Across the country, the ripple effect of cash scarcity is evident. Since the CBN redesigned the top three denominations of the Naira and put a timeline on when these old notes ceased to become legal tender, Nigerians have struggled to get cash. This has disrupted several economic activities and has become a major risk to the livelihoods of many Nigerians.
Businesses, especially players in the informal sector are at the centre of this crisis due to their heavy reliance on cash transactions; many have experienced low patronage. According to the Centre for the Promotion of Private Enterprise (CPPE), the Nigerian economy has lost N20 trillion, due to the ongoing cash scarcity crisis. These losses, according to the body, stem from crippled trading activities, stifled informal sector, contraction in the agricultural sector, and by extension, massive job losses.
Amidst the crisis, Nigerians have switched to using electronic payment channels to perform transactions. Although many in the informal sector are not familiar with its use, the need to carry out transactions has accelerated the use of electronic payments. According to the Nigeria Inter-Bank Settlement System (NIBBS), 108.135 million transfers were made in January, representing a 237% increase when compared to the 32 million recorded during the same period in the previous year. The value of mobile transactions rose by 124.8% to N2.4 trillion from N1.1 trillion in the period under review.
A total of N38.7 trillion over electronic channels in January 2023, represents a 45% year-on-year increase from N26.6 trillion in January 2022. In fact, a higher record was set in December 2022, with an all-time high monthly record of N42 trillion. Economic experts say the surge in mobile transactions means the CBN’s efforts to create a cashless society are coming to fruition. But there are still several challenges.
In its latest data, NIBBS say the value of electronic payment transactions in Nigeria declined by 5% in February. The total value of e-payment in the country fell from N38.8 trillion recorded in January to N36.8 trillion in February. However, the volume of electronic transactions for the month increased from 541 million in January to 787 million in February, indicating that although more people made payments electronically last month, the value of their transactions was lower than in January.
A logical reason for this may not be unrelated to the innumerable failed cashless transactions encountered by people in the course of a transaction. Prior to this crisis, Nigerian banks have been faulted for unreliable electronic services. Now that more people have switched to electronic payment, there is congestion on digital platforms resulting in suboptimal performance. ATMs fail to dispense cash, and there are several failed transactions from mobile transfers and POS terminals.
Consequently, the level of trust in electronic transactions has declined rapidly. So since the peak of the cash scarcity, many businesses that hitherto accepted electronic transfers stopped even in the face of trade decline.
While the cash scarcity is expected to ease in the coming days, with the CBN’s recent announcement of the old note’s validity till December 31, 2023, it has made an indelible mark on the economy, especially in the area of financial inclusion. What is needed to consolidate that traction is a state-of-the-art infrastructure from financial institutions to make electronic services more reliable to their customers.