Nigeria is staring at chaos as Automated Teller Machines, (ATMs) across the country run out of new notes, days before a deadline that will render the high-value currency illegal.
According to a fresh report by Bloomberg, hundreds of people were stranded at a popular electronics market in the heart of Lagos, Nigeria’s biggest city, Thursday night — victims of the chaotic rollout of a policy to redesign the naira. Residents are allowed to withdraw a maximum of 20,000 naira ($43) but many ATMs weren’t dispensing any cash.
The cash shortage is hitting commuters, parishioners tithing at churches, drivers waiting hours at gas stations, and merchants and customers across the $440 billion economy. It has also overwhelmed the digital payments system — as customers opt for online transfers — with transactions taking hours to complete, or failing outright.
At an FCMB Group Plc bank branch in the northern commercial hub of Kano, hundreds of people waited in line at one of the few ATMs offering new notes.
Bank agents — who essentially act as human ATMs across the country — have increased their commissions on cash withdrawals to 10% or 20%, due to the struggle to get cash from lenders.
President Muhammadu Buhari, on Friday, acknowledged the “hardship” facing Nigerians and promised to resolve the cash shortage within a week. He blamed the “selfishness and greed” of the country’s banks for the problem, according to an emailed statement.
Central Bank of Nigeria Governor, Godwin Emefiele has defended his decision to replace 2.7 trillion naira ($5.85 billion) of cash outside the banking system, even as scenes of chaos have unfolded all over the nation, where the vast majority of transactions are still done in cash.
The unfolding crisis has turned political, ahead of presidential elections in three weeks, with a leading candidate suggesting that the naira redesign plan was a plot to sabotage or delay the polls. Last week, Emefiele pushed back the initial Jan. 31 deadline after a meeting with Buhari.
The government has defended the move. Finance Minister Zainab Ahmed on Thursday called the initiative a “success”, because it had brought trillions of naira of cash into the banking system, which the administration believes will boost digital payments, cut inflation and curb corruption. “The only sore point is the pain it has caused to citizens”, she said.
Unless the government moves quickly to alleviate the pain, it could hurt the ruling All Progressives Congress’ chances in this month’s election and “potentially trigger social unrest,” said Cheta Nwanze, a lead partner with SBM Intelligence. Small protests had begun to pop in some cities on Friday, according to local media.
The crisis is also likely to slow growth in the first quarter, Daniel Sodimu, sub-Saharan Africa Analyst at FrontierView said. “It will disproportionately impact the informal sector, where cash is king,” he said, adding that lower-income people will be hit the hardest.
Just 35% of Nilower-income and 47% of men have a bank account, according to the country’s statistics agency. Most of those without an account live in rural areas where there are few bank branches. Roughly two-thirds of Nigerians save cash at home, according to the statistics agency.
The CBN has said it is deploying an additional 30,000 agents to swap the new currency with the old notes, especially in rural areas. The institution will continue to collect the old notes at its branches nationwide even after they cease to be legal tender from Feb. 10.
But for now, Nigeria’s poorest and those trading in its vast informal sector are the ones most likely to suffer, with ripple effects throughout the economy, said Mosope Arubayi, an economist.
