Cash hoarding is happening in the Nigerian banking system. The Central Bank of Nigeria (CBN) is denying this, but realities are contradicting the apex bank’s position.

Several senior bank officials contacted by Economy Post said that they had been directed by the CBN to place restrictions on customers’ cash access.

Several banks visited across Nigeria placed limits on withdrawals at automated teller machines (ATMs) and bank counters.

At Phase IV, Kubwa, Abuja, ATMs of Guaranty Trust Bank (GTB), United Bank for Africa (UBA), Access Bank, Fidelity Bank and First City Monument Bank (FCMB) did not allow customers to withdraw above N20,000 on November 17. Non-customers could withdraw only N10,000.

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At Fidelity Bank, Kubwa, Abuja, the ATM did not work on Friday between 8am and 12pm of November 17.

Cash withdrawals at a bank in Abuja

At GTB located at East West Road, Rumokoro, Rivers State, ATMs restricted withdrawals to N10,000 for non-bank customers and N20,000 for customers on Wednesday, November 15.

The situation was worse at Zenith Bank, First Bank of Nigeria, Fidelity Bank and Access Bank on the same East West Road axis, where no ATM machine dispensed cash on November 15 from 1pm to midnight when Economy Post visited.

At Access Bank, Rumodomaya, Port Harcourt, near Obio-Akpor Local Government Area Council, the ATM did not function in the afternoon and evening of November 15. Bank customers who wanted to visit the counters were asked to wait outside the banking hall until those already inside concluded their transactions.

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“I am surprised that this is happening all over again after our experience in the first quarter of this year,” one customer who wanted to use an ATM facility at GTB, East West Road, Mrs Adenike Adeniran, said.

“This is already causing panic in my neighbourhood. I just hope that this is not a reflection of something bigger,” she added.

A customer who withdrew N20,000 at GTB, Kubwa, was told he had exceeded the day’s limit

The situation is the same in Lagos, where some ATM machines at Airport Road, Oshodi, Apapa and other parts of the state did not dispense more than N20,000.

At 7 and 8 Junction, Zenith Bank ATM allowed customers to withdraw only N20,000 but non-customers, N10,000 on November 14. Across Lagos, the situation was the same for Eco Bank, Unity Bank, Stanbic IBTC, among others.

“This is strange. I suspect that this is another plan to limit cash withdrawal from us. I hope they can allow us do business without disruption,” said a Lagos small business operator in Lagos State, Mr Nicholas Okoye.

“We do business with cash and any attempt to cut withdrawals will affect our revenue and profit by at least 40 percent,” he noted.

Economy Post found that customers were limited to withdraw a maximum of N100,000 at bank counters. This was observed in all the banks visited.

The situation at ATMs are forcing bank customers to visit counters in search of bigger cash, resulting in high number of people waiting on queues at banking halls.

POS agents not affected

The situation is, however, different for point-of-sale (POS) agents across the country.

A POS agent in Oshodi, Lagos, said despite limits to withdrawals for account holders, his business account had no restriction.

“For us, there is no limit to withdrawal. I can withdrawal any amount from it,” the POS agent, who craved anonymity, said.

Another POS agent at Jikwoyi, Abuja, Ms Dorathy Ikebie, also admitted that there were no restrictions on her business accounts in various deposit money banks, stressing that she was allowed to withdraw any amount from them at any time.

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Economy Post found that POS agents’ charges did not change. In Lagos, Abuja, Kano and Port Harcourt, most of the POS agents charged N100 for N5,000, N200 for N10,000, and N400 for N20,000 on Wednesday to Friday.

Emefiele’s image looms large

Economists believe that the CBN may be trying to implement the cash restriction initiated by the embattled former CBN Governor, Mr Godwin Emefiele.

In October 2022, Emefiele had announced plans to redesign and circulate N200, N500 and N1000 notes from December 15, 2022. The CBN said the naira redesign policy would “check counterfeiting, strengthen the economy, reduce expenditure on cash management, promote financial inclusion, and enhance CBN’s visibility of money supply.”

On December 6, the CBN directed that maximum over-the-counter withdrawal from individuals would be N100,000, and N500,000 for corporate organisations, from January 9, 2023.

