The Organised Private Sector has joined the call on the Central Bank of Nigeria to address the cash scarcity witnessed nationwide, stressing that the country is not developed enough for cashless transactions.
Members of the OPS pointed out that the scarcity of cash has adversely affected businesses, especially those in the Micro, Small, and Medium Enterprises category, as they expressed fears of an imminent collapse of MSMEs.
“While the intent may have been to modernise the financial system and promote cashless transactions, the reality is that these policies have inadvertently stiffened business operations across the country,” the National Vice President of the Nigerian Association of Small-Scale Industrialists, Segun Kuti-George, said.
Kuti-George noted, “Nigeria’s economy is not yet developed enough to function effectively on a predominantly cashless basis. A significant portion of the population still relies heavily on cash for daily transactions.
“While the cash scarcity has encouraged some adoption of electronic payment methods, it is not sufficient to address the broader economic needs. The adverse impact on businesses and individuals remains severe.”
He explained that even in advanced economies like the United States and European nations, cash remains an accessible option.
“This is supported by higher levels of financial literacy and efficient systems for online transactions. In Canada, for instance, one can withdraw up to $1,500 in a single ATM transaction. Comparatively, Nigeria’s withdrawal limit of N20,000 (approximately $26) per transaction is impractical and reflects a lack of consideration for the needs of businesses and individuals.
“These restrictions undermine the economy and highlight systemic challenges in understanding and implementing policies that align with the realities of the population. A more balanced approach is needed, one that gradually transitions the economy towards cashless transactions without disrupting livelihoods or stifling business growth.
“The path forward should involve greater financial inclusion, improved infrastructure for electronic payments, and policy adjustments that reflect the economic realities of Nigeria’s diverse population.”
On his part, the National President of the Association of Small Business Owners of Nigeria, Dr Femi Egbesola, said the naira scarcity hurts the macro, micro, and small businesses that are largely cash-dependent.
He said, “Many in this sector sell small-sized products for as low as N50, N100, and N200 that are wholly transacted with cash. Many of these businesses now find it hard to survive with the cash crunch. Another negative outcome of the scarcity is that it discourages small business owners from banking, thereby reducing financial inclusion and increasing financial insecurity associated with carrying cash.
“Some have resorted to buying cash from POS operators at higher costs, resulting either in depleting their profits or leading to increasing the prices of their wares, and this eventually leads to low sales. The majority of the MSMEs still operate in the informal sector and as such are largely dependent on cash transactions.
“It is pertinent then, that CBN responds swiftly to arrest this anomaly before it impedes more negatively on micro and small businesses to the extent of extinction of a substantial fraction of the sector. Hence, if not arrested fast, the wholesale negative effects would become very pronounced on the economy soon.”
The Director of the Centre for Promotion of Private Enterprise, Dr Muda Yusuf, told The PUNCH that the present cash scarcity risks a slowdown of business activities in the country.
Yusuf explained that the cash scarcity was particularly not good for Nigeria’s highly informal sector, saying “The major effects of the cash scarcity on business is that it slows down the velocity and the volume of business transactions, especially at the informal sector level and micro-enterprise level in our rural areas because these are segments of the economy that uses a lot of cash.
“In the cities, I imagine that the use of electronic payments is very high for retail transactions. But in many of our rural areas, the use of cash is huge.
The CPPE president cautioned against the dangers of cash flow disruption, adding “Since cash is a means of payment, once there is a disruption in the flow of cash, it affects the payment system and therefore affects the flow and the velocity of transactions.
“Economic activities are affected and that is not good for any economy. (This is) because you want economic activities to be seamless and you need a very efficient payment system to make that happen. And cash, of course, is a means of payment. So that is the negative effect it has on the economy.”
Yusuf also outlined factors worsening the cash scarcity crisis, including low financial inclusion and lowered trust in commercial banks, noting “There is also the issue of low level of financial inclusion. Even though we have made progress in that, I must confess that there is still a lot more to do.
“Then lately there has been a breach of confidence, if I may put it that way, concerning some online transactions because of the failure of some of the banks’ apps which affected quite many people and created a trust problem.”
According to the economist, the use of online transactions or electronic payment systems is a function of trust.
He explained further: “So if anything happens to undermine that trust, a lot of people may stay away from it. There are quite many people who are yet to recover from the disruptions that happened about a month ago with some of the major banks concerning the electronic payment system.
“Once people have one experience, because of that, they may shy away completely from the use of online transactions and decide to go purely for cash.”
Yusuf stressed the importance of maintaining the trust customers have in banks to dispense cash as well as improving literacy in cash-heavy rural areas.
He emphasised, “The ability to continue to sustain the confidence of citizens in the payment system is extremely very important. Because once anything goes wrong, it has a far-reaching implication for the use of online payments. And once that happens, a lot of people will move to the use of cash.
“Then there is also the level of literacy. The level of literacy is still very low largely in our rural areas. And that affects the enthusiasm about the use of online transactions. So such people prefer and are more confident with the use of cash.”
