By: Emmanuel Ilesanmi
It is 2023, and while Artificial Intelligence (AI) looks to revolutionize the world, Nigeria’s fintech space is facing a change that has brought about a haphazard movement of digital and physical distribution of the legal tender between “e-note“(digital transactions), new note and old note.
However, consumers bear the brunt of this paradigm shift, such as having to buy naira in cash amidst varying prices. The biggest winners are the Mobile Money operators – popularly known as POS vendors — who are currently enjoying the opportunity of an imperfect market based on the Central Bank of Nigeria demonetization policy.
How it started: The agencies
Recall, that chaos came from the CBN’s redesign of outdated banknotes, which led to a deadline for note exchange that was originally set for January 31, 2023. However, President Muhammadu Buhari granted CBN Governor Godwin Emefiele a 10-day extension till February 10, 2023, due to a lack of fresh naira notes.
Judging by the policy roll for the cashless economy policy. Not only did it activate the panic button of Nigerians; but it also created a period of cash shortage in commercial banks and mobile money agents stand. Coupled with inadequate technology infrastructure like telecommunication and a large non-tech-savvy population the adjustment factor has impeded the progress the Central Bank might have expected.
The Catalyst: The Middlemen
“You need Money, to make more Money”
While it now appears to be lucrative to set up a payment merchant sale point; it involves a few cheap technology tools to distribute withdrawn cash. Bearing in mind, that cheap, especially in Nigeria can be relative. The challenge of cash policy also affects agents, so much that if you want to take advantage of the system, you need to be technically aware of generating a system of steady cash flow from the bank to your customer.
Putting aside the complexity that comes with this, at the time of this writing, the market price of Point Of System(P.O.S) devices, goes between 70,000 and 80000. The increased purchase price of the core mechanics for a startup can be translated to inflated charges on consumers for withdrawing cash from middlemen agents, the standard price of N100 for withdrawal below N5000 to about N200 on every N1000 increase.
The End User: Consumers
The Consumer is the worst off in trade-off for a technological advance payment setting. Theoretically, as uncovered from previous paragraphs the flow of money occurs through a circular flow of money.
The onus lies with the CBN to ensure a stable supply of money; when money is circulated in less quantity to the majority, it creates money scarcity.
Ayo, a student of the University of Ibadan and resident of Independence Hall said that he never thought a time in 2023 would come when he would have to resort to cash for medium transactions. He only seeks cash from friends for essential expenses.
Emeka, from the same hall of residence, on the other hand, resorted to still depending on Mobile Money operators for money operators and bank ATMs. This is not sustainable as a better approach will be to use electronic transactions with card and bank app transfers for large sum transfers and cash transactions for petty goods and services, pending the time a swift and integrated payment will be available for petty trade for both sellers and buyers, thereby eliminating all market exploitation.
Can Tech Save the day?
The use of cash is limited to the method of payment option made available to the buyer by the seller. It is imperative to say that in no distant future a seamless cash payment channel will be possible, and this growth phase can be made possible once fintech can muster past the current challenge. One of which to look out for is Momo, a super agency subsidiary of MTN, that aims to ensure secure electronic transfer. In its bid to bank the unbanked in Nigeria, 224,000 new merchants nationwide have been added to the existing 1 million active merchants. It remains to be seen if they can achieve this goal.
In a recent development, a Supreme Court ruling on the 3rd March 2023, reversed the policy engineered by the Central Bank to exclude the old denomination notes.
The failure of the Central banking institution, to print new and sufficient Naira notes, makes the back-and-forth cauldron seem like a waste of time rather than a move to a technologically advanced society, but with the problem comes opportunity and how is the point considered by stakeholders and investor in payment technology rather than dwelling on the payment.