As Nigeria’s Central Bank tries to rebuild trust following a disastrous introduction of new naira bills, customers’ faith in the financial system is being tested, as many still battle to obtain cash.
Nigeria’s Central Bank (CBN) has doubled supply of banknotes to commercial banks for circulation among customers.
The country’s apex money authority has also directed all commercial banks to load their ATMs and conduct physical operations over weekends to ease the monthslong cash crunch that plunged Africa’s largest economy into financial disarray.
It also ordered the old naira bills to be circulated until the end of this year.
Nigeria has battled a cash crunch since October 2022, when the CBN gave a February 2023 deadline to change old 200, 500, and 1,000 naira bills for newly redesigned ones.
Customers still can’t get cash
The new notes were introduced to mop up excess cash outside the banking system, counter corruption and discourage ransom payments to bandits and kidnappers.
Stories of long lines and frustrated customers sleeping outside banks to get cash have been widely documented in Nigeria.
Yet, despite the CBN’s efforts, it appears that some Nigerians are shunning the banking sector, saying the poorly-implemented naira redesign policy has exposed the system’s inefficiency.
Last week, the country’s National Labour Congress (NLC) union threatened strikes over the cash scarcity.
The strike was postponed for two weeks, with NLC president Joe Ajaero saying the organization would monitor how Nigerians were accessing cash.
But many customers, like Samson Adebo, say the situation has not eased.
“There are a lot of crowds because people have been struggling to get cash,” he told DW near a bank in northern Nigeria.
“In fact, I came here several times, and I couldn’t get what I wanted. I think that if you went to any bank in Nigeria, there would be crowd despite the fact they said there is cash.”
Counting the cost
Financial analysts believe the crisis has cost Africa’s largest economy about 20 trillion naira (around Ꞓ40 billion).
It also inadvertently increased the banking sector’s risk of collapse as customers are now shunning cash deposits. The CBN has urged customers to be patient.
While commercial banks have been directed to load their ATMs with new bills, not all are complying, according to some customers DW spoke to.
“Even though there is court ruling on the usage of old naira notes, people should not expect normal business as it was before because the policy didn’t support so much cash in circulation,” Kaduna-based economic analyst Fatimah Salihu Abubakar told DW.
“Government has now realized that 75% of the businesses in Nigeria are dominated by small and medium scale businesses and they heavily rely on cash transactions,” Abubakar added.
“Its advice has been that these enterprises should start accepting the other available channels of payment such as mobile banking, the internet banking, and use of the USSD.”
Central Bank fights to retain faith
According to Fatimah Salihu Abubakar, the Nigeria’s Central Bank should take responsibility for its poorly implemented currency shift, which has hit the informal sector particularly hard.
“At first when the CBN gave out the deadline for old naira notes, people believed it was impossible and didn’t take serious action. Most of people in rural areas found it difficult to transact, and gave rise to a lot of complaints that made the Supreme Court intervene with the extension. People are a bit more relaxed but to the policy is not healthy,” she told DW,
The policy shift was initially intended to promote cashless transactions in Nigeria, where businesses operating in the informal sector, which relies heavily on cash, hardly use the banking system. The CBN also said the new policy would help remove excess cash outside the banking system, counter corruption and discourage ransom payments to bandits.
This article has been adapted from a radio report which was originally broadcast on DW’s daily radio show, AfricaLink.
