Banks without cash undermine confidence in banking system 

VICTOR OGIEMWONYI 

Victor Ogiemwonyi, a retired investment banker, is a former Governing Council member of the Nigerian Stock Exchange (NSE), now Nigerian Exchange Group (NGX Group). He sent this contribution from Ikoyi, Lagos. He can be reached via comment@businessamlive.com 

Recent headlines about the non-availability of cash in ATMs and even banking halls, and the near replacement of bank’s cash function by POS Operators, is giving a serious cause for concern, and creating a crisis of confidence in our banking system. The Central Bank of Nigeria (CBN) sanctioning of several banks in the past week for failure to have cash in their ATMs, underlines this concern. 

Since the fiasco of changing the naira colours and trying to get the large cash outside the banking system into banks by the last CBN administration, serious cash shortages have become the norm. 

The PoS innovation which has helped in spreading banking services to many places that are not properly served and therefore excluded, seem to have now brought with it some variants of bad behaviour in our banking system. The prominent place PoS operations have now taken, while good in many cases, has also  now some unintended consequences, sometimes even extreme.

The convenience of providing cash services for a small fee has suddenly become the big business of selling people their own money at exorbitant prices. You can trust people to take advantage of an opportunity whenever it presents itself. The last cash shortage that caused riots and fights in banking halls across the country, showed that people, when they need cash, will be willing to pay desperate charges in order to be able to meet their immediate cash need.

There are allegations that some bankers in bank branches and cash management centres are exploiting this opportunity. They prefer to reserve all their cash for PoS operators, while also creating scarcity at ATMs,  and forcing desperate members of the public who need cash to patronise PoS operators, who always have cash to sell. There are also allegations that most of the PoS operators are owned by bankers or working with PoS operators, making access to cash easier and profiting from the operations. The profit making opportunities for this set of bankers are so lucrative it makes more sense, and the incentive too attractive to ignore. Some of these bankers, who sell cash for up to one percent of what they make available to PoS operators, sometimes earn more than their salaries. 

Unless a deliberate attempt is made to normalise the situation, the negatives coming out of the present situation portends ominous consequences for the future. CBN sanctioning and naming and shaming those caught is a step in the right direction. But more needs to be done to curb this ugly trend.

Until the recent CBN intervention it was becoming normal to go to an ATM or even banking halls and be told there is no cash and then directed to go to a nearby PoS operator to buy cash. I heard two stories recently that put this in perspective. A friend who was visiting from Washington DC in the USA, told me about an incident in Warri, Delta State, where he was visiting and needed cash. He went into one of the banks named and sanctioned by the CBN recently to withdraw cash from their ATM and there was no cash. Since he was in front of the bank he walked into the banking hall to get the cash. He was shocked how casually the cashier told him there was no cash, and directed him to a PoS nearby. He was even more flabbergasted when two more customers walked in and were also casually told there was no cash, and they walked away without any protest. He could not understand how Nigerians adapt to abnormal situations so easily. He said if that was to happen in a US bank there will be a run on the bank and even several lawsuits will automatically emerge.

The second story was even more pathetic. One of my coordinators in a social engineering experiment we are doing with some of my friends in micro credits, had monies paid into her account by other participants and she needed to cash the monies and pay into our main account to be disbursed to new beneficiaries. She was unable to withdraw the cash for two days. It took her all of the two days, going to the bank several times, to be able to get N350k. To avoid coming back the next day, she asked that the balance of N75k be transferred to another account in another bank. To her surprise she was told the bank does not transfer amounts lower than N100k.

This happened in a first generation bank, one of those sanctioned by the CBN. This was a frustrating situation for her, and I was taken aback. It is now obvious that this will discourage petty traders like this lady from putting money in banks; because she is not always sure she can get her money when she needs it. Just imagine the frustration she faced, and the administrative obstacles they forced on her to keep her from getting her money.

I am also now hearing that the expanding cash shortages are also now a result of traders, in our various markets, refusing to take their daily sales to banks. The traditional replenishments of cash sold for the day going back to banks at the end of each day is now increasingly becoming a thing of the past. This is because traders now have a better deal from PoS operators who come to these traders, at the end of market days, to help take the cash off the traders and immediately deposit their money into an Opay or MoniePoint account. The convenience of not leaving their shops to rush to the banks every evening, at the close of a trading day, with instant deposit of their cash, reflected in their fintech banking accounts, makes this a suitable alternative. 

These emerging kinks, in our banking system, have long term implications that undermine confidence in our banking system. The persistent large cash outside the banking system is one. The ability to control that large cash outside the banking system is something that should worry us. 

The disruption described above is even made worse by another big user of cash. The politicians, who use cash to buy their elections and collect their bribes in cash. Some time ago, a politician told me they have now learnt to gradually collect cash into containers in their houses and avoid the need to want large cash withdrawals from banks near elections and be sabotaged.

Imagine 360 members of our National Assembly hoarding N50 million each in their houses for elections; and add the governors, with even bigger appetite for cash, you start to see why the CBN insistently says large portions of cash available to the economy is not in the banking system. 

All these abnormal tendencies work to make the economy inefficient. We must see them as real problems that need solutions. The CBN can take the funding of PoS operators from banks and do it directly in a systematic way that makes cash available to them in a controlled fashion. Once there is a consistent flow of cash from the CBN, easing out the bankers who are culprits in this debacle, this will remove the friction from our cash system and normality will return. 

The problem with hoarding cash by politicians can be solved when the EFCC decides to focus on doing serious work on corruption, instead of running after young people with laptops, or becoming debt collectors. The EFCC needs to take advantage of technology that exists today – integrate their agents into public service places, equip them with hidden cameras and, in the case of banks, follow the money. There is virtually no crime that involves money today that cannot be solved. Just follow the money from the source. The evidential quality of these methods also recommends them.

There are no problems that cannot be solved, if the willingness and the required focus are on it.

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