Customers are withdrawing unusually large volumes of cash from banks and are depositing less, raising fears in financial circles.

A customer survey at the weekend showed that complaints by customers over scarcity of naira notes continued, with queues diverting from less dispensing Automated Teller Machines (ATMs) to banking halls for over-the-counter withdrawal.

But the Central Bank of Nigeria (CBN) has insisted that there is enough currency in circulation to meet all demands. It also cautioned against panic withdrawals.

Several customers had complained of inadequate cash at ATMs, Points of Sale (PoS), Bureaux de Change (BDCs) and in banking halls. Some officials of banks had in turn claimed they were not getting adequate cash supply to meet customers’ immediate cash needs.

Some customers said banks’ ATMs were increasingly not dispensing cash, forcing them into the banking halls where banks were also rationing cash through forced withdrawal limits.

Many customers said they were only able to withdraw about one-third of their cash demand after staying on unusually long queues in banking halls.

The cash scarcity also appeared to be redirecting customer flow to alternative sources such as PoS operators. The uptick in alternative cash demand has seen a subtle increase in charges by some PoS operators.

However, the degree of cash scarcity differs according to locations with customers in many areas reporting less constraints, although all customers surveyed said they had a sense of scarcity.

A customer expressed worries that if the situation continues in the days ahead, the cash scarcity may snowball into a full-blown panic.

Some bank officials confirmed that there were changes in cash deposit and withdrawal patterns, with more outflows than inflows.

There were also indications that banks were hoarding cash to meet demand of large retail customers, who have considerable influence on branch operations within their areas.

The cash scarcity continued despite assurances by the Central Bank of Nigeria (CBN) to checkmate what it described as a seasonal cash squeeze due to Yuletide and voluminous withdrawals in many branches of the apex bank.

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The apex bank had directed its branches to ensure seamless cash circulation in their states of operations, assuring that there was sufficient cash stock for economic activities and there was no need for panic withdrawals.

The apex bank, in a statement issued by its corporate communications department, said there were no shortage of naira notes as there is adequate supply of cash currency to meet economic demand.

”Our findings reveal that the seeming cash scarcity in some locations is due largely to high volume withdrawals from the CBN branches by deposit money banks (DMBs) and panic withdrawals by customers from the ATMs.

“While we note the concerns of Nigerians on the availability of cash for financial transactions, we wish to assure the public that there is sufficient stock of currency notes for economic activities in the country.

Cash crunch
“The branches of the CBN across the country are also working to ensure the seamless circulation of cash in their respective states of operation,” the apex bank had stated.

The apex bank has also cautioned the public against fake naira notes in circulation.

Acting Director, Corporate Communications, CBN, Mrs Hakama Sidi-Ali, who gave the warning in a statement, stated that the counterfeit naira notes were mainly used for transactions in food markets and other commercial centres across major cities in the country.

She warned that any person found complicit in the circulation of the counterfeit currency notes would face severe sanctions.

According to her, the law provided punishment by a term of imprisonment of not less than five years, for any person found culpable of counterfeiting naira notes or any other legal tender in Nigeria.

“The CBN is in constant collaboration with relevant security and financial agencies to confiscate fake naira banknotes, arrest and prosecute counterfeiters,”Mrs Sidi-Ali said.

She urged members of the public to report anyone suspected of having counterfeit naira notes to the nearest police station, branch of the CBN or through the apex bank’s website.

Newsmen had reported that two key factors were responsible for the emergence of the cash scarcity. An official of the apex bank, who sought anonymity, had blamed the cash scarcity on uneven cash flow dynamics and uncertainty over old naira notes.

According to the official, during the festive season, individuals and businesses tend to withdraw large sums of money for holiday expenses, placing a strain on the banking system’s ability to meet the surging demand for cash.

The official also noted that the Supreme Court ruling extending the validity of old naira notes until December 31, 2023 created uncertainty among the public, leading to a surge in cash withdrawals as people rush to stock up on old notes to avoid being caught unawares and left with less or no cash to spend during the yuletide.

To counter the anxieties fuelling the rush to stock naira notes, the government had approached the Supreme Court to upturn the previous ruling on December 31, 2023 deadline. The apex court ruled in favour of indefinite extension of the use of old naira banknotes.

The Supreme Court’s ruling stipulates that the old versions of the N200, N500, and N1,000 banknotes will continue to be legal tender, alongside the redesigned versions. In accordance with Section 20(5) of the CBN Act 2007, all banknotes issued by the CBN will remain legal tender indefinitely.

The CBN followed with direct orders to its branches to continue issuing and accepting all denominations of Nigerian banknotes, both old and redesigned.

The apex bank however urged the public to embrace alternative modes of payment, such as e-channels, to minimise the reliance on physical cash.