Naira Scarcity in Banks Fuels Fears of Exploitation by PoS Agents in Nigeria

 

Mobile money agents have become a vital lifeline for millions of Nigerians, especially those in rural areas with limited access to traditional banking. These agents use point-of-sale (PoS) machines to facilitate financial services, making them a common sight in both urban and rural areas. In major cities, their presence has grown significantly due to a persistent cash shortage at ATMs, which followed the controversial redesign of the national currency, the naira, last year.

“There are three of them (agents) on my street alone,” said Chi Etche, a 29-year-old media executive. “This means I don’t need to take a bike or cab to reach the nearest bank ATM.”

However, as the country grapples with a severe cost-of-living crisis, opposition to the practices of mobile money agents is growing. Many Nigerians are frustrated by what they see as exploitative practices by PoS agents, who are seen as taking advantage of the country’s financial struggles.

“We are now buying back our money from PoS agents,” said Ibrahim Adamu, a 39-year-old trader. “The commission they charge is increasing, and you can hardly get cash from the machines.”

The Central Bank of Nigeria (CBN) has been working to improve financial inclusion since 2013, and by the end of last year, 74 percent of Nigerian adults had access to financial services, according to the NGO Enhancing Financial Innovation and Access (EFInA). However, the CBN’s policies and the ongoing cash shortage have left many Nigerians with no option but to rely on mobile money agents, experts say.

“CBN policies simultaneously raised barriers for banks to offer cash and cash alternatives to their customers in pursuit of its cashless policy mandate,” explained Ikemesit Effiong, a partner at Lagos-based risk consultancy SBM Intelligence. He also pointed out that these agents often operate without sufficient identity checks or regulatory oversight.

The naira redesign, announced in October 2022, was part of a broader cashless policy aimed at reducing the amount of cash in circulation. However, the policy created significant disruptions, particularly during the presidential election period. With over 85 percent of cash circulating outside the banks, the CBN capped ATM withdrawals and restricted over-the-counter withdrawals of large sums. These measures, intended to reduce the amount of cash in circulation, instead fueled long queues at banks and frequent ATM downtimes, pushing more Nigerians towards mobile money agents.

“Some agents exploit cash scarcity by charging excessive fees for cash withdrawals and transactions,” said Uzoma Dozie, the founder of challenger bank Sparkle. “This practice isn’t inherent to the mobile money system but rather a symptom of broader cash availability issues and inadequate oversight.”

Despite the criticisms, mobile money agents remain essential to Nigeria’s financial ecosystem. Some agents have resorted to purchasing cash from markets and bureaux de change to supply their businesses, factoring those costs into the fees they charge customers.

“I go to markets to buy cash from traders and bureaux de change. I factor that into the commission I charge customers when they come to withdraw cash from me,” explained Ayo Olaoluwa, a 34-year-old PoS agent.

Ifeoma Onwuabuchi, 46, a mobile money agent who started with ₦100,000, said, “That’s why you see a lot of people coming into the space. The income is not big, but it helps keep me moving.”

The Association of Mobile Money and Banking Agents of Nigeria, a key body in the sector, did not respond to requests for comments. However, Dozie emphasized that proper regulation and enforcement could address concerns about exploitation while preserving the benefits of agent banking.

CBN Governor Olayemi Cardoso assured Nigerians that empty cash machines would not be tolerated, warning that banks failing to comply would face stringent penalties. He also urged mobile money operators and PoS agents to adhere to full regulatory compliance, which would promote digital transaction channels and improve service delivery.