February 26, 2024

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Small Businesses Worse Hit by Cash Crunch

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CEMM REPORT, SME | 96.15 per cent of small businesses in Nigeria were negatively affected by the Naira redesign policy of the Central Bank of Nigeria which lead to a cash crunch.

The naira redesign which led to scarcity of the naira also negatively affected 13.51 per cent of employed Nigerians, making it difficult for them to fund their transportation and buy food items.

According to an SBM Intelligence survey, a total of 84.51% of Nigerians were generally affected negatively by the naira redesign policy.

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In its report titled” Strapped: Impact of the Cash Scarcity on Individuals and Businesses,” the socioeconomic research firm stated that the naira redesign policy did not affect only 5.63 per cent.

“Those who were entrepreneurs, traders, or self-employed overwhelmingly reported being affected by the cash crunch at 96.15%. At 13.51%, the employed class topped the percentage of people who said they were unperturbed by the cash crunch. Two-thirds of the unemployed respondents said they were impacted, while all the students reported being affected.

“About 84.51% of responses from the interviewees show that the federal government’s induced cash scarcity negatively affected Nigerians. The other respondents, totalling 15.49%, either said they were indifferent or not affected. The percentage of those indifferent was 9.86%, while that of those unaffected was 5.63%.

The impact of the cash crunch was felt by many as they found it difficult to transport and feed during the period.

“Many respondents said they found transporting and feeding more difficult due to the cash squeeze. Bus drivers and conductors took PoS machines onboard to ease payment for their passengers. As mentioned in the introduction, food sellers reduced prices and battered their goods to obtain other essentials.”

Furthermore, the report notes that Nigerians within the income distribution of ₦250,000 and under ₦500,000, as well as those who earned ₦1 million or more, said they could access cash during the cash crunch.

“On the other hand, 36.11% of those who earn above ₦100,000 and under ₦250,000 could not access cash. Among those receiving less than ₦100,000, 31.33% said they could not spend the naira in its paper form while it was scarce,” it added.

Age Distribution 

Moreover, 45.45 per cent of Nigerians between the ages 18-29 took the biggest hit of the cash crunch while those aged 40–49 were the least hit at 25.93 per cent.

Also, 34.62 per cent within the age bracket of 30-39 were also affected.

“Further down the list were those aged 40–49; 25.93% of them could not access the physical naira. Moving linearly, the respondents most able to access the naira were those aged 50 and above.

“However, reports on social media and the mainstream online media space showed that many older people, especially those in rural areas, experienced difficulty in accessing the naira while it was scarce,” they added.

They also added that respondents were split about the length of the effect of the cash swap policy, revealing that a majority (43.66%) held that the policy’s effect would not last long, while 22.54% said they were unsure.

“A substantial 33.80% were positive that the policy would have a lingering effect on their finances.”

Survey Population

According to the data, 38.03% of respondents questioned are between the ages of 40 and 49, while 36.62% are between the ages of 30 and 39. 50 and older age groups have the lowest representation in the study (9.86%). 15.49% of those questioned are in the 18- to 29-year-old age group.

42.25% of the people questioned were women. The remaining 57.35% of respondents are men, 52.11% are employed, and 36.62% are business owners, merchants, or other self-employed individuals, they noted.

“About 84.51% of responses from the interviewees show that the federal government’s induced cash scarcity negatively affected Nigerians. The other respondents, totalling 15.49%, either said they were indifferent or not affected. The percentage of those indifferent was 9.86%, while that of those unaffected was 5.63%.

“Many respondents said they found transporting and feeding more difficult due to the cash squeeze. Bus drivers and conductors took PoS machines onboard to ease payment for their passengers. As mentioned in the introduction, food sellers reduced prices and battered their goods to obtain other essentials.”

Region

Meanwhile, in Nigeria’s North Central region, 100 per cent of the respondents said they were affected by cash crunch.

In the Southwest Zone, banks were targets of arson, with several reports of attacks on financial institutions emanating from Lagos, Ogun, and Oyo States. The report added that more than 94% (94.74%) of respondents said they were affected.

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They said that Nigerians now understand that the CBN collected more banknotes than they could replace. They also noted that if internet connections had been dependable, many people would have used them more often in addition to cash and the policy would not have negatively impacted individuals in the formal sector as much.

“For the 69.7% of adults living in rural areas, the possibility of using mobile phones to access Unstructured Supplementary Service Data (USSD) channels smoothly could have incentivised them to accept the policy.

“That still leaves a large demographic gap; according to the development organisation, Enhancing Financial Innovation & Access (EFInA), there are 20 million Nigerians, or 19% of adults, who did not have a mobile phone as of 2020

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