Nigerians are already bracing up for a cashless Christmas and New Year Holidays. The situation is worsened by the very long holiday weekend. (Traditionally – Nigeria will observe public holidays on Monday and Tuesday – since Christmas fell on Sunday) Queues at the ATMs and inside banking halls are very long at a traditionally very busy shopping period. There are a lot of speculations but what are the real reasons for the cash scarcity and long queues at ATMs and what can you do as a business owner?
From Port Harcourt to Lagos, Abuja to Calabar and Uyo to Kaduna, the story is the same. Biting cash scarcity and long queues at ATM terminals around Nigeria’s major cities continued unabated into Christmas. What first was attributed to MMM has now degenerated so badly that rumors say the banks are illiquid. However, reports indicate most of the market/trading cities of Aba, Onitsha, parts of Lagos and Kano are not severely hit.
What Are The Real Reason For Cash Scarcity and Long Queues At ATMs?
It’s difficult to pin down the real reasons – but by examining some of the reasons thrown about by some professionals (and insiders) who should know – these are the top reason listed in no particular order:
1. Difficult logistic occasioned by Aviation Sector/Security troubles.
According to reliable insiders, freighting cash has been somewhat problematic for some of the commercial banks. Some banks on several occasions are alleged to have had to return back to vault money meant to be freighted to other states because of unavailability of scheduled flights. The security situation in some of the cities also isn’t helping.
Nigeria has a cashless policy in place but still transfer huge sums across cities via the airports and roads. Bullion Vans gets ambushed, attacked and security escorts killed frequently. A disruption of any of these channels can lead to scarcity of physical cash in target cities.
2. Manage inflation.
Owing to a recent disbursement of cash to the states and the subsequent directive by President Buhari for 25% to be used for Salary arrears payment in the states – experts believe there’s a CBN instruction to banks to hoard cash. The thinking is that a sudden injection of cash in the system at this point (Christmas and New year holidays) will spell doom for the already burgeoning inflation in the country.
3. Banks Want To Close Their Books On A Positive Balance.
2016 was not a particularly good year for businesses and the banks are not excluded. Some experts believe that banks are tactically hoarding cash to preserve positive book balance at year’s end. According to those with this theory, the frustration will limit the amount of money that moves out of banks’ systems – helping them to stay positive enough for the end of year report recordings.
POS to Cash Transactions As A Service
Savvy business owners are taking advantage of the situation and providing POS to Cash Transactions As A Service to people desperate for Cash. Businesses with active Point of Sales terminals simply accepts payments from a customer and give them cash equivalent. One of the filling stations on GU-Ake Express Way, Eliozu Area of Port Harcourt will allow you to pay money into their account via POS and advance you the cash. The service comes with a 5% commission. According to an attendant there – they noticed a pattern of people paying with POS in excess of the actual fuel they wanted and then request for change from the attendant. The management had to step in to profit from it. According to him, this helps them to offload cash but, they wanted to discourage its abuse (especially by the attendants) – hence the commission.
There’s a similar service by a Startup called MATS in partnership with Total Gas Stations and other mobile money agents. They too charged commission and have been in existence
Not Every Store Owner Collects Commission
Not every store owner collects a commission. Some shop attendants actually would give you cash for POS transactions. While this is risky on the part of the business owners, a lot of people are using this strategy to get cash.
Is Nigeria Missing An Opportunity To Deepen Cashless Policy Adoption?
When we sought to find out if the story would have been different – had Cashless Policy taken root, the consensus was that even at full implementation, cash will still be needed for certain category of items. But MPESA was highly successful in East Africa because of the wide adoption by market women and street traders. MPESA however was Telco driven which calls to question the implementation and even the seriousness of the country’s policy makers towards Mobile money.
For ages, there have been calls to allow Telecommunication company to drive Mobile money here. It however appears that the clamor is beginning to yield fruits as the Central Bank recently announced plans to give telcos mobile banking license.
If you know other reasons for the cash scarcity and long queues at ATMs do let us know in the comments.