March 15, 2023/United Capital Research

Most recent data from the Nigeria Inter-Bank Settlement System (NIBSS) revealed that the total value of cashless transactions in the Nigerian economy declined by 4.8% in February 2023 to print at N37.7tn relative to N39.6tn recorded in January 2023. The key driver of the observed decline in the value of e-transactions was the increased failed payment experienced in February 2023, particularly owing to a short-fall in network infrastructure. The increasing traffic arising from customers’ e-transactions has led to infrastructural collapse as most transactions were left unexecuted, thereby leaving customers stranded. We observed that the 41.3% increase in the use of e-payment gateways within the reviewed period could not translate into increment in the value of electronic transactions.
 
Aside from the above, the CBN’s currency redesign policy, which was announced on Wednesday, 26 October 2022 contributed to the “cash-crunch” in the economy. This could be true as customers were unable to access the new notes after the withdrawal of the N200, N500 and N1,000 from circulation. As a result of hardship suffered by Nigerians, three state governments (Kaduna, Kogi and Zamfara) had on 03 February 2023 sued the Federal Government at the Supreme Court for a reversal of the policy. Sequel to the ruling of the Supreme Court on Friday, 03 March 2023, stating that the old N200, N500, and N1,000 notes remain legal tender, the CBN expressed compliance in its recent press release of Monday, 13 March 2022, directing that the select old Naira notes remain legal tender alongside the redesigned banknotes till December 31, 2023.
 
Considering the flip side of the cashless policy as well as the currency redesign policy, we expect a decline in the total output for Q1-2023. This may be hinge on the depressed economic activities emanating from the lack of cash and failed electronic transactions in the period under review