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Report, December 14, 2024.
“Stop this cash crunch.” Daily Trust Editorial, December 16, 2024.
“Recurrent cash scarcity is unacceptable.” PUNCH, December 16, 2024
“OPS fears SMEs’ collapse as cash scarcity lingers,” PUNCH same day.
Cash crunch: The way out
In the past one week alone, virtually every paper in Nigeria has joined the national hysteria concerning acute and worsening cash crunch. The National Assembly, NASS, recently woke up from their collective slumber, to demand that the Central Bank of Nigeria, CBN, should end cash scarcity! There is a national alarm now; which reveals that Nigeria’s elders and most of its gatekeepers in the media don’t listen to warnings. Dr Nwajei, the ICT guru, has repeated several times that “if you want anything hidden from Africans, put it in a book”
To that, it should be added, “or publish it in a newspaper”. Unless it is considered defamatory by a big man then it will get noticed. Otherwise, nobody in government or its agencies pays attention to anything written about their activities unless it is favourable; even if untrue.
“Expect scarcity of everything; scarcity of food, scarcity of dollars…scarcity of cash supply in banks.” Dele Sobowale, 2023.
That prediction was made in December 2023. Three articles had been published since then in which I warned about inevitable cash scarcity. The reasons for the pessimistic forecasts were given; and possible solutions suggested. Only one cause of the imminent cash crunch was left out; because it borders on wilful and organised sabotage. All the warnings were ignored by all those now calling for action. That is typical Nigerian response to tragedies; closing the gate after the cows have fled. It is bad enough that those now calling for immediate answer don’t even know enough about the causes; they actually applauded the measures introduced by the CBN which got us where we are.
HASTY DRIVE TO CASHLESS SOCIETY: ATM AND POS
“Haste makes waste” was a lesson we learn in primary schools in the 1950s.
Quite frequently, over-speeding is often associated with unintended accidents.
Because babits are often stronger than reason, deliberate speed is often advised when implementing new ideas which aim to change entrenched behaviour. The drive towards cash-less society was a great idea which was rushed and led to the present predicament. The urgency solved one problem, but created more.
When banks installed Automatic Teller Machines, ATMs, to speed up cash payments and relieve pressure in banking halls, they also increased the number of people carrying cards significantly. As more people became accustomed to using ATMs, the need to enter banking hall declined.
The introduction of P. O.S operators almost completed the drive towards a cashless economy. With the introduction and proliferation of P.O.S operators nationwide the basic needs of people for banking services can now be met without going to a bank. Depositing cash with P.O.S operators was only a logical step; which has now reduced the flow of cash to the banks.
Today, most Small and Medium Scale Enterprises, SMEs, operate mostly on transfer basis; the cash collected from cash sales is now deposited with a P.O.S operator – virtually next door or across the street. And, if cash is needed, they simply call the POS operator nearby to collect. The incentive to go to bank has been totally removed. It might even be more costly and inconvenient to go to bank. Two years ago, a large distributor for Nigerian Bottling Company products sent her staff to the bank four or five times a day to deposit cash. Now, she no longer sends anybody to bank. Most of her customers have been forced to transfer payments to her account. Cash collected from the small customers are deposited with P.O.S operators – who compete for it. She has not sent anybody to bank in over ten months.
Additionally, transaction costs and convenience of using P.O.S operators work to the disadvantage of banks. In most residential communities, usually far from banks, located in Business Districts, BCs, going to bank to deposit or collect cash calls for a long walk or taking transport. A friend’s real experience, last week, is the rule – not the exception. He drove from his house to the nearest branch of his bank; aiming to draw N150,000 cash. “We don’t have enough cash, Sir, try the other branch.” That was the answer. He went; and had to pay N500 for parking.
Still, no luck. At the third branch, after paying another parking fee of N500, he got N20,000 dirty notes. On his way home, after three hours of frustration, he stopped at a P.O.S operator’s shop and collected N130,000 clean notes in less than ten minutes.
He has also discovered another advantage in patronising the P.O.S operator very close to his house. The place closes at 10pm; instead of 4pm for the bank far away. Banks now suffer the disadvantages of convenience, real transaction costs, and speed, as well as certainty, of service delivery. His small business generates cash; which hitherto was sent to his bank before the close of day. Cash flow to his bank has stopped and he has vowed never again to go to a bank for cash collection. Multiply my friend by 30 million and you will have an idea of the magnitude of the problem. Any experienced Marketing/Sales Manager can easily recognise that Nigerian banks no longer care about customer satisfaction – with respect to small depositors holding cash. P.O.S operators have stepped into the gap created by the banks now needing better marketing effort to help solve the problem.
FG, CBN AND THE BANKS CREATED THE PROBLEMS
“We cannot solve our problems with the same level of thinking that created them.” Albert Einstein, 1879-1955
Yemi Cardoso, the current Governor, is not responsible for the present situation- not only with regard to cash scarcity, but, with lack of control in fiscal policy.
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For over ten years, the Federal Government has been accumulating huge deficits, fuelling inflation and increasing the need for people to hold more cash than ever before. Printing more currency became a habit; which is still driving the 2024 and 2025 budgets of governments. As long as deficit spending, borrow-and-spend remain the bedrock of fiscal policy, the CBN battles inflation in vain.
Buhari and Emefiele blundered with the conception and execution of the currency change initiated in 2022-3. From evidence at our disposal now, it would appear as if politics and a personal agenda to get rich quickly drove the measure and not economics. Otherwise, it is difficult to understand why all the currency had to be changed at once. That was not a mistake. It was deliberate sabotage; which destroyed trust which is the basis of banking.
It is axiomatic that it is easier to destroy than to build trust in any situation political, social, family and economic. And, once destroyed, re-building becomes a much tougher assignment. When Nigerians rushed to deposit their cash in 2023; and could not retrieve, as and when needed, the CBN destroyed trust for decades to come. Conventional approaches to banking will not solve the problem.
Finally, there appears to be deliberate sabotage again. This will require strategy, surprise and speed – not only by the FG, and CBN; but by DSS as well.
Follow me on Facebook @ J Israel Biola.
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