Cash Scarcity in Nigerian Banks and the Rise of POS Operators
Having waited in the banking hall for over an hour, the middle-aged man was informed there wasn’t enough cash to meet his withdrawal request. His frustration grew as he struggled to understand why a bank lacked sufficient funds for its customers. Despite his attempts to create a scene, the cashier remained firm, stating, “We don’t have cash.”
This scenario is linked to the Central Bank of Nigeria’s (CBN) efforts to control the money supply, ensuring that most of the circulating cash remains within the banking system rather than in public hands.
The Origin of the Cashless Policy
In 2012, the CBN, under Sanusi Lamido, launched a cashless policy aimed at reducing cash dependency and financial crime. This initiative promoted digital financial services, leading to the widespread use of USSD codes and banking apps.
To further encourage cashless transactions, in January 2023, the CBN reduced ATM withdrawal limits to ₦20,000 daily and ₦100,000 weekly. However, following public backlash, the limits were adjusted to ₦100,000 daily, ₦500,000 weekly for individuals, and ₦5 million for businesses.
Despite these changes, the percentage of cash in public circulation remains high. As of November 2023, CBN data indicated that about 92% of the money in circulation was outside the banking system.
To reinforce the cashless policy, the CBN has reportedly reduced cash disbursements to bank branches, resulting in cash scarcity and driving demand for mobile money agents, commonly known as POS operators.
How POS Agents Source Cash Amid Scarcity
With cash becoming scarce in banks, POS operators have developed strategies to maintain their businesses. Since banks limit withdrawals to ₦100,000, agents like Taofeek Olayemi source cash from fuel stations and traders to meet their customers’ needs. Olayemi, who has been in the business for seven years, often collects up to ₦5 million in cash from stores and markets, transferring the equivalent amount to the sellers’ bank accounts.
This approach has allowed Olayemi to keep his four POS outlets operational since February 2023, when the CBN’s naira redesign caused a severe cash shortage.
Similarly, Gbenga Dada, another POS operator in Lagos, sources cash from market women due to insufficient withdrawals from his nine bank accounts to sustain his business.
This arrangement is mutually beneficial, as traders avoid the inconvenience of banking by giving their cash to trusted POS agents, who, in turn, ensure they always have cash on hand.
Shift from Banks and ATMs to POS Agents
Nigerians increasingly rely on POS agents for cash-in and cash-out services, not just due to cash scarcity in banks and ATMs. POS agents play a crucial role in financial inclusion across Nigeria. With 1.5 million banking agents nationwide, OPay holds the largest market share at 37.17%.
According to Shakirudeen Taiwo, a senior economist at the Nigerian Economic Summit Group (NESG), the informal sector’s reliance on POS agents is advantageous. He notes that the distance between people’s homes and banks is a significant factor in this shift. For instance, the stretch from Trade Fair to LASU along the Lagos Badagry expressway, approximately five kilometers, lacks a single bank. For informal traders, this makes POS agents a more convenient and accessible option, despite the additional costs.
