As Nigeria grapples with acute cash scarcity, fake naira notes are increasingly finding their way into circulation, particularly in cities like Lagos, Port Harcourt and the Federal Capital Territory (FCT), Abuja.

The crisis, whichh has been exacerbated by high demand for cash during the Yuletide season, is leaving Nigerians vulnerable to fraudulent currency transactions.

The situation echoes the naira crunch, triggered by the Central Bank of Nigeria’s (CBN) controversial naira redesign policy ahead of the 2023 general elections.

Since the misadventure, Nigerians have been going through excruciating pain accessing the naira bills.

Banks fail, PoS operators to the rescue

Despite CBN reports of increased currency in circulation, cash remains elusive for many Nigerians. According to recent data, currency in circulation reached N4.5 trillion in October 2024, yet citizens still face empty ATMs and unresponsive banks.

Experts attribute the scarcity to poor distribution, hoarding, and a breakdown in confidence following the naira redesign saga.

“The system hasn’t recovered fully from the chaos of early 2023,” said a Lagos-based financial analyst who doesn’t want to be quoted. “Many Nigerians are still hoarding cash as a precaution, reducing the amount available for circulation. Add the festive season and poor bank operations, and the result is this crisis.”

Across the country, long queues at commercial banks have become the norm as customers attempt to withdraw cash without success.

Bank staff often tell frustrated customers, “There is no cash.” Consequently, many Nigerians now rely on Point of Sale (PoS) operators for cash transactions, even as these operators face operational hurdles.

Juliet Michael, a Lagos-based hairdresser, shared her ordeal after receiving fake naira notes. “I collected N10,000 from a PoS operator to buy Christmas supplies. When I got to the market, the seller told me two N1000 notes were fake. I had to borrow money from a friend to complete my purchase,” she lamented.

Meanwhile, CBN has slammed the PoS operators with new daily cash withdrawal limits, capping it at N1.2 million, leaving agents with insufficient cash to meet rising demands.

Agents are now charging exorbitant fees for cash withdrawals. “I withdrew N10,000 from a PoS agent, and they charged me N400 as a fee instead of N200,” said Sunday Ademola, a civil servant in Lagos. “We have no choice but to pay because banks tell us there’s no cash. But now, I’m also scared of receiving fake notes.”

Adebayo, a PoS operator in Egbeda, described his challenges: “Every morning, I queue at the bank for hours, but I rarely get enough cash. We also buy cash from filling stations and traders. Customers are frustrated, and now we’re seeing more fake notes in circulation. It’s affecting our business because people are losing trust in cash transactions.”

The rise of counterfeit currency

Street traders and transport workers have reported an uptick in fake notes, particularly in busy urban areas like Lagos.

Criminals appear to be exploiting the cash crunch, knowing that many people are too desperate to scrutinise the currency they receive.

A Lagos-based Street pepper seller, Musa Abdullahi, recounted his experience: “Last week, someone gave me N1000. Later, I realised it was fake. This has happened twice this month alone. We’re afraid of accepting cash now.”

Transport operators are not spared either. For a bus driver operating in Alimosho area of Lagos, Olakunle Matthew, the crisis has made his work more difficult.

“Passengers sometimes pay with fake notes because we can’t check immediately while driving. I’ve lost over N3,000 in the last week,” he said. “It’s frustrating because the money I make in a day is not enough to cover the loss.”

A few days ago, the Nigerian Police Force paraded three suspects arrested with fake currencies worth N129 billion with a breakdown of 3,366,000 in counterfeit US dollars, 51,970 in counterfeit CFA franc, and 1,443,000 in counterfeit naira in Kano State.

“People need to take time to check the security features of naira notes,” said Olaiya Aremu, a financial expert. “But in reality, when cash is scarce, people are more likely to accept notes without verifying them.”

Economic implications

The prevalence of fake naira notes is compounding Nigeria’s economic challenges. Inflation remains high, with the cost of goods and services escalating daily.

Many Nigerians are turning to cashless payment options, but the digital infrastructure is not robust enough to support widespread adoption.

“The scarcity of cash has created a black market for currency, where counterfeiters thrive. This not only erodes public trust in the naira but also undermines the effectiveness of the CBN’s monetary policies,” Olaiya said.

To address the crisis, experts suggest that the CBN must ramp up cash distribution efforts and strengthen policies to restore confidence in the banking system. Financial literacy campaigns are also necessary to educate Nigerians on identifying counterfeit notes.

For now, many Nigerians remain trapped in a cycle of scarcity and desperation. “We just want to live our lives without fear of losing money to fake notes,” Juliet, earlier quoted, lamented. “It’s already hard enough without this problem.”

As the Yuletide season approaches, the cash scarcity and fake currency crisis underscore deeper systemic failures in Nigeria’s monetary policy and financial infrastructure. For citizens, the question remains: When will these challenges end? (BusinessDay)