Naira redesign: Businesses now rejecting card payment, insisting on cash to sell to POS agents
As Nigerians are struggling to get cash which has become scarce as a result of the Central Bank of Nigeria’s policy to mop up extra cash from circulation, businesses are beginning to reject card transactions and bank transfers as means of financial exchange, thereby making the situation worse as the deadline for swapping of old notes ends on Friday, February 10, 2023.
The CBN had initially set January 31 as the deadline for the swap of the old N200, N500 and N1,000 notes. Many Nigerians became jittery and rushed to the bank to deposit their old notes, hoping to withdraw new ones from the bank. Unfortunately, the CBN reportedly released about N300 billion of the new notes into circulation, a far cry from the N1.4 trillion of the old notes it claimed Nigerians deposited since launching the redesigned Naira notes in December 2022.
Despite the extension of the deadline for the swap of naira notes by 10 days, it has done little to stem the long queues that build up at ATM terminals daily across the nation. The heated atmosphere has resulted in attacks against banks and their workers across the country.
To mitigate the problem caused by the scarcity of cash, many Nigerians turned to alternative banking channels as encouraged by the CBN by making payments through USSD, mobile banking apps, and POS. However, these alternatives are now being rejected by business owners who now insist on cash payment.
Findings by Neusroom revealed that due to the inability of mobile money operators also known as POS agents to get enough cash from banks, they have turned to cash-centric and high-cash businesses to meet their demand. These businesses ‘sell’ cash to POS agents who have also now increased the percentage of their charges.
Temidayo Balogun, a PoS agent based in Lagos told Neusroom that the search for cash has forced mobile money agents to turn to market traders to lobby for cash in order to meet the growing demands of customers. “They (market traders) charge us as high as ₦6,000 naira to get ₦100,000 cash from them, that’s why PoS charges also increased by 10% on any amount.”
A Neusroom correspondent who visited some filling stations in Lagos also found that at a filling station on College road in the Ogba area of Lagos, attendants refused to sell petrol to customers who offered to pay via mobile transfer or pay with their debit cards. Instead, they had a stand-by POS operator who provided cash to customers which they used to buy fuel. The same cash is then resold to the POS operator.
A banker told Neusroom that since the naira scarcity, there’s been a significant decline in the number of bulk deposits in banks, suggesting that businesses like filling stations are likely selling their cash proceeds to POS operators.
The same practice is spreading through markets in the country. Neusroom confirmed that instead of going to banks, POS operators besiege markets by ‘buying’ cash from market owners and also encourage them to insist on cash payments from their customers so as to drive their own sales. A bag seller in Lagos told Neusroom that when she called her wholesale supplier to find out if goods were available, she was told that she had to pay in cash and if she did not have, there was a POS operator ready to ‘sell’ to her at the market.
“I thought she was joking until I went to the market and she insisted that I withdraw from POS operators and pay her in cash. This is someone that has always rejected cash payments due to the risk. Now she has found an additional business by selling cash to POS people.”
The currency scarcity has created an illegal naira market where cash is being bought and sold. This black market currency exchange is similar to the illegal market created by the forex policy in the country. With two markets existing: the CBN rate and the black market rate, people are able to game the system by acquiring dollars at the official rate and selling to Bureau De Change operators.
Some Nigerians schooling abroad have also found a loophole in the double market which they are using to their advantage. They earn money in dollars or pounds abroad, sell at the black-market rate to those in Nigeria and use the naira to apply for student forex to pay school fees through a Nigerian bank at the CBN rate. Some go as far as to overpay the Nigerian bank in Naira and get the difference from their school in the country’s currency before selling at the black market rate in Nigeria.
The CBN governor, Godwin Emefiele, has insisted that there would be no further extension of the deadline. The Supreme Court however granted an interim injunction restraining the federal government, CBN, and commercial banks from implementing the February 10, deadline for the old notes being legal tender.
The court asked them not to continue with the deadline pending the determination of a notice on notice in respect of the issue on February 15.
