Nigeria's Central Bank (CBN) has taken drastic measures to address the country's prolonged cash shortage crisis by imposing a ₦150 million fine on deposit money banks and financial institutions caught selling newly minted banknotes to currency hawkers. The fine, contained in a circular seen by TechCabal, aims to curb the illicit flow of mint banknotes to unscrupulous economic agents, which has impeded efficient cash distribution to banks' customers and the general public.

The cash crisis, which began in late 2022, was triggered by the CBN's controversial currency redesign policy aimed at curbing counterfeit currency and "reducing cash outside of banks." However, the unintended effect was a cash shortage that led to widespread frustration among citizens who could not access cash in banks and ATMs. Despite the policy being shelved, the shortage has persisted, leading to a surge in demand for cash via alternative channels, including POS agents who have sourced banknotes from informal traders, including supermarkets and fuel stations.

Beyond POS agents, currency hawkers – who buy fresh notes from banks and resell them at a markup at parties and functions – are also believed to have worsened the problem. One publication recently reported that POS agents were selling newly minted notes in busy Lagos markets, exacerbating the dire situation. The CBN's fine is seen as a move to stem the flow of new banknotes into the hands of these unscrupulous agents and ensure that cash is distributed efficiently to banks' customers and the general public.

In response to the new fine, several banks have already taken steps to comply with the CBN's directives. According to sources close to the matter, at least two major commercial banks in Lagos stopped disbursing mint banknotes over the counter since Wednesday. The CBN statement read, "Any erring deposit money banks or financial institution that is culpable of facilitating, aiding or abetting, by direct actions or inactions, illicit flow of mint banknotes to currency traders and unscrupulous economic agents that commodify naira banknotes shall be penalised at first instance ₦150 million per erring branch and at later instances apply the full weight of relevant provisions of BOFIA 2020."

However, it remains unclear whether the fine will effectively solve the cash shortage crisis, which is likely a systemic problem that has incentivised cash-heavy businesses to sell their bank notes to POS agents, circumventing the banks and ultimately reducing the amount of cash at the banks. The CBN's move is seen as a step in the right direction, but experts argue that a more comprehensive approach is needed to address the root causes of the crisis.

The cash shortage crisis has had far-reaching implications for Nigeria's economy, with many businesses struggling to operate due to the lack of access to cash. The CBN's fine is seen as a move to restore confidence in the banking system and ensure that cash is distributed efficiently to those who need it. As the situation continues to unfold, it remains to be seen whether the fine will have the desired effect in addressing the cash shortage crisis.