A Follow-Up on CBN’s War on Cash
The Central Bank of Nigeria (CBN) has recently been the subject of heavy scrutiny following a few announcements regarding precipitous changes introduced to the financial mechanism of the nation. Three higher denomination notes have been replaced to flush out hoarded cash. Studies attested to 2.7 trillion of 3.2 trillion nairas being unbanked. Nation-wide demonetization efforts have been introduced to counter these adverse statistics.
The crisis was exacerbated by the CBN imposing stringent limitations on weekly cash withdrawal limits. As per the recent modifications, one can withdraw 100,00 nairas weekly, a drastic reduction from the usual 2.5 million naira limit. This, again, was an attempt to restrict cash usage and quell counterfeit or ransom payments.
CBN has been promoting its digital currency as an alternative to cash transactions and faced with the after-effects of demonetization, the nation is gradually resorting to the same.
An Overview of Nigeria’s Cash Scarcity
Demonetization has not treated Nigeria well, especially with it being a nation where cash is king. Agitated mobs queued outside ATMs and banks for hours, hoping to withdraw cash. Most had to return home empty-handed, deprived of cash to buy meals for their family. There have been reports of many stripping off their clothes as a protest against banks. A man was recorded climbing atop a service counter and stripping off his clothes as the staff failed to let him withdraw cash.
There have been continual riots and road blockages by the angry mob that waited for hours to withdraw physical cash. Some complained of being unable to withdraw their salaries despite having hefty amounts in their accounts. Rioters in Ogun state destroyed 10 commercial bank branches. The council secretariat and an odd electricity distribution station also became a party to the wrath.
If the situation was not dire yet, many bank branches have been accused of hoarding the new notes that were to be deposited in ATMs. The cash scarcity has impacted those who need money for the daily functioning of their businesses. Hawkers and market sellers have been struggling to conduct business without the supply of cash. City dwellers, too, have found themselves unable to feed their families or fill their cars with cash supplies dwindling.
Digital Currency: A Viable Alternative
Paying heed to the increasing chaos, the Nigerian Supreme Court has recently ruled that the demonetization efforts can remain legal tenders till the end of the year. With the nation awaiting the inauguration of the new President and his government to assume power by June, the delay offers temporary respite. Following this announcement, many commercial lenders have started recirculating the old naira notes.
The mayhem has allowed digital channels of transactions to emerge and thrive as Nigerians gradually err towards the side of caution. Many are considering digital channels as more efficient, secure, and convenient, allowing faster, error-free, and hassle-free transactions any time of the day.
The banked demographic has been inching towards the use of digital banking apps while the unbanked take to mobile money wallets offered by telcos. Naturally, this has caused significant disruption in the operations of numerous banks and telcos, many crashing for weeks at a time. Recent news speaks of Nigeria’s Zenith, among several other banks crashing frequently, causing unending turmoil among users.
Possible Culprits and Viable Resolutions
The continual crashes have caused extensive disruption in the daily lives of the newly converted Nigerian digital channel users. Much of this chaos has been attributed to a dire need upgrade the banks’ IT infrastructure. But that is only a part of the whole picture that has led the nation to its current situation. A varied approach to how banks execute the technicalities behind digital transactions is deemed a viable repose to the tumultuous user experience.
Banks can assume a different approach to adopting a brand new digital strategy, with digital currencies being the future of Nigerian financial transactions. A switch to more reliable technological platforms and technology partners can be the guiding light in the innovation process of new financial services. The right technology providers can enhance the scope for agility, allowing room for banks to rapidly change and adapt to scalable business capacities as and when the need arises.
A gradually emerging trend is that of major banks creating and establishing their individual subsidiaries as autonomous FinTechs or digital banks. This is an attempt to organize operations from scratch, minus the complexities of the conventional bank structure. Speaking of alternative reliable digital banking platform providers, VeriCash has been a leading player in Nigeria’s FinTech industry. One doesn’t have to go further than the United Bank for Africa (UBA) mobile banking app to find traces of its success.
The UBA mobile banking app has been lauded for withstanding the period of constant digital channel crashes. It has braved the sudden exponential surge in digital channels and leveraged its rapid scalability capacities with VeriCash as its technological crutch. Once deemed as the number 1 mobile banking app in terms of customer experience and satisfaction, the UBA’s smooth functioning has been facilitated by VeriCash’s end-to-end digital banking platform. The latter has enabled such subsidiaries to go to market relatively faster, offering them the agility and scalability necessitated by such volatile market dynamics.
The Bottom Line: Peeking Into Nigeria’s Near Future
Banks in Nigeria have much to contemplate in the years to come. While it is appealing to simply upgrade IT capabilities and make room for more servers, this will be rendered useless unless supplemented by reliable technology providers.
The status quo of digital banking in Nigeria will take a hard turn towards increased demand for the types of financial services. Banks must innovate to deliver customer satisfaction to remain afloat in this period of insurmountable disarray. It is safe to assume, a fate worse than the current status quo will befall the FinTechs in Nigeria that fail to adopt technologies that enable flexibility and agility in terms of the nature and type of services they offer.
About CIT Vericash
CIT VERICASH is a division of CIT GLOBAL, an international leading provider of innovative eCommerce and mCommerce software solutions and services with solid expertise spanning 25 years, since its establishment in Toronto, Canada in 1993. By applying CIT Global’s dedicated centers of excellence and its specialized leading products, in cooperation with its strategic partners, the company has delivered innovative and award-winning solutions to its clients in more than 48 countries, serving leading brands from North America, Europe, Asia Pacific, the Middle East, and Africa.