Nigeria’s cash crisis driving digital transactions to all-time high

Nigeria is reeling from a cash crisis, which the central bank said stemmed from a move to remove excess cash from circulation to shift to a cashless economy.

The apex bank’s drive to redesign the high-denomination currency and reduce the money supply in Africa’s biggest economy helped remove N2.3 trillion from circulation between October 2022 and February 2023, according to the data. Central Bank of Nigeria (CBN).

In a report published in March, the Lagos-based Center for the Promotion of Private Enterprise estimated that the economy lost about N20 trillion to the crisis, one of the sore points of the naira policy.

“Millions of citizens have fallen into poverty and destitution as a result of the disruptions and tribulations caused by the currency redesign policy, especially as more than 70 percent of money has been removed from the economy,” said Muda Yusuf, director general of the organization. .

The shortage is driving many Nigerians to sign up for digital and e-banking services, just as the pandemic lockdown sparked a boom in e-banking adoption in 2020. This also creates a moment of rapid progress and is moving away from a cash-dominated economy.

The demonetisation offer, analysts say, is politically motivated and has been linked to the government’s move to tame vote buying in general elections.

Mobile banking transactions accelerated to their highest level in the month, rising more than fivefold year-on-year to 183.7 million, Data from the Nigerian Interbank Settlement System (NIBSS). That compares to 108.1 million transactions reported in January.

NIBSS is owned by all authorized depository banks in Nigeria and the CBN.

Mobile banking transactions more than doubled between October, the first month the CBN announced its currency overhaul plan, and the end of February.

In value terms, mobile banking transactions expanded from N1.1 trillion to N2.6 trillion in one year.

The volume and value of transactions through point-of-sale (POS) terminals hit a peak in February, the month in which the number of POS terminals deployed across the country reached its highest level.

Alternative payment options

The cash crisis has also spurred activity on the platforms of many digital payment companies and banks that have sprung up across the country.

“Financial Inclusion catalyzed by Covid increased, ideally there was a learning curve for Nigerians to ensure they have a presence on a digital payment platform.” Babatunde Obrimahchief operating officer FinTech Association of Nigeriahe told PREMIUM TIMES.

“The financial crisis would once and for all confirm the need for everyone to register on a digital platform and increase financial inclusion in rural areas.”

Mr Obrimah said some members of his association will roll out biometric POS based in rural areas and markets to help deepen financial inclusion.

The rate of traffic on the platforms of organizations under the FinTech Association of Nigeria more than quadrupled between the beginning of the financial crisis and the third week of February.

Mr. Obrimah said it is time to start embracing cloud technology to expand and build capacity that will help fintechs handle rising transaction volumes seamlessly.

MTN payments unit, MoMo PSB, is recruiting 224,000 new agents across Nigeria to join the one million people already on its active merchant list, to take advantage of cash-strapped opportunities as well as deepen financial inclusion, Fitch Solutions said in a February article. . That was less than nine months ago The fintech company started working.

Digital banks took the top ten positions List of most downloaded financial apps in Nigeria On Google Play as of April 11, according to SimilarWeb, it indicates that neobanks are leading the charge for a cashless economy.

While OPay and PalmPay ranked highest, only seven commercial bank apps appeared in the top 50, with the highest ranking being Guaranty Trust Bank’s app, GWWorld.