Nigerians face worsening cash shortage as festive season approaches

As Nigerians gear up for the Christmas and New Year celebrations, a fresh cash shortage is causing widespread frustration across the country, especially in local markets where cash transactions remain dominant.

Despite recent figures from the Central Bank of Nigeria (CBN) revealing that a staggering N3.87 trillion remains outside the formal banking system, many Nigerians continue to struggle with limited access to cash, fueling concerns about the broader implications for the economy.

Recent data paints a concerning picture of Nigeria’s currency circulation. An overwhelming 93.34% of the nation’s money supply is held by individuals and businesses, with only 6.66% in circulation within the formal banking sector.

This stark imbalance underscores Nigeria’s deep reliance on cash, even as digital banking continues to grow, suggesting a complex challenge in the country’s transition to a more cashless economy.

The scarcity is particularly felt in markets across the country, where vendors and small businesses continue to rely heavily on cash transactions, despite the availability of electronic payment options.

For many market traders, cash remains the preferred method for conducting business, with digital alternatives often seen as inconvenient or unreliable, especially for smaller transactions.

Mr. Isah Zakari, the National Secretary of the Association of Point of Sale (POS) Users in Nigeria (APOSUN), recently highlighted the key issues contributing to the cash shortage.

Zakari pointed fingers at commercial banks, which he says have exacerbated the situation by reducing the amount of cash allocated to POS agents. He explained that this reduction in cash supply has made it harder for POS operators to meet the rising demand for physical currency, particularly as the festive season approaches.

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“Last December, banks cut back on the amount of cash they provided to POS agents, which made it difficult for us to supply the cash needed,” Zakari said.

“Some POS outlets, which are often owned by bank employees, have even been accused of redirecting cash meant for circulation to their own operations.”

He also expressed frustration over the withdrawal limits imposed by banks, with many ATMs dispensing as little as N10,000 at a time, even for customers who wish to withdraw more.

The cash shortage has led to a sharp increase in POS transaction fees, with some operators now charging as much as N1,000 for transactions as high as N50,000, compared to the previous N500 fee.

These higher fees are adding to the financial burden faced by Nigerians, especially during a time when many are preparing for the festive season’s added expenses.

Residents and businesses in areas such as Ikeja, Egbeda, and Agege in Lagos have reported significant difficulties accessing cash, with many ATMs running out of cash after dispensing minimal amounts.

Mr. Dare, an entrepreneur in Lagos, shared his frustration, stating that he is often forced to visit multiple ATMs to meet his cash withdrawal needs. “You will be moving from one ATM to another looking for cash, but many ATMs are empty. It’s even worse than last year’s festive period,” he lamented.

Food vendors like Shade Adeyemo, who rely heavily on cash to run their businesses, are also struggling to obtain enough cash to meet their needs. “I can’t get enough cash from the ATMs.

Imagine needing N100,000 and being told I can only withdraw N5,000 or N10,000. It’s a struggle,” Adeyemo said, underscoring the strain the cash shortage is placing on small-scale businesses.

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Bank insiders, however, offer a different view, suggesting that POS operators themselves are partly to blame for the cash shortage. Some bank officials claim that POS operators often engage in cash hoarding by opening multiple accounts and withdrawing large sums from ATMs, leaving little for other customers.

“POS operators move from one ATM to another to withdraw as much cash as possible, often leaving nothing for others,” one bank official noted. This practice, they argue, has forced banks to implement strict withdrawal limits in an effort to manage the limited cash supply.

Despite this, bankers acknowledge that the issue is not solely attributable to the banking sector. One bank official pointed out that cash hoarding by individuals is also a significant problem, with many Nigerians choosing to stockpile money in their homes rather than deposit it in banks.

“Cash hoarding is widespread in Nigeria. People are stockpiling money in their homes, and this is preventing it from entering the banking system,” the official explained.