Nigeria is staring at chaos as ATMs in Africa’s biggest economy run out of new notes, days before a deadline that will render high-value currency illegal.
Hundreds of people were stranded at a popular electronics market in the heart of Lagos, Nigeria’s biggest city, Thursday night — victims of the chaotic rollout of a policy to redesign the naira. Residents are allowed to withdraw a maximum of N20, 000 ($43) but many ATMs weren’t dispensing any cash.
“I do not know how I will get home tonight because I do not have cash,” David Aghamelum, a 25-year-old computer technician, said.
Like others, he had spent hours searching in vain for an ATM dispensing new naira notes as a February 10 deadline looms.
The cash shortage is hitting commuters like Aghamelum, parishioners tithing at churches, drivers waiting hours at gas stations and merchants and customers across the $440 billion economy.
It has also overwhelmed the digital payments system — as customers opt for online transfers — with transactions taking hours to complete or failing outright.
President Muhammadu Buhari on Friday acknowledged the “hardship” facing Nigerians and promised to resolve the cash shortage within a week.
He blamed the “selfishness and greed” of the country’s banks for the problem, according to an emailed statement.
Central Bank Governor, Godwin Emefiele, has defended his decision to replace N2.7 trillion ($5.85 billion) of cash outside the banking system even as scenes of chaos have unfolded all over Nigeria, where the vast majority of transactions are still done in cash.
The unfolding crisis has turned political ahead of presidential elections in three weeks, with a leading candidate suggesting that the naira redesign plan was a plot to sabotage or delay the polls.
Last week, Emefiele pushed back the initial January 31 deadline after a meeting with Buhari.
The government has defended the move. Finance Minister, Zainab Ahmed, on Thursday called the initiative a “success” because it had brought trillions of naira of cash into the banking system, which the administration believes will boost digital payments, cut inflation and curb corruption.
“The only sore point is the pain it has caused to citizens,” she said.
At an FCMB Group Plc bank branch in the northern commercial hub of Kano, hundreds of people waited in line at one of the few ATMs offering new notes.
Nura Ismail, a 35-year-old trader, said he had been waiting for seven hours for the chance to withdraw N20, 000, an amount that would barely last him through the week.
He was number 595 when he arrived on Thursday morning.
“I have not even had breakfast — I want to buy milk for my newborn baby but don’t have the money to buy,” Ismail said.
“I will remain on this queue up to 12 a.m. until I get this money.”
Bank agents — who essentially act as human ATMs across the country — have increased their commissions on cash withdrawals to 10% or 20% due to the struggle to get cash from lenders.
Unless the government moves quick to alleviate the pain, it could hurt the ruling All Progressives Congress’ chances in this month’s election and “potentially trigger social unrest,” said Cheta Nwanze, a lead partner with SBM Intelligence.
Small protests had begun to pop in some cities on Friday, according to local media.
The crisis is also likely to slow growth in the first quarter, Daniel Sodimu, sub-Saharan Africa Analyst at FrontierView said.
“It will disproportionately impact the informal sector, where cash is king,” he said, adding that lower income people will be hit the hardest.
Just 35% of Nigerian women and 47% of men have a bank account, according to the country’s statistics agency.
Most of those without an account live in rural areas where there are few bank branches. Roughly two-thirds of Nigerians save cash at home, according to the statistics agency.
The Central Bank said it is deploying an additional 30,000 agents to swap the new currency with the old notes, especially in rural areas.
The institution will continue to collect the old notes at its branches nationwide even after they cease to be legal tender from February 10.
But for now, Nigeria’s poorest and those trading in its vast informal sector are the ones most likely to suffer, with ripple effects throughout the economy, said Mosope Arubayi, an economist at IC Group.
“The Central Bank should make the system work. It doesn’t make economic sense for people not to have access to their money,” she said by phone.