Nigeria’s economic strength is tested as citizens and businesses grapple with the negative impacts of the current cash crunch
The Central Bank of Nigeria (CBN) recently embarked on several policy reviews to tame the rising inflation and protect the Naira. The reviews include:
- Raising the monetary policy rate (MPR).
- Launching the Naira4Dollar scheme.
- Adopting the NAFEX rate.
- Clamping down on Bureaux De Change (BDCs) operators.
The most recent is the redesign of naira notes (₦200, ₦500, and ₦1,000) which was unveiled in November 2022, and a cash swap program that retrieved over ₦2Trn from the economy in less than 90 days. The result has been an unparalleled scarcity of cash, a contraction of the economy, and biting hardship on individuals, families, and businesses.
Nigeria’s economic strength is tested as citizens and businesses grapple with the negative impacts of the current cash crunch. Point of Sale (PoS) platforms have become a ‘black market’ for the Naira, charging up to 30% of the naira value as fees; internet and mobile banking platforms such as the Unstructured Supplementary Service Data (USSD) are overwhelmed and bulking under the surge in adoption and use.
The real estate and construction sectors (two largely cash-based sectors) are feeling the pinch of the current realities. There is no cash in the system to pay daily wage workers, and the lack of cash and its impact on transport result in their lateness to construction sites. Contractors and developers now have to manage longer delivery times of building materials to the site as builders’ merchants and suppliers adopt cash/payment confirmation before delivery. All these results in construction delays and increased cost of construction which will impact the cost of housing. The dwindling confidence in digital banking is taking its toll on the real estate market, particularly the retail and logistics segment, causing delays in the timely delivery of orders. In what appears to be a temporary situation, its adverse impacts on productive hours and potential revenue are untold.