By Victor Ogiemwonyi
Recent headlines about the non availability of cash in Automated Teller Machines, banking halls, and the near outsourcing of the cash management function of banks to Point of Sales agents has become a source of concern to customers. Indeed, it has successfully created a crisis of confidence in our banking system.
The decision of the Central Bank of Nigeria (CBN) to sanction several banks in the past week for leaving their ATMs empty underlines this concern.
Since the fiasco of changing colours of the Naira and the attempt by the last CBN Administration to drastically reduce the large volume of cash outside the banking system backfired, serious cash shortages have become the norm rather than the exception.
The PoS innovation has, no doubt, helped to make banking services available almost everywhere, especially many remote communities that were previously not properly served and therefore excluded. This innovation, however, seem to have brought with it some variants of bad behaviour in our banking system. The prominent place PoS operations have now taken, although good, in many cases now also come with some unintended consequences, mostly in the extremes.
The convenience of providing cash services for a small fee, has suddenly, become a big business of selling customers their own money at exorbitant prices.
You can trust Nigerians to take advantage of opportunities when they present themselves, especially when such fields are unregulated. The last cash shortage, that caused protests and fights in banking halls across the nation showed that when people need cash to meet immediate needs are often willing to pay any desperate charge.
There are allegations that some bank branches and cash management Centres, are exploiting this opportunity, preferring to reserve all their cash for PoS agents while also creating scarcity at ATMs thereby forcing desperate members of the public who need cash to patronise PoS Operators who always have cash to sell. There are also allegations that most of the PoS agencies are owned by bankers or working with PoS Operators, making access to cash easier and profiting from the operations. The profit making opportunity for these set of bankers is so lucrative, makes more sense, and serves as an incentive too attractive to ignore. Some of these bankers who sell cash for up to 1% of what they offer to the PoS operators, most times, earning more than their salaries.
Unless a deliberate attempt is made to normalise the situation the negatives coming out of the present situation portends ominous consequences for the future. CBN sanction and naming and shaming those caught, is a step in the right direction. More needs to be done, to curb this ugly trend.
Until the recent CBN intervention it was becoming normal for ATMs or even banking halls, such as customers are told there is no cash. Customers are then directed to go to a nearby POS Operator to buy cash.
I heard two stories recently that seem to put this in perspective.
A friend who was visiting from Washington DC in the USA told me of an incident in Warri, Delta State where he was visiting and needed cash. He had gone into one of the banks named and sanctioned by the CBN recently to withdraw cash from their ATM and there was no cash. Since he was in front of the bank he walked into the banking hall. He was shocked at seeing how casually the cashier told him there was no cash and directed him to a PoS nearby.
He was even more flabbergasted when two more customers walked in and was also causally told there was no cash and they both walked away without any protest. He could not understand how Nigerians adapt to abnormal situations so easily.
According to him, if that was to happen in a US bank, there will be a run on the bank and even as several law suits will automatically emerge.
The second story was even more pathetic. One of my coordinators, in a social engineering experiment I am engaged in with some of my friends in micro credits had money paid into her account by other participants and she needed to cash the money and then pay into the main account for disbursement to new beneficiaries. She was unable to withdraw the cash for two days. It took her all of the period of repeated visits to the bank to get N350,000. To avoid a return visit the following day she asked that the balance be transferred to an account in another bank, only to be greeted by another surprise. She was told the bank does not transfer amounts lower than N100,000.
This in a first generation bank, one of those sanctioned by the CBN. This was a frustrating situation for her and I was taken aback. It is now obvious that this will discourage petty traders like this lady from keeping money in banks. Because she is not always sure she can access her money when she needs it. Just imagine the frustration she faced, and the Administrative obstacles they forced on her to keep her from getting her money.
I am also now hearing, that the expanding cash shortages is also the result of traders in our various markets refusing to take their daily sales to banks.
The traditional replenishment of cash sold going back to bank vaults at the end of each day is now increasingly becoming a thing of the past because traders now have a better deal from PoS agents who come to take the cash off the traders and immediately do a deposit of their money into an account of the fintechs, particularly Opay or Moniepoint Micro Finance Bank. The convenience of not leaving their shops to rush to the Banks every evening , at the close of a Trading day, with instant deposit of their cash, reflected in their Fintech banking Accounts, makes this, a suitable alternative.
These emerging kinks in our banking system has long-term implications that undermines confidence in our banking system. The persistent large cash outside the banking system is one. The ability to control, that large cash outside the Banking system, is something that should worry us.
The disruption described above is even made worse by another big user of cash. There is also the cases of politicians who use cash to buy their elections and collect their bribes in cash. Some time ago a politician told me they have now learnt to gradually collect cash into containers in their houses to avoid the need for large cash withdrawals from banks near elections and be sabotaged.
Imagine 469 members of our National Assembly hoarding N50m each in their houses for elections. Add the governors with even bigger appetite for cash, and then you start to see why the CBN insists that a chunk of cash available to the economy is outside of the banking system.
All these abnormal tendencies work to make the economy inefficient, we must see them as real problems that need solutions. The CBN can take the funding of POS Operators, from Banks and do it directly in a systematic way, that makes cash available to them in a controlled fashion. Once there is a consistent flow of cash from the CBN, easing out the Bankers, who are culprits in this debacle, this will remove the friction from our cash system and normality will return.
The problem with hoarding cash, by politicians, can be solved when the EFCC decides to focus on doing serious work on corruption, instead of running after young people with laptops, or becoming Debt Collectors.
The EFCC needs to take advantage of technology that exists today. Integrate their Agents into public service places, equip them with hidden cameras and in the case of Banks, follow the money. There is virtually no crime that involves money today, that cannot be solved. Just follow the money from the source. The evidential quality of these methods also recommends them.
There are no problems that cannot be solved if the willingness and the required focus, is on it.
Ogiemwonyi is a retired Investment Banker and writes from Ikoyi, Lagos.