As the festive season approaches, Nigeria grapples with a cash scarcity crisis as many citizens struggle to access sufficient funds for their holiday expenditures.
The shortage has been attributed to a combination of insider abuse within banks and hoarding practices by the public.
Despite assurances from the Central Bank of Nigeria (CBN) regarding the ample stock of currency notes in the country, Point of Sale (PoS) operators find themselves resorting to unconventional means to obtain cash.
Some PoS operators are reported to be purchasing cash from traders and petrol station attendants to supplement their withdrawals from banks.
Insider abuse within the banking sector has been identified as a significant contributor to the ongoing cash scarcity.
Racketeering within banks involves individuals paying exorbitant amounts, such as N36,000 for freshly minted notes worth N20,000, and N63,000 for N50,000.
This practice occurs openly, facilitated by Point of Sale (PoS) machines for those unable to transfer funds easily.
Sources within the banking industry allege collusion between CBN staff and security agencies, further exacerbating the cash shortage issue.
The central bank has previously noted that Nigerians are hoarding cash due to concerns about potential government actions related to the naira redesign program.
However, the Supreme Court’s ruling and CBN’s statement affirming the legal tender status of both old and redesigned naira banknotes seem to have failed to alleviate public anxiety.
The scarcity echoes a similar crisis experienced in the first quarter of the year following the redesign of certain denominations, causing a loss of trust and confidence in the banking sector, according to FSDH Research.
As PoS operators limit cash disbursements, the situation is expected to impact the adoption of digital payment channels, increase cash hoarding, and potentially raise the cost of goods and services in the informal economy.
The shortage also reflects in a decline in banks’ deposits with the CBN and an increase in borrowing, suggesting a complex financial landscape that demands prompt attention and regulatory intervention.
The CBN, while emphasizing sufficient currency stock, urges the public against panic withdrawals.
However, the reasons behind the cash crunch—whether attributed to the previously set deadline for old notes or increased spending ahead of the festive season—underscore the need for comprehensive solutions to ensure financial stability and meet the cash demands of the Nigerian populace.
