Business, Featured
By Christabel Ejenike
CUSTOMERS have been complaining that bank branches ration cash they give their customers and even the Automated Teller Machines, ATMs, don’t dispense cash and when they do, the cash is rationed per ATM card. This raises the questions why is the performance of the ATM across the country dwindling?
One of the reasons for this development can be blamed on the high cost of running these machines as research has shown that there are about 23,000 ATMs across the country serving more than 200 million Nigerians. This comes to 115 ATM serving 1000 persons. ATMs are expensive to procure and expensive to maintain; as of 2016 a button, FDK keys, at the sides of an ATM cost about N80,000.
According to Joseph Maleghemi, a Financial IT expert,/ATM engineer, the keypad used to enter pin and codes alone costs N380,000 in 2016. Imagine how much it is now. If people are just using ATM to withdraw money why will I want to buy more.
This was when naira was ₦200 to $1, which is to say the keys would cost about ₦640, 000 and the keypad would cost about ₦3,040,000 if converted with the current exchange rate. Which could be the reason why the banks are failing to invest in new ATM infrastructure, leaving outdated machines to fall into disrepair.
He advised that companies in Nigeria that build ATMs. What companies in Nigeria do is buy the parts and couple it in the country, the same way they couple vehicles. “This makes it very expensive,” he said.
Maleghemi said in his paper that another factor that can lead to this is the acquisition and merging of banks of major banks. “One thing that could have caused the drop is that lots of banks got acquired or merged. In one instance, the acquired bank used to own the highest number of ATMs in Nigeria. After the merger, the bank may have cut back cost by reducing the number of ATMs in a particular location.” This merging can be attributed to the recapitalization policy of the Central Bank of Nigeria, CBN.
Another factor that the poor performance of ATMs can be attributed to the various alternatives for cash transactions such as Digital Banking, USSD, and its popular equivalent is the Point of Sale, PoS, operatives and agency banking. In recent times, there are PoS operators in every corner of the nation, including the remote areas that does not have access to banks.
These PoS operators are more active and could be considered more reliable than bank ATMs as they go over and beyond to make the cash available for their customers even to the extent of buying cash.
According to a PoS operator, Oladimeji Aileru, when he cannot get cash from the banks he sources from other sources to get money. “When I go to the bank and you see people on the line at the ATMs, the next minute you look for how to get cash from filling stations or business places that they can give you cash.”
Correspondingly, the overdependence on physical currency could also be attributed to this basic economy explains that when the demand for a product exceeds its available supply, scarcity occurs.
Despite the efforts to promote the cashless economy, Nigeria’s progress remains sluggish. The government’s initiatives, such as the Central Bank of Nigeria’s withdrawal fees, aim to reduce cash reliance and mitigate risks like robbery.
However, this measure may inadvertently drive merchants, traders and SMEs to seek alternative and potentially unregulated solutions. Perhaps, to accelerate digital payment, Nigeria can harness the benefits of a cashless society, enhance economic growth and reduce financial risks.
3rd September, 2024.
C.E.
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