Cash Crunch Crisis: How Nigeria’s Cashless Policy is Fueling a Parallel Market
Lagos, Nigeria – The ongoing cashless situation in Nigeria has sparked widespread concerns, with businesses and individuals struggling due to the exploitative practices of Point-of-Sale (POS) operators. Tope Dare, the Executive Director, e-Business and Infrastructure at Inlaks Computers Limited, has attributed this crisis to the flawed implementation of the cashless policy and the inefficiencies of banks.
Speaking at a public lecture themed “The Cash War Between ATMs and POS Agents in Nigeria,” Dare highlighted how the Central Bank of Nigeria’s (CBN) policies have led to persistent cash shortages. According to him, the ATM withdrawal limits, though designed to promote wider cash distribution, have instead prompted individuals to hoard cash rather than deposit it in banks.
“Many Nigerians depend on physical cash for daily transactions, and the transition to a cashless society requires a more balanced approach to financial inclusion,” Dare stated. He emphasized that POS agents, once seen as mere banking alternatives, have become crucial intermediaries for cash supply. However, their high fees and questionable sourcing methods have created a parallel market for cash.
Dare explained that POS operators now obtain cash through two major avenues: purchasing cash from local businesses in exchange for digital transfers at a fee and withdrawing directly from ATMs using multiple debit cards. These practices have resulted in ATM congestion and limited access to cash for regular bank customers.
“This dynamic has left everyday bank users at a disadvantage, facing higher transaction costs and long queues at ATMs,” he noted. “While POS agents bridge the financial gap, their unchecked dominance is causing unintended economic consequences.”
A survey conducted on street users revealed a strong preference for POS withdrawals despite their high fees. Respondents cited proximity, speed, customer service, and cash availability as reasons for their choice. Many also found POS agents to be more personable than traditional bank staff, despite lacking formal customer service training.
As of March 2024, Nigeria had approximately 2.7 million deployed POS terminals compared to less than 21,500 ATMs, serving over 63 million unique bank clients. This stark disparity highlights the growing dependence on POS agents for cash transactions. However, the ATM network continues to struggle with issues such as low withdrawal limits, forcing customers to make multiple transactions that disproportionately affect cash-reliant individuals like traders, transport workers, and elderly citizens.
Dare commended recent CBN initiatives to penalize banks that fail to ensure adequate cash availability. These measures include encouraging customers to report ATM cash shortages, increasing oversight, and imposing fines on underperforming financial institutions. However, he stressed that without a comprehensive review of the cashless policy, the exploitation of consumers by POS agents would persist.
As the debate over financial accessibility rages on, Nigerians are left grappling with an uncertain cash supply system, where convenience comes at a steep cost. Whether the CBN’s intervention will bring long-term relief remains to be seen.