Emefiele was, however, pressured to review the withdrawal limits upwards. On December 22, a circular by the CBN’s Director of Banking Supervision, Mr Haruna Mustafa, said individuals could withdraw N500,000 while corporate organisations would be able to take N5 million from their bank accounts.

The entire exercise was, nonetheless, nullified by the Supreme Court of Nigeria on March 3, ruling that it was a unilateral decision as there was no consultation with “state government through the relevant bodies such as the National Council of States and the National Economic Council before embarking on such a policy.”

Analysts say it now looks like déjà vu for Africa’s most populous nation as customers cannot withdraw more than N20,000 at ATMs and N100,000 at various banks’ counters.

“It is not exactly the same situation, but it is already taking the same shape,” said an Abuja-based economist, Dr Larry Udogie.

“The problem is that nobody is providing clarity. The CBN denies that there is cash scarcity. The banks themselves deny scarcity in order not to be blamed. However, the reality is that there is cash restriction in banks at the moment,” Dr Udogie said.

No excess cash in Nigeria

There is no excess cash in Nigeria. Research shows that Nigeria’s cash to gross domestic product (GDP) is less than one percent (0.007 percent) . Total cash in circulation in Nigeria is N2.6 trillion, while the GDP is N440 billion (N352 trillion).

Source: Central banks, Statista

Other countries’ cash to GDP are much higher. Cash to GDP in the European Union is 9.27 percent, while that of South Africa is 5.3 percent. In India, it is 14 percent. In the United Kingdom and the United States, it is 3.14 percent and 9.85 percent respectively. Cash to GDP in Vietnam is highest at 138 percent.

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“There is no excess cash in Nigeria. If the CBN is withholding cash on that basis, that will be really wrong, especially for a new CBN governor who came with a reformist mindset. Total cash in circulation is N2.6 trillion, and it is even the least you can find,” Chief Executive Officer of Centre for the Promotion of Private Enterprise, Dr Muda Yusuf, told Economy Post.

“Total money supply in the Nigerian economy is N51 trillion while cash component of money is just N3 trillion. Cash outside the bank is just N2.8 trillion, just about 5 percent of that. We are doing quite well on e-payment, which is a testament that we are cashless,” Dr Yusuf noted.

He said there might have been a disruption in cash supply or deliberate withholding of cash by the CBN.

CBN says no cash scarcity

The CBN, in response, said there were no cash shortages in Nigeria.

In a statement signed by Director of Corporate Communications, Dr Isa AbdulMumin, and forwarded to Economy Post, the apex bank said there was sufficient stock of currency in its tills.

“While we note the concerns of Nigerians on the availability of cash for financial transactions, we wish to assure the public that there is sufficient stock of currency notes for economic activities in the country.

“The branches of the CBN across the country are also working to ensure the seamless
circulation of cash in their respective states of operation. Members of the public are, therefore, advised to guard against panic withdrawals as there is sufficient stock to facilitate economic activities. Nigerians are also advised to embrace alternative modes of
payment, which would reduce pressure on using physical cash,” Dr AbdulMumin further said.

He noted that the CBN had extended the legal tender status deadline of the old design of N200, N500 and N1,000 denominations ad infinitum, in line with international best practices and to forestall a repeat of earlier experiences.

“Thus, all banknotes issued by the Central Bank of Nigeria (CBN), in accordance with
Section 20(5) of the CBN Act 2007, will continue to remain legal tender, ad infinitum,
even beyond the initial December 31, 2023, deadline. The Central Bank of Nigeria is
working with the relevant authorities to vacate the subsisting court ruling on the same
subject.

“Accordingly, all CBN branches across the country will continue to issue and accept
all denominations of Nigerian banknotes, old and redesigned, to and from deposit
money banks (DMBs). The general public is enjoined to continue to accept all Naira banknotes (old or redesigned) for day-to-day transactions and handle these banknotes with utmost care, to safeguard and protect the lifecycle of the banknotes. Also, the general public is encouraged to embrace alternative modes of payment, e-channels, for
day-to-day transactions.”

However, Nigerians are wondering why there are still limitations on cash withdrawals in deposit money banks.