Banks Blame Zero Deposit For Cash Crunch

By Rasaq Adebayo

It seemed there was going to be a respite after  the Apex bank governor, Godwin Emefiele ordered that the commercial banks should start giving out cash to their customers, however, as at press time, customers .were still waiting for their money at the banks.

Following the threat by the Nigeria Labour Congress (NLC) to go on strike if the Central Bank of Nigeria (CBN) refused to release cash into circulation, the CBN governor, Godwin Emefiele had directed the commercial banks across the country to dish out both old and new currencies to their customers.

This was done to avert the strike threat and possible grounding of the economy. However, the hardship has continued unabated.

Though it seems getting eased gradually, the system is still tough as people still face hardship in getting cash for daily transactions. The banks do not have enough cash to give out and the Apex bank is not printing new notes, ECHONEWS gathered.

There are long queues at the banks while Automated Teller Machines (ATM) centres across Lagos State are still flooded with crowds pushing one another for a chance to withdraw cash from the machines.

Despite the struggle, cash withdrawal from ATMs has been limited to  N10,000 and N30,000 per day; the machines have been set so that a particular ATM card cannot withdraw more than once a day.

Our correspondents who visited  ATMs in Isolo, Oshodi, Abule-Egba, and Ikorodu could not withdraw more than N10,000, and none of the ATMs visited was dispensing the new notes.

The CB had said that withdrawal per individual per day from the counter should be pegged at N500,000 but this has not been so.

A tour across major banks in Lagos State by ECHON EWS indicated that people are still struggling for cash despite the directive and announcement by the Governor of the Central Bank of Nigeria (CBN) that commercial banks across the country should commence disbursing both old and new naira notes.

An investigation by ECHONEWS revealed that there is little cash in circulation as banks do not have enough cash to satisfy their customers’ needs yet.

Some customers who relayed their experiences to ECHONEWS complained that the banks were not putting enough cash in their ATMs hence, many customers could not get the cash daily from the ATMs.

It was gathered that commercial banks have access to limited cash far below what is needed to ameliorate the lingering crisis occasioned by cash scarcity.

A senior banker told ECHONEWS that it is difficult for banks to give 50 per cent of what their customers need in cash presently, saying more than 85 per cent of the cash withdrawn from circulation has not been returned while new notes are not printed.

The banker who prefers anonymity explained that people no longer deposit their money in the banks and when the banks give out the little in their vaults, the cash crisis still continues.

“There is no way the banks would not run into trouble and there is no way the crisis would be eased, customers are no longer depositing their cash, they only withdraw and the banks only trade with the little cash in circulation.

“The process is not sustainable, and I don’t see anything anybody will do to end the supply crisis until that process changes. If customers withdraw cash only to keep a substantial part of it and nobody returns what has been given out to banks as deposits, how much will CBN print to meet the cash needs of the industry?

“The banks don’t get the cash from Apex bank because a larger percentage of the cash withdrawn from the circulation is not returned while new notes are not printed.”

He said many regional or head offices of banks have had to depend solely on CBN in the past two weeks as they have exhausted the residual cash left in their vaults following January/February mop-up.

Despite the partial relief from ATMs, the Point of Service (POS) operators are still charging their customers high for withdrawing from them. Some still charge N1,500 on N5,000 withdrawn from them while some others charge N1,000, only very few of them now charge N1,000 on any N5,000 withdrawal.

Experts said the cash crisis may not be eased as soon as expected, noting that the Apex bank is insisting on implementing its cashless polish.

The CBN governor had urged Nigerians to brace up for a more aggressive cashless situation, suggesting that the country might not return to the pre-naira redesign cash level.

This seems to be so with the current data. For instance, currency in circulation (CIC) fell from N3.292 trillion at the end of last year to N982 billion at the close of February. That means, the value fell by 70 per cent in two months

However, the banks have not been able to cope with the cashless policy. This has compounded the crisis; online banking such as transfer and USSD (Unstructured Supplementary Service Data) code has been frustrating and affecting the economy.

Commenting on the impact of the current situation on the economy, the Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, said Nigeria’s economy cannot be operated without some percentage of cash in circulation, noting that the cash crunch has slowed down economic activities and taken a heavy toll on small businesses.

According to him, “one had expected that the situation will improve after the elections, but that has not happened. It has continued to slow down economic activities and it is taking a very heavy toll on small businesses, on those in the rural areas, and the agricultural sector.”

He noted that these are very huge and strategic constituents of the economy because of their contributions to job creation, economic inclusion, and their contributions to economic diversification.

He observed that the Nigerian economy has lost an estimated N20 trillion to prolonged cash scarcity.

He said the losses arose from the deceleration of economic activities, the crippling of trading activities, the stifling of the informal economy, the contraction in the agricultural sector, and the paralysis of the rural economy, including corresponding job losses in hundreds of thousands.

“So, it is a major issue and we thought that the CBN will relax these things now that the elections have come and gone because it appears the main agenda was not just to ensure that money is not used for the election,” he said.

Yusuf said whether that is the way to go is a different matter, but that the cost to the economy and the welfare of the people is enormous and it will drag down the gross domestic product (GDP), leading to the contraction of the economy as well as job losses.

He said the damage is far higher than whatever benefits people might want to ascribe to it, noting that the CBN cannot arbitrarily cut the amount of cash in the economy.

“It has to be based on clear economic principles and empirical study. You have to relate the amount of cash to the size of your economy as well as the total money supply. Those two variables are very important. That is the way to manage an economy.”

Meanwhile, the telecom operators who provide network services and USSD to the banks have claimed that the problem is not from them.

In a chat with ECHONEWS, the Chairman of the Association of Licenced Telecom Operators of Nigeria (ATCON), Mr. Gbenga Adebayo, said the telecom operators have not ceased their services to the banks.

He noted that the failure of services in the banking system is within the banking service and has nothing to do with the network service.

According to him, it is a result of congestion on the websites of commercial banks as many people now transit to online banking.

“Using the USSD code, you experience the same congestion. If you make a transfer, people don’t get credited until 24 hours after, and others and that has nothing to do with the USSD code.

“As service providers, we have enough capacity, we have provided for them and the NIMS are open, the NIMS are well running very well and with the current experience people are having we believe is due to congestion on the websites of the banks.

He emphasised that the ongoing banking challenge is unrelated to the network issue.

“It is nothing to do with the network at all, we have enough capacity, the networks are working and there is no congestion on our side. We believe we have reason to believe that the congestion is from the banks.

“Although the banks are owing us, we are still cooperating with them, we are supporting financial institutions to mitigate am the current problem people are experiencing.”

Stakeholders in the banking sector also confirmed congestion on the websites due to the enforcement of the cashless policy.

Since the introduction of the newly redesigned naira note and the withdrawal of the old N1,000, N500, and N200 notes, more people have moved to online banking.

This, according to them, has made the online banking ecosystem to be more congested, and may not abate sooner as many banks do not have the capacity for the number of customers who now move to online transactions.

Since the cash crisis started, financial technology (Fintech) has come to the aid of many account users.

Apart from expanding financial inclusion, fintech has been helpful in the implementation of the cashless policy.

Meanwhile, experts said the cash crisis may not ease soon as expected, urging the banks and fintechs to upgrade their online system for people to transact.

The Fintech Development Manager at Mastercard, Tolulope Adeyinka urged the banks to start investing in technology to expand their capacity to be able to cope with the cashless policy when it is fully implemented.

She said the fintech ecosystem will also need to be upgraded while the online payment banks also need to expand their capacities to accommodate the increasing number of customers.