On Friday 3rd of March 2023, the Supreme Court ruling delivered by Justice Emmanuel Agim nullified the ban on the use of old 200, 500 and 1000 naira notes. Extending their status as acceptable legal tender until the 31st of December 2023.
This ruling is coming 52 days after Nigeria was thrown into a cash crisis caused by the cashless policy that the majority of Nigerians described as myopic, disastrous and callous.
The cashless policy was first and foremost introduced to Nigeria by the Sanusi Lamido led central bank in 2012. The then policy prescribed a processing fee for cash withdrawals and deposits exceeding 500,000 naira for individuals and 3 million naira for corporate bodies at 3% and 5% respectively.
According to the then CBN governor, the policy was aimed at reducing the amount of physical cash that is being used in the system and an attempt to cut down on cash handling expenses of banks.
It was suspended in 2015 due to the shortage of technological infrastructure to encourage widespread acceptance and use.
However, in October 2022, the CBN led by Godwin Emefiele restated the desire of the apex bank to usher Nigeria into a cashless economic system. This was followed by the introduction of a change of currency and a cashless policy that took effect on the 9th of January 2023.
Although perhaps seven years after the first cashless policy was called off, there have been series of technological and infrastructural development like the online banking, PSB’s POS machines, agent banking, mobile banking, and CBDC’s. Unfortunately, the reality of the policy threw Nigeria and Nigerians into a frenzy causing an untold amount of suffering and impact on the informal economic sector.
In between a high distrust for the banking system due to cases of attempted fraud, successful fraudulent transactions and poor technology / infrastructure causing failed transactions that take weeks to be resolved, the informal sector remained unyielding.
Nigeria, according to world economic data, currently has an informal economy estimated to be 57.7% which represents approximately $1,164 billion at GDP PPP levels. It’s also the 3rd largest in the world following Afghanistan and Zimbabwe at 72.0% and 64.1%.
In the past 52 days, there has been a noticeable decline in the activities of the informal sector. Consumers cannot buy because of the unavailability of cash and sellers cannot sell because of distrust.
As the informal sector and majority of the population in rural areas struggle to adapt to the cashless policy, Two Chinese backed Fintech startups; Opay and Palmpay lead the innovation and encourage widespread acceptance of the cashless policy.
Chinese owned fintech startup Opay and Its competitor Palmpay were established in 2018 and have been pivotal to financial inclusion amongst Nigerian, with the solidification of agent banking and provision of POS machines both rural and urban areas since 2018.
Their account opening process is seamless, as it uses the customer’s mobile phone number to generate an online bank account and does not require a Bank Verification Number. The transactions on the app are free compared to traditional banks that charge from 10 naira for inter bank transfers.
While the traditional banks struggle with unsuccessful transaction and money debited that take days to be rectified, Chinese owned Opay and Palmpay continue to gain traction in the informal sectors and amongst poor and middle class Nigerians, commercial bike riders and market women with easy to open bank accounts, free transfers and miraculously smooth electronic movement of money.
