Why the cash crisis in Nigeria?

Queuing in front of cash machines in Nigeria used to be an unusual sight, but for several weeks now it has become a common sight in the country. Africa’s largest economy is facing a cash crisis, which has turned into a form of chaos.

Nigeria’s political economy expert, Dr. Ernest Ireke, in an interview with DW said that the common man is facing severe problems due to this cash crisis. “Generally understand that this issue has adversely affected the socio-economic situation of the citizens apart from their economy.”

Last year, the Central Bank of Nigeria announced the issuance of new currency notes. Citizens had until January 31 this year to exchange old currency notes with new notes. This deadline passed and all the people failed to get the new notes, so the government gave another deadline of February 10. However, the Nigerian Supreme Court suspended the deadline following legal points raised by the three states. These states were of the view that due to the change of notes, problems were arising regarding the conduct of elections.

According to Arike, in this context, many citizens who were easily engaged in business activities in normal circumstances, are currently facing many kinds of problems.

According to Professor Ereke, affiliated with the University of Abuja, “For example, people who travel by paying the fare cannot pay online. “

After the release of the new currency notes, many people had to stand for hours outside the cash machines of banks and wait for their turn to get the new notes. “It’s very bad. We don’t understand what’s going on,” one such Lagos resident told DW. Many people have spent their old currency notes and are now waiting for new currency. Many people are currently deprived of purchasing common items as the shopkeepers are not accepting old currency notes.

Another citizen told DW, “Without cash, it’s like everything has come to a standstill. Right now, for example, as I’m talking to you, I don’t have any cash. I’m hungry. But What and how should I eat? The situation is very difficult.”

According to the Central Bank of Nigeria, the new policy is aimed at reducing the amount of cash in the market while moving the economy towards a cashless one. According to the bank, this process will also help in reducing inflation. Since January, the central bank has also set a limit on withdrawals from machines on a weekly basis. Now ordinary citizens can only withdraw 100,000 Naira or 220 Euros per week from the bank.

Three trillion naira is in circulation, eighty-five percent of which is outside the banks. Since the issuance of the new currency notes in October last year, 1.3 trillion naira have been deposited in banks so far. According to the central bank, the new currency notes will also reduce the incidence of fraud due to additional security features.