Many Nigerians, including business entities, are increasingly embracing the use of electronic payment platforms amid cash-in-hand challenges in the implementation of the currency re-design policy of the Federal Government.
As commercial banks run out of cash and Automated Teller Machines (ATMs) cease to dispense new currency notes as directed by the authorities, Nigerians have run into severe difficulty with socio-economic activities greatly challenged. This has triggered demonstrations and riots in some states.
In order to meet their daily needs, such as feeding, transportation and communication, a large number of Nigerians have moved to digital transaction and alternative payment platforms. The micro, small and medium enterprise (MSME) operators have also besieged the electronic payment options in order to remain in business.
Industry stakeholders observe that an unintended positive outcome of the ‘bad’ scenario is the boost in the nation’s financial inclusion scheme – National Financial Inclusion Strategy (NIFS) as more people embrace the digital transaction options. The NIFS, which has experienced sluggish performance despite several measures by the Central Bank of Nigeria (CBN) to re-tune its mechanism has, by the recent Naira crisis, assumed tremendous expansion: The banks are recording increasing number of account opening, digital applications (Apps) enrolment and funds transfer – beyond what they had recorded in the past.
“More customers are using alternative channels such as the Internet banking, mobile banking apps, USSD, cards/POS, eNaira, to conduct their banking transactions. The banking hall is virtually empty these days, but a lot of business, worth billions of Naira, goes on digitally every day,” said an official of an old generation bank in Ikeja, Lagos, who would not want her name published (despite wearing a name-tag).
Ndubisi Nwokoma, Professor of Financial Economics, University of Lagos observed that the currency re-design policy will impact significantly on the nation’s cashless policy and change the culture of carrying cash about. He stated that many Nigerians “down the ladder” are now moving towards digital transactions including the commercial vehicle operators, petty traders and pepper sellers in the market.
“This policy has been able to help us to push for having a cashless economy. This is something we have to acknowledge. This policy may not solve all the problems of the CBN, but it has encouraged people to embrace the cashless economy. Those in the lower rung of the society can transact their businesses – use the services of commercial buses, buy pepper, buy yam, buy tomatoes in the market”, said Nwokoma, on a national television programme, monitored by THEWILL recently.
In a report on its Website, the Nigerian Inter-Bank Settlement System (NIBSS), stated that the Naira scarcity emanating from the CBN’s redesign and cash withdrawal policy had pushed Point of Sales (POS) transactions to N807.16 billion in January 2023.
According to the report, this is a 40.69 percent year-on-year increase from the N573.72 billion transactions that were done in January 2022. Data from the NIBSS showed that total cashless transactions in Nigeria rose by 45.41 percent year-on-year to N39.58 trillion in January 2023.
The NIBSS which monitors cashless transactions through the Nigeria Instant Payment (NIP) System and POS terminals stated that total NIP transactions for the period rose by 45.52 per cent year-on-year from N26.65 trillion as of January 2022 to N38.77 trillion as of January 2023.
According to NIBSS, the usage of electronic channels for transactions grew by 45.50 per cent year-on-year from 438.48 million times to 638 million times in the period under review. The inter-bank clearing platform added that there were 955,234 deployed POS terminals in the country as of January 2022.
A survey conducted by this newspaper between February 10 and 14, 2023 revealed that more residents of Lagos, Nigeria’s commercial capital, have embraced alternative payment platforms as the scarcity of Naira notes bite harder.
A visit to various banks across the state showed a large number of customers using the Automated Teller Machine (ATM) terminals for fund transfers while others in the banking halls were updating their banking applications (Apps) or seeking assistance to install new ones.
The findings also showed that many customers throng the banks for fund transfer while others make use of their GSM telephone handsets for payment of goods and services.
At the newly opened JustRite supermarket on Egbeda Road, Akowonjo, very few customers made cash transactions as most of those who came for shopping paid with their debit cards. The supermarket also has JustRite cards that enable customers to pay for their purchases without cash.
“My wife used the transfer app. to pay for snails at Igando market in Alimosho Local Government Area recently. The seller came with her phone ready for a cashless transaction,” said Mike Iwerunoh, a journalist.
This newspaper encountered a commercial motorcycle operator, popularly called Okada, at Mile-2 in the Amuwo Odofin Local Government Area who said he prefers transfer to cash transactions.
“I make more money these days because my passengers do not have to part with cash and I don’t have to waste time looking for change; they simply make transfer to my account and that settles it.