Further, the CPPE director pointed out the negative impact of money laundering on cash scarcity, remarking, “There is the problem of money laundering. A lot of corruption activities are done in cash which could also affect the demand for cash and if the total supply has not increased, then there may be scarcity.
Yusuf added that the business model of Point of Sale operators which presently competes with commercial banks for cash is a net negative for sufficient cash circulation in the economy.
The economist noted that there were over three million POS operators in the economy who “Rather than wait for depositors to bring cash to them like the banks would do, go to retail outlets to buy cash.
“So cash is not flowing to the banking system as it used to, because the banks now have a major competitor in the POS operators.”
The economist acknowledged a higher percentage of cash resided with the POS operators who do business with them.
“They buy the cash and they dispense cash at a commission,” Yusuf asserted. “That (POS business) has added a completely new dimension to the dynamics around cash management and cash availability in the economy. Because as of October, for instance, we had cash currency in circulation, I’m talking of currency outside the banking system of about N4.3tn.”
Yusuf exclaimed that with N4.3tn in circulation, there should be sufficient cash but for the drop in confidence, money laundering issues, and emerging money-buying POS business.
Speaking with The PUNCH, the Director-General of the Nigeria Employers’ Consultative Association, Mr Adewale-Smatt Oyerinde, described the cash scarcity in Nigeria as a double-edged sword.
Oyerinde noted that while it could accelerate the shift towards a cashless economy, it poses significant challenges for micro, small, and medium enterprises and the informal sector, which heavily rely on cash transactions for their daily operations.
According to Oyerinde, “The current cash scarcity is a double-edged sword. While it could foster a faster evolution of the much-touted cashless economy, it also portends a great challenge to MSMEs and the informal sector.”
He added that balancing this transition is critical to ensuring inclusive growth and economic stability.
While decrying the devaluation of the naira, the President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, Dele Oye, said the lack of confidence in the naira was part of its scarcity.
He said, “Nobody is holding naira, everybody is holding a dollar, this is why nobody goes to the bank to withdraw naira because they put all their money in dollars. This is why the naira has to become stabilised. If it continues to appreciate, that is fine. However, the Central Bank of Nigeria has not told us the fundamentals of why we should trust the naira. Until they carry us along, we cannot know what is happening.
“The CBN is not engaging stakeholders, it may be the end of the year if they want to show that they have performed. The Central Bank of Nigeria needs to engage and listen more to the stakeholders. They should not only listen to the banks or talk to the banks, they need to also talk to people who utilise those banks, like what are our impressions of the services? How do their monetary policies affect us? This lack of stakeholder engagement is a big problem.
Oye explained that the consequence is for investors to invest in other countries due to the lack of uncertainty in Nigeria.
CBN fines banks
The CBN is making efforts to tackle the cash scarcity, as it announced a fine of N150m per branch on Deposit Money Banks found guilty of facilitating the illegal flow of mint naira notes to currency hawkers and unscrupulous agents.
The apex bank disclosed this in a circular issued on December 13, 2024, signed by the acting Director of the Currency Operations Department, Mohammed Olayemi.
The circular revealed that the CBN is concerned about the increasing prevalence of mint naira notes being traded by hawkers, a practice the bank described as impeding efficient and effective cash distribution to customers and the general public.
The circular, which referred to an earlier directive dated November 13, 2024, highlighted the apex bank’s determination to address the commodification of the naira.
Under the directive, any branch of a financial institution found culpable will face a penalty of N150m for the first violation.
Subsequent infractions, the CBN warned, would attract stricter sanctions under the provisions of the Banks and Other Financial Institutions Act 2020.
To ensure compliance, the apex bank stated that it would increase periodic spot checks in banking halls and ATMs while deploying mystery shoppers to uncover illicit cash hawking spots across the country.
The PUNCH earlier reported that the CBN issued a stern warning to Deposit Money Banks over cash hoarding and diversion, stating that such actions will attract stiff penalties.
In a circular dated November 13, 2024, signed by the Acting Director of Currency Operations, Muhammad Olayemi, and released by the CBN, the apex bank announced intensified measures to ensure efficient and transparent cash disbursement.
The CBN reminded banks of its ongoing mystery shopping exercises and spot checks aimed at discouraging the abuse of naira notes and ensuring responsible distribution of cash, especially as the festive season approaches.
According to the circular, the initiatives are designed to prevent the flow of newly minted banknotes to hawkers and support efficient cash disbursement to the public.
The central bank stated that any DMB traced to seized cash from unauthorised hawkers would face financial penalties.
Such banks will be fined 10 per cent of the total value of cash withdrawn from the CBN on the day the offence was committed. Repeat offenders will incur an additional five per cent penalty for each subsequent breach.
The CBN also warned against cash hoarding, diversion, and other practices that hinder cash flow, stressing that such actions violate the Clean Note Policy. It noted that defaulters would face appropriate sanctions, which may include additional fines or other regulatory actions.