swap scheme.
The culture of spending cash can be traced back to the days of saving in an enclosed box, thrift collection, and a variety of other cash-based saving methods. Nigerians are still highly comfortable with cash transactions, especially considering the country’s low level of education and exposure, particularly in rural regions. Furthermore, due to the country’s education divide, many Nigerians do not trust the financial system for fear of being duped. In recent years, there has been a rise in the number of false alerts, in which a trader receives a credit alert for a transaction that is not completed, only to receive a reversal. Similarly, flaws in the financial infrastructure have severely eroded Nigerians’ trust in the cashless strategy.
CBN has made the move to aggressively enforce cash-less-based transactions.
By revamping the naira notes and putting a cap on daily cash withdrawals, the CBN has taken action to aggressively push cashless-based transactions in the nation. Immediately after this change, it’s crucial to fix several of the previously mentioned difficulties. In other words, banks need to improve their infrastructure, the central bank must inform the public about the benefits of cashless transactions, and the general public needs to be receptive to change and innovation.
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