The financial landscape in Nigeria has undergone significant shifts post-COVID, with Point-of-Sale (POS) operators emerging as dominant players in financial transactions. While Automated Teller Machines (ATMs) remain essential, they have been overshadowed by the growing influence of POS services. This shift has led to increased competition for cash, leaving many Nigerians struggling to access their funds conveniently.
There is no doubt that POS operators have evolved from mere alternatives to traditional banking services into crucial intermediaries and first-choice service centers for many Nigerians. However, the high fees they impose, unchecked, have incentivized them to source cash through desperate and unethical means, such as withdrawing cash directly from ATMs to meet demand—defeating the purpose of ATMs. This dynamic has left regular bank customers at a disadvantage due to ATM congestion and higher transaction costs for everyday users.
Bank officials acknowledge that several ATMs in Nigeria remain underutilized and nearly redundant, leading to what many describe as a “cold war” between traditional banks and POS agents, who have come to be recognized as Reliable Human ATMs (RAMs). While these agents bridge the gap left by banking institutions, often at a steep price for consumers, user dissatisfaction is palpable across the country. Something must be done before the situation worsens.
How POS Agents Source Cash
The Central Bank of Nigeria (CBN) introduced agent banking and POS systems in 2013 to promote financial inclusion and drive a cashless economy. While this policy improved banking accessibility and empowered thousands of Nigerians to become POS operators, it also created an unintended consequence: a parallel market for cash.
Many POS operators now obtain cash through two major avenues:
- Purchasing cash from businesses: They collect physical cash from local businesses in exchange for digital transfers, creating an informal economy of cash distribution.
- Withdrawing directly from ATMs: POS agents often drain ATMs by making multiple withdrawals, further limiting access for regular bank customers.
A survey of street users revealed a preference for POS withdrawals despite the high fees. Respondents cited proximity, speed, customer service, and cash availability as reasons for their choice. Many also noted that POS agents are more personable and relatable than traditional bank staff, despite lacking formal customer care training.
Challenges in the Nigerian ATM Ecosystem
As of March 2024, Nigeria had approximately 2.7 million deployed POS terminals compared to fewer than 21,500 ATMs. With over 63 million unique bank clients, this disparity highlights the growing reliance on POS machines. However, the ATM network in Nigeria faces several issues, such as:
- Low withdrawal limits: Customers often cannot withdraw more than ₦5,000–₦10,000 per transaction, leading to multiple withdrawals.
- Scarcity of cash: Many ATMs frequently run out of cash, forcing users to seek alternative options.
- Long queues: Many ATM users complain about long wait times, especially as some banks operate with as few as one functioning machine out of five.
This system disproportionately affects individuals who rely on cash, such as traders, transport workers, and elderly citizens who struggle with digital banking platforms.
Bankers’ Perspective and CBN’s Response
Bankers largely place the blame on the CBN’s cashless policy, arguing that cash shortages stem from regulatory policies rather than banking inefficiencies. A bank official explained in an interview:
“The CBN’s cashless policy has created persistent cash shortages. People now prefer to hoard cash instead of depositing it in banks. The ATM withdrawal limits are there to ensure wider cash distribution.”
Corporate account holders, such as POS operators, often have higher withdrawal limits of up to ₦500,000 daily, while regular customers face strict limitations. This imbalance fuels frustrations among ordinary Nigerians who rely on ATMs for cash access.
A Fintech Leader’s Perspective
One of the major super-agent operators with a presence across the country noted that the cash availability problem affects both POS and ATM users. He stated:
“There is generally no cash in circulation, and all aspects of the financial system are feeling it.”
When asked what could be done, he explained that the issue is not just that POS operators demand high fees but that ATMs are not profitable enough. In his words:
“ATMs need to be made more profitable so banks can deploy more, and people can have a trusted alternative to POS.”
He further noted that POS usage in Nigeria comes with security risks:
“We’ve had cases where people were robbed at gunpoint inside commercial buses and forced to present their cards for withdrawals using a POS terminal. How were these terminals issued? Could these transactions be traced? We need to improve security and reduce cash transactions.”
CBN’s Efforts to Solve the Problem
To address these concerns, the CBN announced measures in September 2024, including:
- Injecting ₦1.4 trillion into circulation over three months.
- Penalizing banks that fail to ensure adequate cash availability.
- Encouraging customers to report ATM cash shortages for prompt action.
- Increasing oversight and imposing fines on underperforming financial institutions.
Additionally, the CBN set limits on POS transactions:
- ₦100,000 daily limit per customer.
- ₦1.2 million daily total limit for POS agents.
- ₦500,000 weekly withdrawal cap for customers.
- Fines of ₦150 million imposed on nine banks for failing to dispense cash during peak periods.
These measures aim to regulate cash availability and curb illegal cash sales while pushing for wider adoption of digital payments.
The Way Forward: Balancing Convenience and Affordability
Despite the push towards a cashless society, cash remains a crucial part of Nigeria’s economy. Many Nigerians depend on physical cash for daily transactions, necessitating a balanced approach to financial inclusion.
Several key questions remain:
- Are POS services making financial transactions more inclusive, or are they exploiting customers?
- How can we ensure ATMs provide better service without being drained by POS agents?
- What policies can help strike a balance between accessibility, affordability, and fairness?
The CBN’s regulatory measures are a step in the right direction, but their effectiveness will depend on proper enforcement and the adaptability of banks, POS operators, and customers. While ATMs continue to serve as lifelines for millions of Nigerians, POS services remain indispensable in bridging financial gaps—albeit at a cost.
As Nigeria navigates this evolving financial ecosystem, stakeholders must collaborate to create a system that prioritizes both convenience and fairness for all users. And perhaps more importantly, we must redefine inclusivity. If the purpose of introducing POS agents into Nigeria’s financial system is to promote financial inclusion for people in rural areas and those with limited economic access, how do we justify paying ₦100–₦300 for a ₦5,000 withdrawal?