Nigeria Faces Shortages in Transition to New Paper Bills

Nigeria is having a tough time switching over to some new paper currency.

The Financial Times (FT) reported Friday (Feb. 3) that a shortage of the new bills has led to long lines at banks and ATMs, fights, limits placed on withdrawals, closed bank branches and a newly created shadow economy.

The troubles started with Nigeria’s attempt to replace three high-denomination bills with new designs that are said to be more difficult to counterfeit, according to the report.

When authorities failed to print enough of the new bills, the shortage led to the current chaos as people tried to withdraw their own money or exchange their old currency before the deadline, which was initially Jan. 31 but was extended to Feb. 10, the report said.

The outgoing president blamed banks for being inefficient, while banks said they hadn’t received enough of the new bills. In addition, the central bank told people to use cards or electronic payments, while banks found they didn’t have the infrastructure needed to handle the sudden surge in demand, per the report.

Cash is used for most transactions in the country, according to the report.

The removal of old bank notes from circulation and replacement with a new design had already faced divided opinion.

The policy was championed by the governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, to prevent people from hoarding cash for illicit purposes and to control inflation.

However, two days after the CBN announced the redesign in October, the naira suffered a historic crash. Shortly after that, the International Monetary Fund (IMF) urged caution as the central bank implemented the policy.

This transition to new bills comes at a time when the CBN was already taking a tough stance on the cash economy.

Just weeks earlier, the government announced a ban on all cash withdrawals from government accounts and the CBN began enforcing new limits on ATM withdrawals.

As PYMNTS reported on Jan. 8, the CBN — like other central banks around the world — has often extolled the benefits of non-cash transactions.