Cash Crunch In Banks: Damage may be worse than COVID-19, by Afe Babalola

*Although cashless payments are becoming increasingly common, the demand for cash is rising in many advanced economies. Cash is the safest payment and financial instrument for the public in underdeveloped countries like Nigeria

Afe Babalola

In recent times, the Central Bank of Nigeria and commercial banks have inflicted cash crunch on bank customers in the country.

The cash crunch was felt virtually throughout the country. Many banks had turned customers back for lack of funds while those who had the misfortune of gaining entrance into the banking halls went home disappointed.

Customers could not withdraw cash from the ATMs (Automatic Teller Machines)  in my university. The banks operating in the university also had no cash to pay to customers.

The saving grace was that the students who relied on ATMs were on holiday.

Nigeria used to be a developing country, but, in the past few years, what we have experienced is backward development.

Time it was that our economy was basically trade by barter. Gradually, traders exchanged goods for cash.

Now, most Nigerians earn their living from daily sales. These include market women, transporters, hawkers, vulcanizers, plumbers, roadside mechanics, hairdressers and so on.

In the absence of sales through cash, these large proportion of Nigerians suffer more than the few wealthy Nigerians from the cash crunch imposed by the Central Bank and the commercial banks.

The popular African adage is that “when hunger is eliminated from one’s problems, the remaining problems become easier to solve.” A man without cash will certainly go without food. He becomes hungry.

Of course, a hungry man becomes an angry man, and an angry man becomes violent. A violent man can kill, behave irrationally and even commit suicide.

COVID-19 was regarded as a dangerous and a dreaded epidemic, which kills its victims, but I dare say that cash crunch kills faster than COVID-19, and certainly will kill more people than COVID-19.

According to a study by Johns Hopkins, “every minute, hunger kills 11 people compared to seven COVID-19 deaths.”

Hungry families also resort to desperate measures such as sale of babies, child marriage, banditry and kidnapping in order to secure food for the family.

According to Luiz Inacio Lula da Silva, President of Brazil, “Hunger is actually the worst weapon of mass destruction. It claims millions of victims each year.”

A consumer holding Nigeria’s Naira notes

This corroborates the statement by George McGovern: “Pay attention to the hungry, both in this country and around the world. Pay attention to the poor. Pay attention to our responsibilities for world peace. We are our brother’s keeper…”

Some might say that, in the developed countries, much cash would not be in high demand because of cashless payment policy.

Yes, it only works because their governments have created the enabling environment for such technology to thrive.

In the Nigerian context, a country that prides herself in much of analogue platforms that cannot transmit election results because 301 out of her 774 local government areas (LGAs) could not have access to Internet can, therefore, not effectively run a cashless environment, needless to successfully implement the so-called “Naija e-wallet.”

Even if the motive is to fully implement a cashless payment policy, then a robust change management policy must have been put in place that will not inflict hardship on the masses.

Although cashless payments are becoming increasingly common, the demand for cash is rising in many advanced economies.

Another school of thought might say that cash hoarding will help to alleviate monetary policy on one hand while cash hoarding erodes the effectiveness of monetary policy by weakening the money creation process.

On the other hand, greater cash issuance increases a central bank’s income through greater seigniorage.

Cash is useful for payment and for other transactions. It is favoured by the elderly and marginalised, low-income people.

Cash becomes especially useful when natural disasters cause power shortages and destroys computers. Cash is the safest payment and financial instrument for the public in underdeveloped countries like Nigeria.

I hereby call on the Federal Government to critically look into the situation of dearth of cash and or cash crunch by banks in the country.

If it is not effectively tackled, it will lead to serious hunger, which can dovetail into high mortality rate, uncontrolled crimes and increased insecurity.

Aare Afe Babalola, OFR, CON, SAN, LL.D (Lond.), FNSE, FCIArb, is Founder/Chancellor, Afe Babalola University, Ado-Ekiti, Ekiti State

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