He languished at a bank after a long queue to withdraw some cash to save his expectant wife.

James Auta of the Kasuan Magani area in Nigeria’s northwestern Kaduna state left the bank cashless, only to return his wife home from the hospital because he could not pay the bill. The wife laboured for hours to deliver the baby until she bled to death.

Auta had gone to the hospital with his wife on her delivery day, but doctors refused to provide medical attention until he made a cash deposit. His efforts to get cash from the bank failed, and with informal money brokers shut down in town, he could not pay. 

Left with no other option, a frustrated Auta took his wife home and indulged a local – albeit unregistered  – nurse to help with the delivery. The local nurse failed, causing the woman to bleed for too long until she died in deep pain.

“After my wife delivered a baby, blood was coming out non-stop, and all efforts made by the nurse to stop the bleeding failed,” Auta said. “I had up to ₦300,000 in my account when my wife was pregnant. She was attending antenatal in Lafia, coming from the village until mid-January when the scarcity of cash set in and the stress of travelling made her abandon her routine medical check-ups.”

Auta shared his heart-wrenching story with journalists at the time. He could not be reached for further comments when HumAngle tried contacting him earlier this year.

The withdrawal of cash from circulation, intended to push Nigeria to a cashless economy, caught many off guard; Auta was one of them. When the Central Bank of Nigeria (CBN) announced it sometime in January 2023, some Nigerians wondered how such a shift could happen suddenly. The hurried implementation of the policy led to widespread suffering for the nation and its people, with many running into deadly financial crises.

After redesigning the currency, the CBN authorities demonetised the old Nigerian Naira notes to transition to a cashless economy rapidly. However, the move led to a severe cash shortage. After mopping up nearly 70 per cent of the old notes, the central bank struggled to replace them with new ones, leading to a severe cash shortage in circulation, which lasted for several months, particularly between January and March of 2023. The shortage worsened as many traders and businesses stopped accepting old notes ahead of the deadline. 

Nigeria’s long journey to a cashless economy

This was not Nigeria’s first attempt to introduce a cashless policy. In 2012, under former CBN governor Sanusi Lamido, the country started exploring the idea. 

At that time, the central bank didn’t withdraw cash from circulation, but instead pushed financial institutions to increase their investment in digital payment infrastructure and promote digital payments among customers. Asked why he insisted on ensuring a cashless economy in Nigeria, Sanusi said it aimed to get more money in circulation into the system and track money laundering activities. Among many other reasons, the former governor, during his tenure, argued that many countries of the world were going cashless and ensuring that all financial transactions were electronic.

As Sanusi continued to advocate for a cashless society, Nigeria saw the introduction of alternative electronic payment systems, such as debit or credit cards, alongside digital payment services like PayPal, Zelle, Venmo, and Apple Pay. 

The policy couldn’t thrive for long because the country’s deposit banks lacked the infrastructure to ensure a smooth, cashless system. When Emefiele became the CBN governor in 2015, he suspended the policy to give enough time for banks to build technological capacities for a cashless society.

When Emefiele re-introduced the cashless policy in 2019, nothing much was achieved. But in October 2022, amid the fierce campaign for the general elections, he declared that the CBN was committed to making Nigeria wholly cashless. Interrogated by the Nigerian lawmakers, the former CBN governor insisted that the country was ripe enough to commence a holistic cashless system.

“The proliferation of financial access touch points and e-payment channels across urban and rural areas, which presents citizens with ample alternatives for financial transactions, further justifies the nationwide policy implementation,” he told the lawmakers.

Emefiele argued that there were 6,500 branches of deposit money banks, other financial institutions, 1.4 million agent locations, 900,000 Point of Service (PoS), and 14,000 Automated Teller Machines (ATMs), including 31 commercial banks with 4,603 branches; 878 microfinance banks with 1,966 branches; 1.4 million agents; 899,642 PoS Terminals and over 14,000 nationwide.

