Last week was very stressful for many Nigerians as far as getting cash was concerned. Many people endured long queues in banking halls, ATM galleries, and POS stores in search of cash. And at the end of the day, they still couldn’t get any.
Many disturbing viral videos and pictures emerged online of Nigerians standing in queues for hours and even fighting themselves all in a desperate bid to withdraw cash.
Many POS operatives have also started charging higher fees for the withdrawal of cash either old or new notes. Some POS operators charge as much as N200 for every N1,000 old note that is withdrawn, while others charge N300 for every N1,000 new note. This represents a premium of at least 20% and as much as 30%.
Findings by Nairametrics around some markets in Lagos, Ogun, and Oyo state revealed that market traders have refused to receive payments through transfers or adopt POS payment and have insisted on cash collection. This has also had a ripple effect on the level of business activities in the country as most Nigerians are now more prudent in their cash expenditures.
Meanwhile, the growing demand for cash in the country, despite moves by the CBN to improve Nigeria’s cashless policy begs the question of why Nigerians are desperate for cash rather than mobile transactions.
In understanding the need for cash by Nigerians, it is imperative to consider the demographics of the country as well as the socio-economic level of most citizens. This will help paint a better picture of why Nigerians would rather spend valuable time to get cash rather than adopt mobile transactions or other forms of internet banking.
High poverty rate: According to the National Bureau of Statistics (NBS), about 133 million Nigerians are multidimensionally poor largely due to the lack of access to adequate healthcare, food insecurity, and lack of education amongst others.
- The number of multi-dimensionally poor Nigerians represents 63% of the entire population. On the other hand, the World Bank estimates about 95.1 million Nigerians to be poor based on their income, with much Nigerian living below the poverty line of $1 per day.
- The high level of poverty in the country means that most will transact in petty trades, which would involve small amounts, that are not easily done over the use of an app. For example, buying a sachet of water costs an average of N20, fish N300, and many other petty staple foods.
- It becomes a difficult form of transaction for Nigerians to use a transfer
The culture: By default, cash has been the natural means of transactions for most Nigerians over the years. A cursory analysis of data from the Central Bank of Nigeria revealed that most currencies in circulation at every point in time have been outside the banking sector.
- Recent data showed that as of December 2022, a total of N2.57 trillion was outside the vaults of the banks, representing about 85% of the total currency in circulation.
- Meanwhile, a recent update by the CBN governor revealed that the figure dropped to N900 billion in January as a result of the cash swap programme by the apex bank.
- The culture of spending cash can be traced to the era of saving in an enclosed box, thrift collection, and many other cash-based means of saving.
- Nigerians are still very much comfortable with their cash transactions, especially given that the level of education and exposure is still low in the country, specifically in rural areas.
Lack of trust: The issue of trust in the Nigerian financial system cannot be overemphasized as this has influenced the adoption of cashless-based transactions in the country to a large extent.
- Due to the education gap in the country, many Nigerians do not trust the financial system due to the risk of being scammed.
- There have been increased cases of false alerts in recent times, where a trader receives a credit alert for a transaction that is not completed only to receive a reversal in a later period.
- Similarly, the inadequacies of the banking infrastructure have also further dampened the confidence of Nigerians in the cashless policy.
‘Owambe’ spending: If there is anything our Nigerian parties are known for, it is the sufficiency of food and money spraying. Monies sprayed at parties in the country are viewed as a measure of wealth, and most importantly, support for the celebrant.
- Flamboyantly spraying money on the celebrant or guest musician is also a way of showing the people that you are well-to-do. This essence will be defeated if they can just transfer the fund to the celebrant.
- This could have been termed as a cultural factor for Nigerians, however, it is too interesting a factor to lose under the category of cash spending culture.
Inadequate infrastructure: Banking mobile applications have suffered major downtime over the years and more renounced in recent times, following the increased adoption.
- Nigerians have had to face embarrassing and frustrating scenes of debited but failed transactions, or undelivered funds despite debts, most of which could be attributed to the bank’s inadequate infrastructure and bad internet services in the country.
- Banks have also recently lost many of their IT staff to the #japa trend, which had put a strain on the smooth running of their mobile applications.
Bottom line: The CBN has made the move to aggressively enforce cash-less-based transactions in the country by redesigning the naira notes as well as placing a limit on daily cash withdrawals.
Following this move, it is important for some of the factors highlighted above to be addressed. That is, banks should fix their infrastructure, the apex bank needs to enlighten the public on the advantage of cashless transactions, and the public should also be open to changes and innovation.