In bustling Mile 12 market, a major commercial hub in Nigeria, Raheem, a Point of Sale (POS) agent, faces a daily challenge: securing enough cash for his two stalls. With commercial banks limiting daily withdrawals to â¦100,000 since early 2024, he canât rely solely on over-the-counter transactions. Customer deposits are inconsistent, and sourcing cash from other agents is prohibitively expensive.
âBanks are now only giving out a maximum of â¦100,000 cash for savings account holders," explains a POS agent in Ketu, Lagos. âWeâve found a workaround by striking deals with supermarkets, wholesalers, and fuel stations. They need to deposit cash, and we need it for our business, so there's no charge involved."
This arrangement, which began in February 2023 during a severe cash shortage triggered by the Central Bank of Nigeria's (CBN) rushed currency change, has become a common practice. POS agents paid a premium, often â¦5,000 for every â¦100,000, to fuel stations and other cash-intensive businesses, passing the cost on to customers who paid an additional â¦500 to â¦700 for a â¦5,000 withdrawal.
While a court ruling in March 2023 forced the CBN to adjust the currency change timeline, alleviating the immediate cash crisis, the practice of POS agents sourcing cash from these businesses continues. They waive deposit fees, making it a mutually beneficial arrangement.
However, this unofficial system creates a significant unintended consequence: a persistent cash shortage at commercial banks. The CBN's policy capping weekly over-the-counter withdrawals at â¦500,000 exacerbates the problem. The regulator's efforts to promote cashless transactions have reduced cash disbursements to bank branches, further contributing to the scarcity.
This scarcity pushes businesses towards POS agents, who rarely run out of cash. Bank branches, reliant on cash deposits from the CBN and customers, are forced to impose their own withdrawal limits as businesses direct their deposits to agents rather than banking halls, leading to a vicious cycle.
âEven with the central bank's â¦500,000 limit, we canât dispense more than â¦100,000 per customer," reveals a banker. "We often open with only â¦600,000 or â¦1,000,000, and have to ration it to ensure everyone gets cash." The banker adds that their Ojodu branch received cash from the central bank only twice the previous week.
With limited access to cash at branches and ATMs, customers are now primarily visiting bank branches for customer service issues, leading to a decrease in foot traffic.
âWeâve eased the pressure on visiting banks," boasts Raheem. With less than 23,000 ATMs in Nigeria and 2.7 million active POS terminals, there are 120 POS terminals for every ATM in the country, highlighting the ubiquitous nature of POS agents.
Raheem, like most agents, provides Cash-In Cash-Out services for traders, charging â¦100 for withdrawals under â¦5,000, with fees increasing up to â¦5,000 depending on the transaction size. Agents explain these fees cover costs like rent, local government taxes, data, transport, and the inherent risk of holding cash.
While daily profits fluctuate, with some agents earning as little as â¦1,000, many earn enough to support their families. Some agents even report making up to â¦25,000 daily, exceeding a third of Nigeria's newly approved monthly minimum wage.
With an estimated 1.5 million POS agents in Nigeria, the ease of entry and subsidised POS terminals contribute to the popularity of agency banking. Their widespread presence has spurred the growth of digital payments in Nigeria, with cash transaction values dropping by 36% from 2019 to 2023.
The rise of POS agents in Nigeria presents a complex dilemma: while providing a valuable service to a cash-dependent population and contributing to the growth of digital payments, they also inadvertently strain the financial system by creating a cash scarcity at commercial banks. This situation highlights the need for a more balanced approach to promoting cashless transactions while ensuring adequate cash availability for both businesses and individuals.
