Banks lose control over cash supply to politicians, PoS operators

Bank customers have expressed frustration over persistent cash scarcity in banks and their Automated Teller Machines (ATMs), as players outside the formal banking system gradually take over the business of dispensing money to customers for a fee, Business Hallmark can report.

BH recently visited some bank branches in Lagos, FCT, Delta and Bayelsa States and observed many customers complaining bitterly over their inability to get naira notes needed  from the counters and ATMs.

Our correspondent observed that virtually all the banks visited in Lagos only gave out the sum of N20,000 to their customers.

For instance, all bank branches on Iju Road and the popular Ogunnusi Road (Ojodu/Berger Road), with the exception of United Bank for Africa (UBA) branches, gave customers only N20,000.

While customers of UBA in two of their branches located opposite Dominion Pizza on Iju Road and the one besides Cake and Creams on Ogunnusi Road (before Federal Road Safety Corps office) were able to collect up to N100,000 cash, customers of other banks in the axis like First Bank, GTBank, Access Bank, Union Bank, Fidelity Bank, Sterling Bank, and Zenith Bank were not that lucky.

Some aggrieved customers, who challenged the visibly harassed young cashiers that attended to them were informed that the decision to limit the amount payable across the counter came from management.

Frustrated, customers in need of more cash trooped to their bank’s ATMs to get more cash but met a worse situation on the ground.

However, while most of the ATMs on the ground were out of service, those working (usually one), were besieged by a large crowd.

At the end of the day, majority of the customers resorted to getting their cash from PoS agents and filling stations attendants.

The same scenario played out in Delta and Bayelsa States with our correspondent, who had attended the 20th edition of the All Nigeria Editors Conference (ANEC) unable to get cash from all ATMs visited in the oil city of Warri in Delta State and Yenagoa, the Bayelsa State capital.

A scene played out at the Agofure Transport Company park in Yenagoa, when a booking clerk told intending travellers that they must pay for their transport fare in cash as the company has a policy of not accepting bank transfers.

Aggrieved travelers, who refused to follow the clerk’s directive to get cash from recommended agents and dashed to nearby bank branches to collect cash soon returned, claiming their efforts were fruitless.

The travelers were later directed to adjoining retail shops and PoS merchants within the vicinity, who collected N150 on every N5,000 withdrawn.

Also, it was observed that while banks in the Federal Capital Territory (FCT) struggled to get cash, PoS operators were busy fulfilling the cash needs of customers.

During a visit to some bank branches in Lugbe and Gwagwalada in the FCT, cashiers were observed rationing cash, restricting maximum over-the-counter withdrawals to a daily limit between N5,000 and N20,000.

However, despite banks and the ATMs not having money to dispense, BH observed that every PoS shops in the three states and the FCT had cash to sell to Nigerians, who needed cash during the time of visit.

The cash scarcity, which has lingered for several months, is coming amidst recent data from the Central Bank of Nigeria (CBN), revealing that the money outside banks exceeds currency outside the banks.

According to the CBN data,  total currency in circulation is N4.14 trillion, with N3.87 trillion currently outside the banking system.

The report stated that 93.34% of Nigeria’s currency is in the hands of Nigerians and businesses, while 6.66% is in the banking sector.

Meanwhile, BH findings revealed that forces outside the banking industry, including politicians, PoS merchants, currency hawkers, party goers and rich Nigerians (mostly Muslims), who usually dash out money to guests and beggars are to blame for the scarcity of cash in banks and their automated teller machines.

These group of people, checks revealed, take up more their own share of currency notes by regularly mopping up available notes in circulation, thus denying Nigerians their own share.

A source in the Economic and Financial Crimes Commission (EFCC), informed BH that politicians huge appetite for cash is partly responsible for the scarcity of cash in banks.

According to the source, who spoke on the condition of anonymity because he did not have the permission to talk, over 40% of cash in circulation are in the hands of politicians, who use it to oil their political machines, especially for settling their supporters and for election purposes.

