Nigeria's Central Bank has announced that it will penalize commercial banks that fail to provide cash to customers at their automated teller machines (ATMs) and branches, as the country continues to face a prolonged cash crunch. According to CBN governor Olayemi Cardoso, the regulator will conduct spot checks across deposit money banks (DMBs) and impose penalties on institutions effective December 1, 2024.

The move comes as Nigerians have faced a cash squeeze since 2023, following a controversial currency change. While the failed naira redesign project led to a boom in digital payments, it created a cash shortage at ATMs and banking halls. A central bank policy capping weekly over-the-counter withdrawals at ₦500,000 also contributed to the cash shortage.

In response to the cash scarcity, businesses have turned to POS agents, who source cash from supermarkets, market people, and fuel stations. This has led to calls to regulate the agency banking business. In May 2024, the government ordered the country's 1.9 million POS operators to register with the Corporate Affairs Commission (CAC).

Despite the CBN's efforts to promote a "cashless economy," the governor emphasized that the regulator will provide adequate cash supply to meet the country's needs, particularly during high-demand periods such as the festive season and year-end. "Our focus is ensuring a seamless cash flow for Nigerians while fostering trust and stability in the financial system," Cardoso said.

The CBN has urged customers to report difficulties withdrawing cash from bank branches and ATMs directly to the CBN through designated channels. The guidelines will be distributed widely to raise public awareness. The regulator has also called for full regulatory compliance by all stakeholders, including mobile money operators and agents, to promote digital transaction channels and improve service delivery.

Financial institutions found engaging in malpractices or deliberate sabotage will face stringent penalties, according to Cardoso. The CBN's move is seen as a step towards addressing the cash crunch and promoting a more stable financial system in Nigeria.

The implications of the CBN's decision are far-reaching, with potential consequences for commercial banks, POS agents, and the broader economy. As Nigeria continues to navigate its cash crunch, the regulator's efforts to promote a seamless cash flow and foster trust in the financial system will be closely watched.