🍔Quick Bite: In Nigeria, ATMs are becoming less reliable, and PoS agents have taken over as the main way to access cash. While they were meant to complement ATMs, their high fees and dominance have left many feeling like they’re paying extra just to access their own money.
🧠 The Breakdown
For many Nigerians, withdrawing cash from a bank ATM has become an increasingly rare experience. While ATMs were designed to provide convenient access to cash, they are now often empty, leaving people with no choice but to rely on Point-of-Sale (PoS) agents. A report from KPMG showed that weekly ATM usage among Nigerians dropped from 70% in the past few years to 40% in 2023.
This decline represents the growing frustrations with unreliable ATMs and the increasing dominance of PoS agents in cash distributions.
Convenience turned necessity
Initially introduced to promote financial inclusion and ease cash access, PoS services were meant to complement ATMs, especially in areas where ATM penetration was low. The country’s “ATM-to-population” ratio has long been inadequate. In 2021, the World Bank reported that Nigeria had only 16 ATMs per 100,000 adults, a stark contrast to other countries. Within Africa, Namibia had 73 ATMs per 100,000 adults, while South Africa had 44. Outside the continent, the disparity was even greater, with the United Kingdom boasting 96 ATMs per 100,000 adults and Canada an impressive 212.
Given this gap, many rural areas in Nigeria have come to rely entirely on PoS agents. This made sense at first: PoS agents could bridge the gap for those far from banks or ATMs.
However, what started as a convenience has become a replacement. In major urban cities, PoS agents now dominate cash distribution, even in areas with several ATMs nearby. The issue now is not the availability of ATMs but their functionality—or lack thereof. Many ATMs are out of cash, forcing even those close to banks to turn to PoS agents.
The increasing reliance on PoS services is evident in the rise of POS machines deployed nationwide. As of July 2024, data from the Nigeria Inter-Bank Settlement System (NIBSS) shows that the number of deployed terminals in the country reached 3.04 million, a 32% jump from 2.3 million in the same period last year.
Between August 2023 and July 2024 alone, 744,533 new terminals were deployed, highlighting their growing role in cash distribution. Despite this expansion, accessing cash through PoS comes with significant costs, leaving many Nigerians frustrated with a system that feels exploitative, though convenient.
A pricey alternative
Unlike ATMs, which let you withdraw for free at your bank’s machines and charge a flat fee of ₦35 after the first three free transactions at other banks, PoS agents charge based on the amount withdrawn. For instance, withdrawing ₦5,000 costs ₦100, while ₦10,000 costs ₦200. The fees increase with every ₦5,000 increment, with the possibility of it being more in a case of cash scarcity.
These charges might seem small at first but add up quickly, leaving many Nigerians feeling like they’re “buying” their own money.
To put this in perspective, withdrawing ₦100,000 through PoS agents costs around ₦2,000 (₦200 for every ₦10,000). In contrast, using an ATM would cost a maximum of ₦175, assuming a charge of ₦35 per transaction and a withdrawal limit of ₦20,000 per transaction.
While ATMs remain the cheaper option, their frequent cash shortages make them unreliable, forcing more people to rely on costlier PoS services. For many, the savings ATMs offer are out of reach, highlighting the growing challenges in Nigeria’s cash distribution system.
A broken system?
The dominance of PoS agents has sparked concerns that banks are intentionally funneling cash through these agents, where fees benefit private operators rather than customers. While this may or may not be the case, the perception is troubling. Banks, which should ensure access to cash through ATMs, appear unable or unwilling to meet demand.
Meanwhile, PoS operators are thriving. Many Nigerians see operating a PoS terminal as a lucrative business opportunity. With fees creating significant profit margins, there is little incentive for agents to lower their rates, and the market remains largely unregulated.
The role of the CBN
The Central Bank of Nigeria (CBN) just recently attempted to address the cash distribution issue by directing banks to prioritise ATMs for cash withdrawals. In a circular issued ahead of the Christmas season, the CBN warned banks against diverting cash to unauthorised channels. It also announced penalties for banks linked to cash hoarded by currency hawkers, a practice that contributes to cash scarcity. The CBN has pledged to work with law enforcement to monitor cash distribution and ensure compliance.
While this directive is a step in the right direction, it remains unclear how effective it will be. Without addressing the underlying issue of ATM outages, Nigerians may still find themselves at the mercy of PoS agents.
What needs to change?
The PoS system was never meant to replace ATMs, but its current dominance exposes deeper flaws in Nigeria’s banking and cash distribution infrastructure. While PoS agents have been pivotal in promoting financial inclusion, their rapid proliferation and the high fees they charge have become unsustainable for many Nigerians.
To address this, the government must regulate POS fees, ensuring they are fair without discouraging agents from serving areas where banking infrastructure is limited. Striking this balance is key to making cash access both equitable and affordable.
As the Central Bank of Nigeria (CBN) and banks work to tackle these challenges, a clear and consistent policy on cash distribution is critical. Collaboration among banks, regulators, and the government will be necessary to create a system where cash is readily available without exorbitant costs.
Meanwhile, with Nigeria’s ongoing cash struggles, the global shift toward cashless economies is gaining momentum, and Nigeria is very much part of the conversation.
This raises an important question: how effective have the Central Bank of Nigeria’s policies been in promoting a cashless society?
While the push for a cashless economy is commendable, challenges such as unreliable ATMs, the dominance of PoS agents, and the high costs of cash access reveal significant gaps in policy implementation. These hurdles leave us questioning whether the vision of a cashless Nigeria is truly within reach or remains an aspiration for the future.
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