How POS agents are solving Nigerians’ cash needs while banks ration withdrawal

When Dele Olaitan (not his real name) visited a commercial bank inside the Lagos State University (LASU) campus, Ojo, on Friday, July 26, 2024, to withdraw ₦100,000, he expected to get the money without hassle. Unfortunately, he left the bank disappointed, angry and frustrated.

Having queued in the banking hall for over an hour waiting for his turn, he was told there wasn’t enough cash for the amount he wished to withdraw.

The middle-aged man could not understand why a bank wouldn’t have cash to dispense to its customers. He flared up and tried to cause a scene but the cashier insisted, “We don’t have cash.”

This situation stems from the Central Bank of Nigeria’s efforts to manage the money supply and ensure the bulk of money in circulation is under its control and not in the hands of the public.

How it all started

In its bid to reduce cash dependency and financial crime, the CBN, under Sanusi Lamido, introduced a cashless policy initiative in 2012.

The policy was initiated to encourage digital financial services, leading to the birth and popularity of USSD codes and bank apps.

To further encourage cashless transactions, the CBN in January 2023, reduced cash withdrawal limits via automated teller machines (ATMs) to ₦20,000 daily and ₦100,000 per week.

But after public outrage, the apex bank increased over-the-counter and ATM withdrawal limits to ₦100,000 daily, ₦500,000 weekly for individuals, and ₦5 million for business entities.

Despite these measures, the percentage of cash in the public continues to rise. As of November 2023, the data by the CBN showed that about 92% of the money in circulation was outside the banking system.

To further drive the cashless policy, the CBN has reportedly cut down on its cash disbursements to bank branches, triggering cash scarcity and opening a thriving market for mobile money agents better known as POS operators.

Gbenga Dada, a money agent of one of the tier-one banks in Nigeria disclosed that despite being a money agent for the bank, he could not withdraw “ordinary ₦50,000” over the counter.

“They said the CBN isn’t releasing money to them, so they’re managing what they have for all customers. They don’t even prioritise their agents. They believe everybody has the right to the money in the bank and they have to ration it,” Dada told Pulse Nigeria.

Confirming this, Abas Ademola, an Ibadan-based banker said whenever his bank branch is low on cash, they ration it for customers to make it go round.

“Most of the time we ration cash. If there’s cash we can give you the amount you request, but don’t forget there’s a limit to the amount you can get,” he noted.

With cash scarcity in banks and the subsisting ATM withdrawal limits, the Nigerian informal market, which is the backbone of the country’s economy is left with no choice, but to turn to POS operators for cash needs.

How POS agents source cash amid scarcity

To keep their business alive amid cash scarcity, POS operators have devised various means to ensure they always have the cash to serve the informal market that now depends on them for cash-in and cash-out services.

Since banks are no longer giving customers more than ₦100,000, Taofeek Olayemi, a money agent who has been in the business for seven years, said he sources money from fuel stations and traders to meet his customers’ cash needs.

“What I do now is that I have some stores that deal with cash. I go to them to collect the cash up to ₦5 million and I transfer the amount into their accounts. I have some cold rooms and provision stores in Igando where I get cash. Sometimes, I go to markets to meet traders who sell beverages to get cash from them. I’ve become their friend and sometimes, they send me money up to ₦2 million even before asking for it,” Olayemi said.

This strategy has helped the Obafemi Awolowo University graduate to keep his four POS outlets in business since February 2023, when the CBN hastily and controversially redesigned the naira, throwing the whole country into a cash crisis that incited mobs to vandalise or burn some banks.

Olayemi believes his POS business can’t run out of cash like banks because he currently gets money from at least 10 traders and filling stations.

Dada, who equally has many POS stands in Lagos, said he started sourcing cash from market women because, despite having nine bank accounts, the cash he gets from withdrawals is not enough for his business in one day.

“Market people are the ones helping POS people, if you know your way. Although some of them charge us, they may ask you to add ₦1,000 or ₦2,000 if they are giving you ₦100,000 but they have to trust you before they give you their money,” he said.

It may appear traders are helping POS agents with cash to keep them in business, but the situation is essentially a mutually beneficial relationship between the parties.

While traders give cash to POS operators to run their businesses, the agents save them the stress of going to banks to deposit their money.

“I realised that traders and store owners are no longer taking money to banks again. What they do now is to find an agent they trust and give the money to them. They complain about the time they would spend at the bank and the tellers’ attitude towards them. So, instead of taking their money to the bank, they prefer to have a money agent who would take the cash from them,” Olayemi added.

The shift from banks and ATMs to POS shops

Nigerians now gravitate more towards POS agents for cash-in and cash-out services and the scarcity of cash in banks and ATMs is not the chief reason for this behavioural shift.

POS agents are major drivers of financial inclusion in Nigeria and, according to the Nigerian Financial Services Market, there are 1.5 million banking agents in the country with OPay leading the market share with 37.17%.

According to Shakirudeen Taiwo, a senior economist at the Nigerian Economic Summit Group (NESG), for an economy largely run by its informal sector, the growing presence of POS agents is a great advantage for agency banking over the formal banking system.

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Taiwo explained that the distance between people’s residences and banks is a major reason some Nigerians would prefer to patronise POS operators over banks, regardless of the cost.

Citing an example, the economist said the stretch of the road from Trades Fair along Lagos Badagry expressway to LASU, which is approximately five kilometres, has no bank.

“For an informal trader, that’s a problem. It means there’s even a cost of going to banks for people living in that area,” Taiwo said.