It’s Sunday and 24-year-old Esther is standing in line at one of Lagos’s most popular shops when an announcement comes over the loudspeakers. “We’re sorry, but we only accept cash. Our servers are down and we cannot accept transfers.” Esther drops the bread she was holding and leaves the store. The announcement causes pandemonium. On her way out, she overhears security telling people they can’t get in unless they have cash. People grumble. Many of them have not had access to physical naira notes for weeks. Like Esther, most people leave disappointed.
Cash is an essential part of daily life for many Nigerians. According to the Global Findex database from the World Bank, it is the most preferred means of payment for Nigerians. It’s how they pay for transportation, food and other basic necessities. However, after the Central Bank of Nigeria issued a dirty Attempting to change the legal tender last November has awakened many Nigerians to the shocking reality that they cannot easily access cash. They face long queues at the few banks that have cash because they can no longer withdraw money at the counter or ATMs. In recent weeks, amid several subsequent changes by the government over which denominations of the currency should be considered legal tender, Nigerians have had to adjust to the new realities of cash shortages in different ways, including how they spend their money.
Some people have had to reduce their spending because of the high cost of acquiring cash. “I had to cut back on some things,” says Esther, who earns $80,000 while working and living in Lagos, Nigeria. “First, I have to pay exorbitant prices to get the money. That alone reduces the amount of money I can spend,” she adds. For low-income households, this can be particularly challenging, as they may already be living paycheck to paycheck. Only one in three Nigerians live above it multidimensional poverty. These times have also led people like Ms. Nurudeen, a 37-year-old teacher, to go into debt. “It’s easy to say you cut back on some things. But the prices of things in the market keep rising. At the end of the day, I spend more than I normally would, trying to keep the bills on the same income,” she says. As of 2015, Lagos, Nigeria was among the top five sub-Saharan African cities with the largest market size in terms of consumer spending. And was projected by Euro monitor to remain the largest consumer market in 2030.
Many Nigerians have resorted to using digital payment options, such as mobile money, online money transfers, and credit and debit cards, to transact. However, these options are not accessible to everyone and technical glitches make it difficult to access financial services. And people are unable to make necessary transactions. “It would be easier if I could make transfers anywhere at any time. But the banking apps have not been effective. I have often felt embarrassed and stranded when I needed something quickly,” says Esther.
Meanwhile, the lack of cash is forcing some people to save more money as they try to prepare for an uncertain future. Boluwatife, 24, has more money than usual in her account halfway through the month, but she’s not ecstatic about it. “It’s not voluntary,” she says. “Some days I skip meals because I can’t get cash or use digital payment to buy food. However, somehow it helps with my diet plans.
Unfortunately, a ripple effect of these consumer changes is reaching businesses and small retailers. Food vendors and small retailers that rely on cash transactions are finding it hard to sell, while those who have adapted to accepting digital payments remain skeptical due to bank outages. “Sometimes people make a transfer, but the money is not in their account until the next day. Sometimes the money doesn’t come through at all. Some people even take advantage of this to trick you,” says Samuel K, a taxi driver. Such discrepancies can lead to a drop in revenue and potential business closures. According to news reports, Nigerian Breweries experienced its worst February in 15 years. The company’s sales fell by 15.6% compared to last year, all because of the cash flow chaos in the Nigerian economy. It has been difficult for people to buy stuff, and there is even a shortage of raw materials for production due to a lack of foreign exchange.
As Nigerians adjust to the new realities of limited cash, businesses and policymakers will need to adapt to ensure the economy remains stable. One possible solution is to invest more in digital payment infrastructure and improve the reliability of these systems. This will not only help consumers, but also businesses that are struggling to sell. Another solution is to increase access to credit for small and medium-sized enterprises, which have been hit particularly hard by the cash shortage.