The scarcity is driving Nigerians in droves to sign up for digital and electronic banking services
Nigeria is riding on the back of a cash crunch, which the central bank said resulted from the move to mop up excess cash from circulation, to hasten its shift to a cashless economy.
The apex bank's push to redesign high-denomination currency in Africa's largest economy and curb money supply helped remove N2.3 trillion from circulation between October 2022 and February 2023, according to figures from the Central Bank of Nigeria (CBN).
In a report issued in March, Lagos-based Centre for the Promotion of Private Enterprise estimated the economy lost around N20 trillion to the crisis, one of the naira policy's several pain points.
"Millions of citizens have slipped into penury and destitution as a result of the disruptions and tribulations perpetrated by the currency redesign policy, especially the mopping up of over 70 per cent of cash in the economy," said Muda Yusuf, the CEO of the organisation.
The scarcity is driving Nigerians in droves to sign up for digital and electronic banking services, the same way pandemic lockdowns in 2020 sparked a boom in e-banking adoption. This is also causing a moment of rapid progress and unwieldy shift away from a cash-dominated economy.
The demonetisation bid, analysts say, is politically motivated, and has been linked to the government's move to tame vote buying during the general elections.
Mobile banking transactions accelerated to their peak level ever that month, jumping year on year by more than five times to 183.7 million, according to data from the Nigerian Interbank Settlement System (NIBSS). That compares to the 108.1 million transactions reported for January.
NIBSS is owned by all licensed deposit money banks in Nigeria and the CBN.
Mobile banking transactions more than doubled between October, the month the CBN first announced its currency redesign plan, and the end of February.
In value terms, mobile banking transactions expanded from N1.1 trillion to N2.6 trillion in in one year.
Both the volume and value of transactions conducted via point of sale (POS) terminals touched their peak in February, just as the number of POS terminals deployed across the country was at its record high during the month.
Alternative Payment Options
The cash crunch has also spurred activities across the platforms of many payments companies and digital banks springing up all over the country.
"There was an increase in Financial Inclusion catalysed by Covid which, ideally should have been a learning curve for Nigerians to ensure they have presence on a digital payment platform," Babatunde Obrimah, the chief operating officer of FinTech Association of Nigeria, told PREMIUM TIMES.
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"The cash crisis would definitely reaffirm the need for everyone to register on a digital platform and increase financial inclusion in the rural areas."
Mr Obrimah said some members of his association are set to roll out biometric-based POS in rural areas and markets to help deepen financial inclusion.
The traffic rate on the platforms of organisations under FinTech Association of Nigeria soared more than fourfold between the start of the cash crunch and the third week of February.
Mr Obrimah said it is high time to start embracing cloud technology in order to expand and build capacity that will help fintechs handle bulge in transaction volumes seamlessly.
MTN payments unit, MoMo PSB, is recruiting 224,000 new agents across Nigeria to join the one million people already on its active merchant list in order to leverage opportunities opened up by the cash scarcity and also deepen financial inclusion, Fitch Solutions said in a February article. That was less than nine months after the fintech firm began operation.
Digital banks took the top ten spots on the list of Nigeria's most downloaded finance apps on Google Play as of 11 April, according to SimilarWeb, an indication that neobanks are leading the charge in the march towards a cashless economy.
While OPay and PalmPay ranked the highest, only seven commercial bank apps featured among the top 50, the highest ranked being Guaranty Trust Bank's app, GTWorld.
