Naira Scarcity: How Small Business Owners Are ‘Recovering’ From Impact 

Following the scarcity of new Naira notes that left owners of businesses grounded across the country for weeks due to limited funds in the running of activities, entrepreneurs in Lagos, especially those heavily reliant on cash, opened up on how their businesses have been able to recuperate from the adverse effects of cash crunch.

Businesses, especially petty traders in the first quarter of the year recorded low sales because of their unbanked customers who rely solely on cash transactions.

The cash crunch was witnessed from early February 2023 after the Central Bank of Nigeria (CBN) introduced the redesigned policy of the country’s currency to combat counterfeiting, ransom payment and take control of the Naira in circulation as well as manage inflation.

However, the implementation of this redesign did not go smoothly as the new currency was not readily available, leaving many Nigerians stranded and unable to access cash for their daily needs.

This led to long queues at banks and ATMs as people struggle to get their hands on the new Naira note, businesses were not left out, as activities in most stores came to a halt.

In March, the Supreme court eased the effect of the hardship faced by millions of citizens and businesses after the seven-member panel of the apex court faulted the entire policy of the CBN, saying the timing and implementation were defective and then ruled that the old N200, N500 and N1000 notes remain legal tender until December 31, 2023.

Old Naira Notes In Circulation After Supreme Court Verdict

The Central Bank of Nigeria, in compliance to the Supreme Court, in late March began the disbursement of old Naira notes to Banks in efforts to end currency scarcity that had inflicted pain on millions of customers and businesses nationwide.

CBN in its directive asked banks to pick old ₦1,000, N500 and N200 notes at its offices across the country for onward disbursements to customers.

Within days, commercial banks got old Naira notes from CBN offices across the country, with multiple bank sources,  including CEOs and top executives affirming that the apex bank released old notes to banks.

What impact did Naira scarcity have on Nigeria’s Economy

Even though the scarcity has eased, a public Affair analyst, Kelvin Emmanuel in an interview told Naija News the impact of currency scarcity on the economy yielded only counterproductive results. 

He said: “The cash supply to the economy at 25.8% slowed down the velocity of money and accelerate inflation on the short to medium term. The jump in the first quarter reading to 21.8% is a reflection of what the impact of cash shortage on the speculative increase in the price of commodities.

“One theory can argue that the bankers’ committee being shareholders in the Interbank settling system is happy that there was a constriction of cash that lead a slight marginal increase in the number of bank verification numbers from the current 63m that operate a weighted average of 3.8 accounts, but the question that always has to be asked is if the NIBSS has the capacity to accommodate for the surge in migration to online transaction payments that the PTSA infrastructure will experience as a result of the surge. 

“The Central Bank in order to balance between wanting to increase the number of people covered in the banking system (that also is a way to raise the tax bracket) and reduce the amount of cash outside of the banking system introduced the policy. But however, there is a third element, in that the ratio of internet penetration is currently 43%.

“There are currently 4 bank branches, 25 PoS machines and 117 PoS terminals per 100k Nigerians, Wholesale, retail and agency banking cannot spread to areas without telephone and internet signal. Therefore, is there a need to argue that there is a direct correlation between the level of expansion in base transceiver stations (BTS) across Nigeria and the level of financial inclusion?

“The evidence certainly points to it. It’s important to note that in India, where demonetization happened, records show that the level of M1 cash supply rose 57% over a period of 5 years after the demonetization exercise from 15.3 trillion rupees to 28.2 trillion rupees. This points clearly to the fact that an unbanked population will always see cash as king, and confiscation of cash as a tool to force people into the banking system, only yields counter-productive results.”

State of Small Businesses after cash crunch

Now the old notes are back in circulation, many small business owners are still weary and some debt-ridden owners say that business transactions with costumers varies and no longer the way they use to be.

Even though the court ruled for the new Naira notes, although still scarce, to be used side by side with the old Naira notes, customers still dabble between the usage of e-transactions and cash.

Friday Ese, 42, a barbing saloon owner,  said the cash crunch forced him to paste his account number at the entrance of his store and these days, however, his younger consumers prefers to transfer while the older gives him cash.

“My costumers that are students prefer to pay by transfer, but the old ones still come in and give me cash. Before the scarcity, everyone paid in cash, but now, there are options to pick from. Some people because of the fear of failed transaction and they do want to stress by going to the bank, come with cash,” he said.

Another business owner, Busayo Shodipe, 46, decried the effect of the Naira crisis on her provision business, adding that it plunge her business into debts.

“My customers are mostly students who had their ATMs available for transactions, but the problem was, i did not have a Point of Sale (POS) machine at the time which led to costumer’s loss. I could not also receive transfers because the network was very bad and most times you don’t get the money even after they deduct from the costumer’s account. 

“The complains became too much i had to stop accepting transfer for a while, i took some risk with customers with OPAY accounts and my business suffered for it as many had no cash to buy goods.” she said.

She, however, added that she recently acquired the POS machine, but business has been slow, although, most of her customers are literate to use their card and at the other time transfer which make the whole process easier for her.

A food vendor, Jaiyeola Azeezat, 26  said her business suffered some setback due to the Naira crisis as refusal of old notes from customers who still had them led to their loss.

She continued saying that the reintroduction of the old Naira notes eased a lot for them, as most of the costumers now have cash to buy food.

While the new and old Naira notes are in circulation, small businesses are yet to recover from the hardship and loss the Naira crisis, which last for almost a month brought. Business owners remain unsure of how long before they are fully on their feet, but have decided to be optimistic about ‘catching up’ with the tirade soon.