The Central Bank of Nigeria (CBN) has imposed fines totaling ₦150 million on several commercial banks for failing to keep their Automated Teller Machines (ATMs) stocked with cash. This regulatory move aims to address the persistent cash shortages affecting millions of Nigerians. However, the root causes of the issue extend beyond mere negligence by the banks, revealing a deeper crisis within the financial sector.
During a recent visit to an ATM stand in Lagos, customers expressed their frustration over the unavailability of cash. A customer noted that “eight out of ten ATMs are either out of service or have no cash,” adding that “even when they do, it’s usually only until noon, and then they stop working. The only option is to go into the bank and make transfers yourself.”
A banking insider from one of Nigeria’s top-tier financial institutions shed light on the underlying factors behind the persistent ATM cash shortages. He explained that while banks are expected to ensure their ATMs remain operational, the growing influence of Point-of-Sale (PoS) operators has significantly disrupted the cash flow cycle.
“Yes, there is a CBN sanction on banks when ATMs are not dispensing, but the problem is more complex,” he stated. “PoS operators have become major players in the liquidity challenges faced by banks. These agents are constantly positioned at ATMs and business locations, collecting and buying cash from customers or businesses. Instead of businesses depositing cash into banks, they are now heavily reliant on PoS agents, reducing the cash available within the banking system.”
The rise of PoS agents, initially seen as a solution to financial inclusion, has ironically contributed to cash scarcity. These agents often withdraw and hoard large sums of money, capitalizing on the high demand for physical cash. In urban areas, some PoS operators reportedly hold onto cash to inflate withdrawal charges, further exacerbating ATM shortages.
According to data from the Nigeria Inter-Bank Settlement System (NIBSS), the number of PoS terminals in Nigeria has surged by 129% over the past three years, reflecting an increasing reliance on these services. While PoS operators have provided convenience for many Nigerians, their operations have led to unintended consequences, straining banks’ ability to maintain adequate cash flow at ATMs.
The CBN’s recent sanctions are aimed at compelling banks to improve cash availability at ATMs. However, financial experts argue that the root cause of the issue—the unchecked expansion of PoS services—needs urgent attention. The insider emphasized that “before banks can effectively address the ATM shortage, there must be a discussion on regulating the PoS sector and encouraging businesses to deposit cash back into the system rather than hoarding it.”
The government’s push for digital financial inclusion, coupled with inflation and currency devaluation, has placed immense pressure on the banking system. As Nigeria transitions to a cashless economy, access to physical cash remains essential for daily transactions. Addressing this crisis requires a balanced approach that ensures both the efficiency of digital transactions and the stability of cash circulation.
In response to the ongoing cash crisis, the CBN reaffirmed its commitment to enforcing cash circulation guidelines. “Ensuring seamless cash flow is paramount to maintaining public trust and economic stability. The CBN will not hesitate to impose further sanctions on any institution found violating its cash circulation policies,” a recent statement from the apex bank read.
The statement also highlighted the CBN’s efforts to monitor cash hoarding and rationing at bank branches and by PoS operators. “The Central Bank is working with security agencies to crack down on illegal cash sales and operational violations, including enforcing PoS operators’ daily cumulative withdrawal limit of ₦1.2 million.”
As Nigeria navigates its evolving financial landscape, experts suggest that the key to resolving the ATM cash shortage lies in tackling the root causes—ensuring proper PoS regulation, encouraging businesses to make bank deposits, and maintaining a balanced approach between cash-based and digital transactions.
