Exploring Nigeria’s Cash Preference

Following the election, Nigeria continues to face major challenges surrounding access to cash. A recent Techpoint Africa article explores why—although Nigerians are in favour of expanding payment options—cash remains essential to daily life.

Tech reporter Bolu Abiodun spent one Saturday in February travelling around the nation’s capital, seeing whether it was possible to go a whole day without using cash. Unsurprisingly, it was not, but the varied reasons for people’s cash preference illustrate the need for payment systems to evolve in ways that to add choice; co-existing with physical money rather than replacing it.

Abiodun’s first transaction was with a commercial bike rider, who declined a bank transfer in favour of cash. The issue was not that he lacked an account—in fact he has three—but rather a lack of access to them. He had lost the SIM card that was linked to their security details, and thus was currently unable to log in and check whether money had been successfully transferred. Additionally, he cited concerns about the reliability of bank transfers, and the inherent possibility of transactions being reversed. Cash in hand provides absolute certainty that the agreed amount has been transferred from one person to another.

Exploring cashless options on buses, Abiodun reports he found one driver who was prepared to accept a transfer if he added an extra 400 naira (almost $1) to cover the expenses he would incur ‘turning the fare into cash’. While one passenger was reportedly interested enough in this option to ask for his bank details, they ultimately did not go ahead since the extra charge would have been more than her total fare.

Sentiments were similar among market traders, who preferred cash but would typically allow bank transfers only for purchases above 600 naira. Additional charges associated with cashless options are a common problem, with transaction fees currently a hot topic in Kenya as well as North America and Europe.

Against this backdrop, the ongoing cash shortage means that many people are unable to make withdrawals, leaving their money trapped in a bank account. ABC News reports customers are ‘waiting all day at banks and ATMs to withdraw only enough money to last a day’. For many people, this is forcing difficult decisions between outgoings such as food or transport. It is also affecting trade for small and medium businesses from farming to market trade and transportation, says Joachim MacEbong, a senior governance analyst at Nigerian intelligence company Stears.