The Central Bank of Nigeria (CBN) recently came down hard on commercial banks over cash scarcity, slamming nine financial institutions with fines totaling N1.35 billion for failing to make cash available at Automated Teller Machines (ATMs) during the festive season.
The affected banks, Fidelity Bank Plc, First Bank Plc, Keystone Bank Plc, Union Bank Plc, Globus Bank Plc, Providus Bank Plc, Zenith Bank Plc, United Bank for Africa Plc, and Sterling Bank Plc, were each fined N150 million for non-compliance with cash distribution guidelines.
This latest move by the CBN signals a zero-tolerance stance on cash shortages, especially during periods of high demand. However, the big question remains: Will fines alone solve Nigeria’s recurring cash scarcity problem?
According to the CBN, the sanctions were necessary to ensure banks adhere to cash distribution policies. Acting director of corporate communications, Mrs. Hakama Sidi Ali, while emphasising that ensuring seamless cash flow is crucial to maintaining public trust and economic stability said,“The CBN will not hesitate to impose further sanctions on any institution found violating its cash circulation guidelines.”
To curb illegal cash hoarding and rationing, the CBN had also intensified monitoring efforts at both bank branches and Point-of-Sale (PoS) operators. The bank warned that it was working closely with security agencies to crack down on illicit cash sales and ensure compliance with the daily withdrawal limit of N1.2 million for PoS operators. CBN governor, Olayemi Cardoso, had last year reiterated the bank’s commitment to maintaining a robust cash buffer to meet Nigerians’ needs.
Despite persistent complaints of cash shortages, official CBN data showed that currency outside the banking system has surged by 41.79 per cent between January and November 2024. The data showed that the total currency in circulation stood at N4.878 trillion in November up from N3.65 trillion in January.
Currency outside banks rose to N4.652 trillion in November compared to N3.281 trillion in January. This means that while cash is scarce at ATMs and bank counters, huge sums of money are circulating outside the formal banking sector, raising concerns about hoarding and the role of informal cash markets.
Many Nigerians, unable to access cash from banks, have resorted to PoS operators, who often charge exorbitant fees. This situation has fueled speculations that banks might be diverting cash to third-party operators, a claim the CBN has vowed to investigate.
Beyond fines, the CBN has also announced stricter penalties for banks involved in cash diversion. A circular issued on November 13, 2024, warned that any bank linked to cash seized from hawkers will face a 10 per cent fine on the total withdrawn amount, while a subsequent violations will attract an additional five per cent fine.
As part of its clampdown, the CBN has also moved to regulate PoS operators, who have become the primary cash distributors in many parts of Nigeria. A new directive issued to Deposit Money Banks (DMBs), Microfinance Banks, Mobile Money Operators, and Super-Agents imposes a N1.2 million daily cash-out limit per agent.
The policy is designed to push more Nigerians towards electronic transactions and prevent abuse of cash disbursement channels. Banks have also been instructed to ensure that PoS terminals are linked to the Nigeria Inter-Bank Settlement System (NIBSS) for better monitoring.
While electronic transactions and PoS use has been on the rise, challenges remain
Can These Measures Work?
The CBN’s penalties may deter banks from hoarding, but monitoring enforcement remains a challenge. Despite previous directives, cash scarcity continue to persist, an indication that banks may find ways to bypass regulations. Thus the success of the policy will depend on how strictly CBN enforces compliance.
However, excess availability of cash may increase dependence cash. While Nigeria remains a heavily cash-reliant economy, excess availability of cash may cut back the progress made in digital payments.
In the midst of the cash scarcity last year, instant electronic transactions consummated in the country hit an all time high of N1.078 quadrillion. According to data just released by the Nigeira Inter Bank Settlement System (NIBSS) the value of NIBSS Instant Payment (NIP) in 2024 rose by 79.6 per cent compared to N600.349 trillion that was recorded in 2023.
The volume of transactions also increased in 2024 compared to what was recorded in 2023, as the volume of transactions in 2024 stood at 11.27 billion as against 9.669 billion that was recorded in 2023. The highest transaction volume was recorded in May last year while the highest transaction value was recorded in December.
Similarly, Point of Sale (PoS) transactions had an uptick last year with value of transaction hitting a record N18.146 trillion as against N10.736 trillion recorded in 2023. The volume of the transactions also rose from 1.386 billion in 2023 to 1.454 billion in 2024.
PoS transactions had seen a particularly high volume and value in November and December last year as bank customers had to resort to banking agents to access cash amidst a cash scarcity. Also, the rise in the use of PoS is not unconnected to the service disruptions that many banks encountered last year.