“We are urging the ‘Agberos’ (members of the National Union of Road Transport Workers (NURTW)) to begin to think cashless because it will benefit everybody. This issue of cash, cash, makes many people to misbehave”, a young man who identified himself as Lawal Ogundele said.
Roadside fruits and roasted yam/plantain sellers now accept transfer. Itinerant hawkers have also gone cashless.
“Instead of going to queue in the bank for the money I may not access, I go cashless and that is good for my customers. Many well-respected people patronise me daily, and they are happy when I tell them to pay by transfer,” said a woman who identified herself as Mama Kehinde, selling roasted yam, potatoes and plantain, at the Shasha mammy market in Alimosho LGA.
At the Lagos State University (LASU) mammy market, sellers and students were seen transacting businesses in a cashless manner. Recharge card vendors also operate the alternative payment systems.
Outlining immediate and long-term benefits of the currency redesign, the CBN governor said recently that the policy will, among other things, strengthen the cashless policy of the bank.
Emefiele who made the declaration at a meeting with the diplomatic and consular missions in Abuja on the recent monetary policy decisions of the CBN, said the currency re-design exercise was overdue and had to be implemented to reduce money in circulation. This appears to be yielding the desired results.
Reports confirm that banking halls across the country are virtually empty as frustrated customers resort to alternative payment platforms. According to the National President, Association of Mobile Money and Bank Agents in Nigeria (AMMBAN), Victor Olojo, the cashless policy has forced people to go digital.
He said, “The cashless situation forced people to move to digital, to POS. The policy contributed to that growth. People had to seek alternative channels aside from cash so this is expected. But this is not all from POS withdrawals, we have merchants, businesses, and supermarkets. All other sectors using POS to transact contributed to it.”
Commenting on how POS operators have been accessing cash, he added, “Cash has also not been available to operators, most of them have shut down. And those who are getting cash are seeking it from other alternatives, marketplaces, filling stations, pharmacies, and they get it at a cost.
As Nigerians grapple with the reality of the new naira note policy, the Institute of Chartered Accountants of Nigeria (ICAN) says the cash-in-hand challenge has revealed the weakness in the country’s alternative financial payment system.
As such, the institute advised banks, fintechs and telecommunication companies to ramp up investment in their alternative and digital payment platforms.
ICAN said, “The current cash-in-hand challenge has revealed the weaknesses in our alternative financial payment solutions. Accordingly, we encourage the deposit money banks, telecommunication and fintech companies to ramp up investments in their systems and processes towards improving the quality of their services in the Nigerian economy in the shortest possible time”
Financial inclusion means that people have access to basic financial services like a savings account, credit and insurance. The importance is on the fact that financial services have the capacity to empower people, create jobs and open up the remote areas for meaningful economic activities. The higher the inclusion, the better the quality of life for the people. A higher exclusion rate in Nigeria could lead to a poorer population, as lack of access to credit and insurance puts them at an economic disadvantage.
The CBN had in a circular in 2018 lamented that Nigeria was not meeting any of the agreed financial inclusion targets included in the 2012 Financial Inclusion Strategy. The Enhancing Financial Innovation and Access, EFInA, data showed that only 64.1 percent was financially included by the end of 2020. This means that 36 percent of Nigerian adults, or 38.1 million of the country’s 106 million adults of 18 years and above, remain completely financially excluded – a shortfall by 16 percent points from the desired target of a 20 percent exclusion rate.
To underscore its importance, Emefiele, in his second term agenda as the CBN Governor in 2019, put Financial Inclusion at the forefront of his 5-point agenda. He set a target of 2024 to achieve 95 percent financial inclusion.
“Over the next five years, through initiatives and policy measures such as the Shared Agent Network (SANEF) and the payment service banks, we intend to broaden access to financial services to individuals in under-served parts of the country. Our ultimate objective is to ensure that 95 per cent of eligible Nigerians have access to financial services by 2024.
We will also intensify our financial literacy and consumer protection programs such that current and eligible bank customers are fully aware of the financial services being offered to them as well as the cost of utilising these services, which will enable them to make well-informed choices,” Emefiele stated in his world press conference on June 24, 2019.
The CBN had stated in its Payments Vision 2025 document published last year that the use of cash payments will drastically reduce in the country by 2025. It explained that by 2025, the country will have a cashless and efficient electronic payment system infrastructure to service all the sectors of the economy.
With the licensing of Payment Service Banks (PSBs) for the telecommunication firms, and many banks going into a holding company (Holco) structure to operate subsidiaries that would enhance their financial inclusion programmes, the current surge in digital payment options will, definitely, accelerate the achievement of Emefiele’s and CBN’s targets.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
