CASH RATIONING: BANKS, BANKERS, CUSTOMERS SUFFER
Cash-rationing by banks refers to the practice of limiting the amount of cash that can be withdrawn by customers from their accounts. This measure is often implemented by banks during times of financial stress, such as economic downturns or liquidity crises.
Nigerians suffered immensely in an attempt by the Buhari administration
to change the old currency under the Godwin Emefiele-led Central Bank of
Nigeria (CBN).
The former president said was to check fraudulent
politicians from inducing voters in the last general election.
Nigerians questioned the rationality in spending so much
money and making citizens go through so much stress and strain just to rein in
the high-spending political class, of which he is one.
On its own side the CBN said the policy was intended to help
deepen the country’s financial inclusion by bridging the gap between the banked
and unbanked population of the country. Whatever that meant, it was lost on a
people who had money in the banks but had none to spend.
A policy intended to promote financial inclusion ended up
pushing more Nigerians away from the financial sector, thereby creating
financial exclusion that caused serious trouble for the economy.
The three major political parties had a party making
high-flying promises to alleviate the sufferings of the people if voted into
power.
Expectations were
therefore high that the new administration of President Bola Ahmed Tinubu would
correct the mess his predecessor made with the monetary policy, but that
doesn’t seem to be happening after spending almost a year in power.
The banking public is finding it difficult by the day to
walk into any of the financial banks for cash transactions. While most banks do
not allow daily withdrawal from personal accounts beyond N20, 000, Nigerians
find it difficult to withdraw cash from Automated Teller Machines (ATMs) across
the country.
While money in circulation is increasing, according to data
from the CBN, the cash flow no longer passes through the banking sector and
bank customers have no access to the cash flow. They wonder where the cash is
flowing to.
The level of money in our economy is unbelievable, based on
CBN data, yet the funds are actually not in the banking sector, and by
extension, their customers.
This has forced many people to revert to the pre-banking era
of keeping their money at home instead of using services rendered by the
banking sector. Convenience is not much the issue but the security implications
are dire.
A bank staff, who spoke on condition of anonymity, noted
that they had to adopt the strategy to ration cash because they did not have
enough cash.
“Of course, there is rationing of cash, the policy came from
the CBN and we don’t have enough cash right now,” he said.
Another staff of a branch of a different bank said that the
branch had not loaded its ATMs for two days (at the time he spoke) now because
of a cash rationing strategy.
“It is true, we don’t have money in the ATMs here; we have not loaded for two days now and I don’t know when they would load, but you can withdraw at the counter. People have been coming and going away,” the banker, who also spoke on the condition of anonymity, said.
As the cash rationing bites harder, a lot of Nigerians now
regularly visit PoS operators to withdraw money for their daily transactions
because banks ATMs have failed them in recent times.
Alhaji Olaide, bank customer said: “In most of the ATMs,
despite that I am the bank customer, I couldn’t withdraw more than a N10,000 at
my bank’s ATM and I had to go to the counter where I got N20,000.
“This policy is not helping, because I needed N50,000 to pay
for something, despite the urgency of it I had to wait till the next day.’, he
said.
Another bank customer said “I don’t like to move around with
cash, but last year was hell for me and my family and even now no one is sure
of what they are doing with cash.
“I won’t be depositing money for now, I have to wait and
watch how long this development will stay, and you know the saying, once beaten
twice shy.”
Speaking on the impact of the cash crunch on the financial
inclusion drive, the President of the Association of Small Business Owners in
Nigeria, Femi Egbesola, said it would have a negative effect, noting that with
what is happening now; people’s confidence in the system would be eroded.
“People are trying to get their businesses structured and
take their monies to the bank. With what is happening now, the confidence is
eroded. People, mostly in the micro sectors, need cash for their daily
transactions,” Egbesola said.
A lot of the cash that left the banking sector may not find
its way back into the formal banking sector.
The disconnect between the amount of cash in circulation and
the actual cash in the banking sector has created a challenge in the banking
sector that has forced the banks to resort to cash rationing to meet customers’
demands.
There are two main types of cash rationing, which are
explicit and implicit cash rationing. Explicit cash rationing occurs when banks
openly impose limits on cash withdrawals. For instance, a bank may limit
customers to withdrawing a certain amount of cash per day or per week.
Implicit cash rationing on the other hand occurs when banks
use indirect methods like delaying cash transactions or imposing strict
identification requirements to limit cash withdrawals.
Bank customers now get various frustrating excuses and
bottlenecks in an attempt ration how much cash is available to them. This is
even more precarious as the e-banking and non-cash transactions also suffer hitches.
A bank executive said “Banks are rationing cash because they
are not getting enough from the CBN. If we receive more cash from the CBN, we
will be able to increase our daily withdrawal limits by customers”.
“The CBN is responsible for the current cash rationing by
commercial banks. For instance, the CBN gives you N10 million as a bank and you
have to service about 2000 or more customers, how you ensure satisfy your
customers without leaving anybody out?”
Currently, banks are shutting down branches to embrace
agency banking with Point-of-sales (POS) terminals.
Some opinions however believe banks could be hoarding cash
to sell to POS operators at the expense of the public.
Cash rationing can have significant effects on individuals,
businesses, and the broader economy that could lead to reduced consumer
spending. When individuals are unable to access their cash, they may reduce
their spending, which in turn will lead to a decline in economic activity.
On the other hand, cash rationing can lead to increased
inequality. Cash rationing may affect vulnerable populations, such as the poor
and elderly, who rely more heavily on cash transactions.
Government policies are good only if they affect the lives
of citizens positively.
No matter how good the intentions of a government decision
are, it must not hamper the wellbeing of its citizens who should come on the
first line of the concerns of any government.
The cash rationing policy has failed woefully as banks, bankers,
the banking public and the economy have not gained from it.
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