The past few weeks have been crazy here in Nigeria. Aside from the tension, frustration, disappointment and sobering outcome of our presidential elections, we have been struggling with a cash crisis!

A few days ago, an article in Bloomberg revealed that Nigeria’s private sector economy contracted between January and February. “It’s the worst [index] reading since the height of the coronavirus pandemic in June 2020.” And this has been a result of the cash shortage in the country, which has led companies to decrease production and cut jobs.

Cash is King AND Expensive

Undoubtedly, this has been a wake up call for all of us, and a reminder that cash is still king in Nigeria. 60% of the population is unbanked (with the majority living below the poverty line). Our 2022 survey revealed that 39% of pastoralists have mobile phones, and only 18% have an education. I often get asked why we aren’t using digital payments like mobile money, and these statistics are some of the reasons. Even if we solved the mobile phone and digital wallet challenge, this won’t eliminate all our payment issues. In rural areas where a trip to the closest bank or ATM could cost a pastoralist 50-100% of her daily earnings, withdrawing cash in this way is unaffordable and owning a bank account is prohibitive. Although there are POS agents that offer the option to withdraw cash in neighbourhoods, the fees are expensive and can be as high as 10% of the transaction value. These cash withdrawal fees rose rapidly because of the cash crisis, and charges reached 40% at peak levels in areas such as Gwagwalada Area Council in Abuja.

Yes, you read that right. To withdraw ₦10,000, it would cost you ₦4000.

Today, even if you are willing to pay those fees, there is no cash in circulation. POS agents have shut down their businesses. Village shop owners have closed their doors because they can no longer survive by selling on credit. As crazy as it may sound, we even considered introducing a barter system as a potential solution to the problem. We asked ourselves, what do pastoralists need daily? Can we buy this item in bulk and pay them with it as an alternative currency? We are now onto crazy ideas. Crazy things are happening, and yet we are breaking records.

Fintech for the Poorest

In 2022, startups in Africa raised $4.8 billion. 37.5% of these funds were raised by Fintechs and 25% was raised in Nigeria – the largest deal being Flutterwave’s $250m Series D. EFInA’s Access to Financial Services in Nigeria 2018 Survey showed that 39.5 million adults (39.7% of the adult population) have a bank account. So, my question to all Fintechs out there is this: are your solutions really “banking the unbanked,” and helping Nigeria’s poorest when it comes to payments? This crisis is surely a lightbulb moment for Fintechs that the majority of our population isn’t in their addressable market. That cash will remain king until we have viable payment solutions for the rural poor. Nigeria’s Fintech sector has essentially not made any meaningful impact on this segment of the population. It’s time to refocus Fintech efforts on Nigerians who don’t have phones or can’t affordably access ATM and POS machines.

If you have any ideas on how we can solve this, I’d love to hear them. Please reach out. No matter how out there your solution might be, it’s probably not as crazy as the situation we currently find ourselves in. What if the next crazy thing could indeed transform the lives of millions of the rural poor in Nigeria?

Aisha

Update: Nigeria’s Supreme Court has made a final ruling – it has invalidated the Naira redesign policy introduced by the Central Bank of Nigeria (CBN) and ordered that all the old denominations of the Naira notes shall remain in circulation until the end of December 2023.

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