Nigeria is facing a severe cash squeeze, a crisis that has sent shockwaves across the economy, affecting businesses and households alike. With cash supply dwindling and inflation spiraling out of control, the situation has become untenable. Economic experts are sounding the alarm, urging immediate intervention to stabilize the financial system and prevent further hardship. The longer this crisis persists, the more damaging its effects will be on the nation’s economic health and the well-being of its citizens.
The severity of the cash crunch cannot be overstated. Banks are reporting historically low cash supply levels, with only 15% of the required liquidity available to meet growing demand. The cash circulation problem has created a ripple effect, driving up prices on essential goods and services by an astronomical 200% to 300%. Meanwhile, an estimated ₦4 trillion remains in circulation, but a staggering 95% of that cash is outside the formal banking system, exacerbating financial exclusion. In response, Nigerians have turned to digital transactions, with Point of Sale (POS) usage surging by 30%. Yet, for millions of people, particularly those in rural and underserved communities, reliance on cash remains a necessity, not a choice.
The economic implications of this crisis are deeply troubling. Businesses, especially small and medium enterprises (SMEs), are struggling to complete daily transactions, leading to declining revenues and stunted growth. Inflation continues to erode the purchasing power of ordinary Nigerians, pushing more families into financial distress. With investors wary of committing to an unstable economy, economic recovery remains elusive. The cash shortage has also deepened financial exclusion, making it nearly impossible for vulnerable populations to access the resources they need to survive and thrive.
Addressing this crisis requires decisive action. The Central Bank of Nigeria (CBN) must move swiftly to boost cash supply in banks, ensuring that financial institutions can meet the demand of businesses and individuals. Inflation-reducing policies, including strategic monetary interventions and price control measures, are essential to restoring economic stability. At the same time, financial inclusion must be prioritized. Marginalized communities need greater access to affordable financial services to reduce dependency on physical cash. Digital payment solutions present an alternative, but their adoption must be supported through improved infrastructure and awareness campaigns to ensure accessibility for all Nigerians.
The introduction of Payment Service Banks (PSBs) was supposed to be a game-changer for financial inclusion. However, their performance in 2023 tells a different story. Major PSBs such as MoMo PSB, Smart Cash PSB, and Airtel PSB have reported substantial financial losses, with MoMo PSB alone suffering an ₦18.98 billion loss. The reasons for these setbacks are clear—high operational costs, low transaction volumes, intense market competition, and stringent regulatory requirements have stifled their growth. Without urgent reforms, these institutions risk failing to deliver on their promise of bridging Nigeria’s financial divide.
For PSBs to succeed, a shift in strategy is necessary. Operational efficiency must be prioritized to reduce costs and improve service delivery. Aggressive customer acquisition campaigns and innovative financial products can help drive engagement and adoption. Regulatory frameworks also need to be reviewed, ensuring they encourage growth rather than hinder progress. Moreover, Nigerian consumers must embrace these services, providing feedback and enhancing their financial literacy to fully integrate into the evolving financial ecosystem.
Nigeria is at a critical juncture. The cash squeeze has exposed deep structural weaknesses in the country’s financial system, but it also presents an opportunity for meaningful reform. The government, financial institutions, and citizens must work together to address this crisis head-on. By increasing liquidity, controlling inflation, and promoting digital financial inclusion, Nigeria can emerge from this crisis stronger and more resilient. The time for action is now—before the cash shortage escalates into a full-blown economic catastrophe.