In an Alimosho branch of First Bank, Nigeria’s oldest bank, customers face frustration and long queues at Automated Teller Machines (ATMs) as they attempt to withdraw cash in preparation for the upcoming holidays.
The scene echoes a reminiscent period earlier in the year when a currency redesign by the Central Bank led to a four-month cash crunch from January to April 2023.
Currently, several tier 1 Nigerian banks have imposed restrictions on daily cash withdrawals, limiting customers to amounts ranging from ₦10,000 to ₦20,000.
This has intensified the rush for cash, with ATMs either not dispensing cash or restricting withdrawals to a single ₦10,000 transaction per customer.
The blame game ensues, with customers accusing the Central Bank of Nigeria (CBN) of causing unnecessary suffering, while the CBN points fingers at commercial banks and individual customers.
Hakama Sidi Ali, CBN’s Acting Director in Corporate Communications, insists that there is sufficient cash in circulation but attributes the scarcity to panic withdrawals and hoarding by individuals.
Insiders with knowledge of CBN’s operations suggest that the disruption in the money cycle could be due to hoarding or fears that old notes may face further phasing out in January 2024.
The cash scarcity poses challenges for Nigerians and businesses, especially as the country relies heavily on cash transactions.
While some fintech startups experienced increased transactions during the previous cash crunch, the current situation highlights the persistent reliance on physical cash in Nigeria.
As queues grow longer and the holidays approach, concerns rise about the impact on businesses and the inconvenience faced by individuals.
In an attempt to avoid high commissions charged by POS/mobile money agents, many Nigerians opt for ATM withdrawals, contributing to the extended queues.
POS operators acknowledge the increased difficulty in obtaining cash and adjust their charges accordingly, further complicating the situation for customers seeking alternatives to traditional banking channels.
Government and Financial Institutions seek solutions amid cash scarcity challenges
As frustration mounts among Nigerian citizens grappling with the cash scarcity, there are calls for urgent interventions from both the government and financial institutions.
The persistent queues at ATMs and limited cash withdrawals have raised concerns about the impact on the economy and citizens’ daily lives, particularly with the holiday season approaching.
The Central Bank of Nigeria (CBN) faces the challenge of restoring confidence in the banking system and addressing the perceived hoarding of cash.
Officials from the CBN emphasise the need for cooperation between the central bank, commercial banks, and the public to ease the current situation.
Additionally, efforts are underway to investigate the root causes of the disruptions in the money cycle and implement measures to encourage the depositing of cash back into the system.
Government authorities are also urged to play a role in alleviating the strain on citizens. Calls for increased communication and transparency regarding currency policies have emerged, aiming to reduce panic withdrawals and promote trust in the financial system.
The Ministry of Finance and relevant regulatory bodies are expected to collaborate on initiatives that stabilize the flow of cash and mitigate the adverse effects on businesses and individuals.
Meanwhile, businesses, especially those heavily reliant on cash transactions, are feeling the brunt of the scarcity.
Small and medium enterprises (SMEs), market traders, and service providers face operational challenges as the shortage disrupts their cash flow. The government is urged to consider targeted support for these businesses to help weather the impact of the cash scarcity.
As the holiday season intensifies, concerns grow about the potential escalation of the situation. Long queues, frustrated customers, and economic repercussions highlight the need for swift and effective measures to address the challenges posed by the cash scarcity.
Stakeholders, including regulatory bodies, financial institutions, and the government, are urged to collaborate in finding sustainable solutions to restore normalcy and confidence in the financial ecosystem.
