A combination of insider abuse within banks and hoarding by customers has been identified as the root cause of the current scarcity of cash in Nigeria, creating challenges for citizens ahead of the festive season. Despite assurances from the Central Bank of Nigeria (CBN) regarding sufficient currency notes in the country, many Nigerians are reportedly struggling to access enough cash from banks.
Point of Sale (PoS) operators, in response to the cash shortage, have resorted to purchasing cash from traders and petrol station attendants to supplement their withdrawals from banks. A banking source revealed that racketeering within banks is contributing to the cash scarcity, with individuals paying significant premiums for freshly minted notes.
The insider abuse extends beyond individual actions, as sources allege collusion between CBN staff and security agencies in these activities. The central bank had recently stated that Nigerians were hoarding cash in anticipation of potential government action related to the naira redesign program, despite the old and redesigned naira banknotes remaining legal tender according to the Supreme Court’s ruling and the CBN’s statements.
The country previously faced a severe cash shortage in the first quarter of the year following the redesign of N200, N500, and N1,000 notes by the central bank, causing a loss of trust and confidence in the banking sector, according to FSDH Research.
PoS operators and businesses are feeling the impact of the cash shortage, with reports of restrictions on cash withdrawals and the need to source cash from alternative channels such as traders and markets. The scarcity has led to increased costs for obtaining cash, affecting businesses and individuals alike.
Damilare Akinlotan, an investment and equities analyst for Risevest, highlighted potential consequences if the cash scarcity persists. These include an increased adoption of digital payment channels, cash hoarding, higher withdrawal costs, and potential inflation in the informal economy.
Banks’ deposits with the central bank have witnessed a significant decline, dropping by 36.99% in two months, while their borrowing from the central bank has increased from zero to N39.40 billion, according to recent data.
Despite the reassurances from the CBN about sufficient currency notes, concerns about the scarcity persist. Experts attribute the cash crunch to factors such as the previously set deadline for old notes (now suspended by the CBN), increased spending ahead of the festive season, and hoarding due to the expectation that old naira notes would cease to be legal tender by December.
While the CBN has urged Nigerians to use cashless options for transactions, the challenges posed by the current cash scarcity underscore the need for a comprehensive and sustainable solution to address the various contributing factors.