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Cash Scarcity: POS Operators and Banks Trade Blame as Nigerians Struggle

November 26, 2024

 

As the Christmas and New Year holidays approach, Nigerians are once again grappling with severe cash shortages. Residents across the country, particularly in the Federal Capital Territory (FCT) and its surrounding areas, are feeling the pinch, with many struggling to access cash from Automated Teller Machines (ATMs) and Point of Sale (POS) operators.

Despite the Central Bank of Nigeria (CBN) revealing that a staggering N3.87 trillion remains outside the formal banking system, this has not alleviated the situation. Data from the CBN indicates that a large majority, 93.34%, of Nigeria’s currency is controlled by individuals and businesses, with only a small fraction circulating within the banking sector, highlighting the country’s continued reliance on cash despite the rise of digital banking services.

Local markets are experiencing difficulties, with many traders still preferring cash transactions, especially in rural areas where farmers are hesitant to trust electronic payments due to past issues with fraudulent credit alerts. This ongoing reliance on cash has placed a strain on the economy, as POS operators face increasing difficulties in sourcing cash for transactions.

Mr. Isah Zakari, the National Secretary of the Association of Point of Sale (POS) Users in Nigeria (APOSUN), pointed the finger at commercial banks for exacerbating the cash shortage. He explained that in December 2023, many banks reduced the cash withdrawal limits for POS agents. Zakari alleged that some POS outlets, often owned by bank employees, were hoarding cash meant for customers, leaving POS operators with limited access to funds.

“POS operators are now forced to go to traders and petrol stations for cash, and this has caused transaction fees to surge,” Zakari said. He noted that while some banks still imposed cash withdrawal limits of N10,000 or N20,000 per day, the lack of sufficient cash available for withdrawal forced POS operators to rely on alternative sources, further driving up costs for consumers.

In areas such as Nyanya, Mararaba, and Lugbe in the FCT, businesses are struggling with limited access to cash, with POS operators reporting that they could only withdraw N10,000 or N20,000 at a time, hampering their ability to serve customers. In Mararaba, operators have been unable to withdraw sufficient amounts to sustain their businesses, leaving customers frustrated.

Residents, including entrepreneurs and food vendors, expressed their frustration, with some saying they have resorted to keeping cash at home due to the difficulty of accessing enough funds to run their businesses. One food vendor, Titilayo Abayomi, shared her experience, saying, “Imagine needing N100,000 for your business and being told you can only withdraw N10,000. It’s frustrating.”

For others, such as businessman Abdul Saheed, seeking alternatives like filling stations for cash has become more common. “ATMs no longer work, and you end up going from one point to another, only to find that no machine is dispensing cash,” he lamented.

However, some bank officials placed the blame squarely on POS operators. According to these sources, many operators have multiple accounts and ATM cards, allowing them to withdraw large sums of cash meant for others. “Banks are forced to set limits on withdrawals to curb the activities of POS operators who are draining the ATMs,” one official explained, adding that some POS operators have formed partnerships with traders, further exacerbating the cash shortage.

The bank officials also mentioned the issue of cash hoarding, with many Nigerians holding large sums of money at home, further reducing the amount available in the banking system. “When the CBN releases cash, people hoard it, either out of fear or for political reasons,” one official said.

Despite the challenges, the officials urged Nigerians to embrace electronic transfers and reduce their reliance on cash. They highlighted the benefits of a cashless society, noting that digital payments are more efficient and secure, especially in an increasingly cash-scarce environment. However, the public remains wary of fully transitioning to electronic payments due to concerns about system failures and the digital divide.

As the country approaches the festive season, the ongoing cash scarcity has added to the already significant challenges faced by Nigerians, with both POS operators and banks engaged in a blame game while ordinary citizens bear the brunt of the crisis.

 

Written by Adeyemi Adewale




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