“Nigerians will be shocked to know the volume of cash in the hands of their leaders. It is mind-boggling. My office did a recent investigation and found out that N40 out of every N100 is in the hands of politicians.

“Politicians always deal in cash, untraceable cash to curry favour. Go to the office or residence of an average politician to understand what I am saying.

“It is even worse during this period when states are holding local government elections. That’s what they (politicians) are using to buy votes.

“Everyone of them is involved, just that some have more money than others. Just over the weekend, a large sum of money was seized by security agents from a party bigwig in Ogun trying to influence Saturday’s LG poll in the state.

“The scarcity should ease a bit after the conclusion of LGs polls as state governors scramble to hold on to the allocations of LGA in their states”, the EFCC source claimed.

Another group of people responsible for the current cash squeeze in banks, BH gathered, are PoS merchants and their enablers in banks. According to available data, PoS business has become a big one in the country.

In its recent report, the Nigerian Inter-Bank Settlement System (NIBSS), disclosed that the PoS industry saw an increase of  27.85% in 2023. NIBSS said the total value of POS transactions grew from N8.39 trillion in 2022 to N10.73 trillion in 2023.

The report further shows that Q1 of 2024 has recorded a total value of PoS transactions at N2.62 trillion, with 315 million transactions carried out. The number of registered POS businesses, NIBSS added, also increased from 2,537,442 people in Q1 of 2023 to 3,730,441 people in Q1 of 2024.

“This shows that the business is profitable for both banks and vendors”, NIBSS stated.

Sources in DMBs informed our correspondent that bank management is complicit in the matter in their attempt to cut down costs.

“What most people don’t know or don’t want to understand is that banks are in the business to make money.

“Unfortunately, the cost of doing business in Nigeria, especially that of maintaining ATM machines and keeping banking halls open, is very high.

“Rather than operating at a loss, banks are now pushing their unviable businesses to money merchants, who can recover operating costs without fear of harassment by the CBN.

“With PoS merchants now in charge of a large chunk of currency in circulation, banks are now able to cut down on branches and ATMs. Instead, they now give the bulk of their cash to money merchants, who are able to charge market rates for it.

“At the end of the day, the banks are still the winners. They own NIBSS, which charges fees on all PoS transactions. The source said you can see that they have nothing to lose”.

Apart from banks and their officials, PoS operators are also responsible for the disappearance of cash from banks. PoS agents, investigations revealed, apart from getting their supplies from bank officials after paying a premium, often visit banking halls to buy off cash from willing customers.

“I was in a banking hall one day to deposit N600,000 into my account when a lady approached me to sell the money to her.

“I was initially hesitant but was encouraged by the cashier attending to me to play along. At the end of the negotiation, she agreed to pay me N5,000 extra for my cash.

“When I asked her how she was going to recover the money, she told me that she would get a revenue of at least N12,000 on the N600,000 by charging N100 on every N5,000.

“She added that after removing the N5,000 she paid me, she’s going to make a cool profit of N7,000 on withdrawals alone, while fees charged on depositing/transfers will fetch her more money”, a bank customer told BH.

PoS operators also visit fuel stations, abattoirs, and markets to buy off cash from attendants, butchers, and sellers.

Like politicians, PoS operators, and DMBs, currency hawkers, who sell new notes to partygoers also share in the blame.

Our correspondent gathered that the hawkers usually mop up newly minted currency notes, which account for about 5% to 10% of the money in circulation, from bank vaults at a cost, which they then sell to partygoers at a premium.

A currency hawker, Moji Hamzat, said she always sells the new notes sourced from banks at parties held during weekends.

“It is a very good business as Nigerians love to show off by ‘spraying’ new notes at parties. I don’t mind paying a premium to get the new notes from banks as I know that I will make my money back.

“For instance, I charge N2,000 on every N10,000 notes I sell on the mainland. Some rich people on the island pay as much as N4,000 to N5,000 on every N10,000 they can get from us.

”Apart from the risk of getting arrested by the EFCC, the business is very good. I won’t give it up for any other job,” Hamzat vowed.