The naira crisis, coupled with the inability of banks to effectively respond, has led to a significant shift among customers towards mobile money platforms. Funmi Fabunmi explores how this transition has resulted in a flourishing business for fintech companies. The redesign of the naira notes triggered a crisis that complicated daily operations for numerous individuals and organizations. In February, a severe cash shortage nearly caused the collapse of Nigeria’s economy, leading to widespread protests. In response, the government reintroduced the old N200 notes into circulation and extended the deadline for their withdrawal by 60 days, now set for April 10.
The cash scarcity associated with the naira redesign has placed immense pressure on traditional banks, which have struggled to keep up with the influx of customers migrating to mobile and digital banking. Many banks were forced to close their doors due to protests from frustrated customers unable to withdraw cash. With automated teller machines disabled and over-the-counter services unavailable, banks’ digital platforms became overwhelmed. Customers found themselves stranded, unable to complete transactions, as digital banking services became increasingly unreliable. Transfers that typically took minutes were delayed for days. For instance, Adedeji Owonibi, Founder and Chief Operating Officer at Convexity, recounted a payment he made through a digital platform that failed to deliver even after a week. Another customer, identified only as Bolanle, expressed her frustration with her bank’s app, which had been inaccessible since the previous Friday. She noted, “Thank God I have customers who trust me enough to give me items on credit. If not, I do not know what I would have done.”
In response to the surge in failed transactions, many banks have increased their customer service personnel to address complaints. However, the banking sector was already facing challenges prior to the naira crisis, including the loss of skilled staff due to the ‘japa’ syndrome, a local term for migration. This crisis has highlighted the shortage of qualified IT professionals in the banking industry, as many have relocated to developed countries. A source close to a human resource consultant revealed that banks are willing to hire expatriates at any cost due to the embarrassing situation, although attracting talent to Nigeria remains difficult for various reasons. The focus now is on poaching skilled individuals to stabilize the system while also considering younger talents for training.
Seun Kuti-George, Vice President of the Nigerian Association of Small Scale Industrialists, acknowledged the potential for online payment migration but expressed concern over service glitches. He shared an example of a payment he made that had not been confirmed, leaving him unable to finalize a transaction. He noted that if the situation were urgent, it could lead to significant losses. A source at the United Bank for Africa, speaking anonymously, attributed network glitches to the overwhelming online payment traffic. Similarly, an official at Access Bank indicated that persistent glitches might necessitate a visit to the bank for assistance, as issues could stem from network service providers.
Dr. Uju Ogunbunka, President of the Bank Customers Association of Nigeria, clarified that banks do not provide network services and emphasized that the network failures were due to excessive pressure on the system. He explained that the problems were not solely the banks’ fault but rather a manifestation of broader network issues affecting various sectors. He pointed out that many cases of missing funds were linked to network malfunctions rather than theft, and while some funds could be recovered, others were lost due to system interruptions.
Victor Olojo, National President of the Association of Mobile Money Agents in Nigeria, noted that the sector is under significant strain due to Central Bank of Nigeria (CBN) policies, which have overstretched banks’ IT capabilities. While banks struggle to cope with the demands stemming from the naira redesign, fintech companies have experienced a boom. Many customers have turned to fintech solutions for their daily transactions, with platforms like Kuda, PalmPay, and Moniepoint becoming increasingly popular. Olojo remarked that fintech has stepped in to fill the gaps left by traditional banks, which are unable to meet customer demands. He urged banks to strengthen their infrastructure to handle increased traffic and suggested that the federal government should create a more favorable environment for fintech to thrive.
Owonibi also highlighted the need for fintech to transition to blockchain technology to prevent system breakdowns amid rising network traffic. As the naira crisis continues, it has become evident that while traditional banks face significant challenges, fintech companies are well-positioned to adapt and meet the evolving needs of Nigerian consumers.
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