Nigeria’s cash scarcity during this festive season is a paradox that highlights systemic inefficiencies in the country’s financial ecosystem. Despite the Central Bank of Nigeria (CBN) reporting a record high of ?4.5 trillion in currency circulation as of October 2024, millions of Nigerians face daily struggles to access their own money.

The disconnect between currency abundance and availability is not just an economic puzzle; it is a reflection of broader issues within the financial and governance structures. As queues at ATMs stretch endlessly and mobile money agents charge exorbitant fees for withdrawals, the frustration among citizens is palpable. This situation demands urgent and thoughtful intervention to restore public confidence and ensure economic stability.

For many Nigerians, the festive season is synonymous with travel, gift-giving, and community celebrations. Yet, the persistent scarcity of cash has cast a shadow over these traditions. Customers like Oyeniran Adesola, who could only withdraw ?5,000 despite needing ?20,000, reflect the growing despair among the populace.

Businesses are equally affected. Market traders and small-scale retailers, many of whom operate on a cash-only basis, are reporting plummeting sales. The economic ripple effects of this crisis are significant, with reduced spending power impacting sectors reliant on consumer activity.

At the heart of this issue lies a mismatch between monetary supply and distribution efficiency. While the CBN reported that ?4.3 trillion is circulating outside the banking system, citizens still struggle to access cash. This surplus, as economists like Professor Ijeoma Kalu have noted, undermines the effectiveness of monetary policy tools, including the cash reserve ratio and lending rates.

The commodification of the Naira is another alarming trend. Cash hoarding and illegal sale of banknotes by unscrupulous actors have further exacerbated the crisis. This black-market activity erodes public trust in financial institutions and creates a cycle of scarcity that disproportionately affects low-income Nigerians.

Commercial banks must accept their share of responsibility. Stories of empty ATMs and rationed withdrawals point to inefficiencies in cash management and distribution. While the CBN has imposed fines on banks found complicit in diverting new banknotes to illicit markets, punitive measures alone will not resolve the underlying issues.

Banks must adopt more transparent practices, ensuring that cash is equitably distributed and available to customers. Regular audits and public disclosures of cash allocations can foster accountability and rebuild trust. Additionally, technology-driven solutions such as automated cash monitoring systems could enhance operational efficiency and minimise leakages.

Compounding the cash scarcity is the confusion surrounding the validity of older Naira notes. Despite a Supreme Court ruling affirming the indefinite circulation of these notes, misinformation persists, leading to unnecessary panic.

The CBN’s communication strategy requires urgent improvement. Clear and consistent messaging, leveraging both traditional and digital platforms, is essential to dispel rumours and reassure the public. This is particularly critical during periods of heightened demand, such as the festive season.

The CBN has long advocated for a transition to digital payment systems as a means to reduce reliance on physical cash. While this is a commendable objective, the current infrastructure is insufficient to support such a shift.

Nigeria must invest in robust and reliable digital payment platforms that are accessible to all segments of the population. This includes expanding mobile network coverage in rural areas, improving internet reliability, and addressing affordability issues. Kenya’s M-Pesa offers a blueprint for how mobile money can drive financial inclusion and mitigate cash shortages.

Public education campaigns are also crucial to encourage the adoption of digital payment systems. Trust-building measures, such as ensuring transaction security and resolving disputes efficiently, will be key to overcoming scepticism.

The cash scarcity crisis is symptomatic of deeper governance challenges. Beyond addressing immediate distribution issues, there is a need for structural reforms within the financial sector. This includes tackling corruption, improving regulatory oversight, and fostering collaboration between the CBN, commercial banks, and other stakeholders.

The commodification of the Naira must be addressed decisively. Strengthened enforcement mechanisms and harsher penalties for illegal cash trading can deter bad actors and restore normalcy to the cash distribution network.

This crisis is a test of leadership—both within the CBN and the broader financial ecosystem. Immediate measures must be taken to ensure cash availability during this festive season, including intensifying monitoring of ATM operations and holding banks accountable for non-compliance.

Long-term reforms are equally critical. The transition to a cash-lite economy must be supported by investments in digital infrastructure and public education. Policymakers must also address systemic inefficiencies in cash management, ensuring that future monetary policies translate into tangible benefits for citizens.

Nigeria’s cash scarcity crisis is a stark reminder of the urgent need for systemic reform. It is a challenge that affects not only economic stability but also the daily lives of millions. The current situation cannot be normalised; it demands decisive action and visionary leadership.

To address this crisis effectively, the Central Bank of Nigeria (CBN) and commercial banks must work together to implement a comprehensive strategy. This includes strengthening cash management systems, improving ATM availability and functionality, and enhancing the efficiency of cash distribution channels. Additionally, the CBN should continue to promote the adoption of digital payment solutions, such as mobile banking and online payments, to reduce reliance on physical cash.

As Nigerians navigate this challenging festive season, they deserve more than temporary fixes—they deserve a financial system that works. With proper oversight, clear communication, and strategic investments, Nigeria can turn this crisis into an opportunity for lasting reform. The time to act is now. By implementing these measures, Nigeria can build a more resilient and efficient financial system that benefits all its citizens. (BusinessDay Editorial)