He also told journalists that the Nigerian financial system had allowed too much illicit cash flow, which was against global standards. “Our economy uses too much cash for transactions for goods and services, especially for buying and selling. This is not how it is done in other progressive countries of the world where there are other payment options like debit and credit cards, bank transfers, bank direct debits, ATMs, and even mobile phone money,” he said.

The rise in the digital payment system

Although President Tinubu’s government has accused Emefiele of destroying Nigeria’s financial system, the cashless policy seems to have opened many doors for digital payment platforms to thrive. Several digital payment platforms took advantage of the cash crunch to invest in Nigeria, which has subtly booming financial inclusion and a fast-paced payment system. The cash shortage in Nigeria then revealed the vulnerability of the country’s alternative payment systems, fueling a rapid rise in digital payments.

The policy propelled a surge in Nigeria’s Point of Sales (PoS) transactions. According to the Nigeria Inter-Bank Settlement System, in January 2023, PoS transactions increased by 40.7% year-on-year, reaching a total value of ₦807.16 billion. Meanwhile, overall cashless transactions in Nigeria experienced a substantial 45.41% year-on-year growth, amounting to ₦39.58 trillion in January 2023.

The digital payment system soared prosperously in 2024, with millions of online transactions, as against the traditions of using ATMs or visiting physical banks to obtain cash. Thanks to the CBN cashless policy, a report by Zone, in collaboration with TechCabal Insight, revealed that Nigerians have transitioned from ATMs as the primary means of conducting financial transactions to online transfers.

The report emphasised the role of regulatory initiatives such as the CBN’s payment system vision, which were instrumental in promoting digital payments and financial inclusion. It noted that the growth of payment methods and channels, such as online transfers, and NEFT transfers, is a testament to the effectiveness of these initiatives.

More than ever before, digital payment systems flourished in the past year. The 2024 Informal Economy Report by Nigerian fintech company Moniepoint explicitly stated that the adoption of digital payments in Nigeria has doubled following the severe cash crunch in the first quarter of 2023. The report noted that the digital transformation that emerged from the policy gaffe by the CBN has changed the financial behaviours of Nigeria’s micro, small, and medium enterprises (MSMEs), nearly 90% of which operate within the informal economy.

Nigeria’s informal economy has a large share in the economic formations, accounting for over half of its Gross Domestic Product (GDP). Also known as the shadowy economy, the sector is dominated by approximately 40 million MSMEs.

The Moniepoint report provides insights into this sector, based on data gathered from over 2 million businesses across Nigeria. Before the recent CBN’s cashless policy, cash was the preferred payment method, particularly in low-trust environments where small businesses relied on it for its ease of use and ability to meet immediate cash flow needs.

The cash crunch, however, has prompted a significant shift in payment methods, with thousands of the informal economy actors digitalising their transactions. According to Moniepoint, card payments have become the most common method for in-person transactions in the informal economy, accounting for 80.2% of payments. When informal business holders were asked about their payment preferences, they chose digital methods such as cards and transfers, making up 46.2% of their transactions.

The Moniepoint data suggests a nuanced transition phase in payment behaviours, where businesses that prefer transfers also tend to use cash more frequently. This suggests that while digital payment methods are gaining traction, cash is still an important part of the payment landscape in Nigeria’s informal economy.

“The cash scarcity issue changed things. Moniepoint was in a unique position,” Edidiong Uwemakpan, the Vice President of Global Marketing at Moniepoint, said. “On one side, cash scarcity affected the cash-in, cash-out aspect of the agent business. Conversely, Moniepoint also had a robust business banking operation.”

Azuka Mordi, a digital payment and financial inclusion expert, said Nigeria needs to collaborate with telcos, fintech and banks to achieve a seamless cashless economy. He stressed that the government’s partnerships with fintech players, telecom companies and other strategic partners will provide digital solutions to support the cashless economy. The financial inclusion expert added that such partnerships also offer the greatest potential to overcome infrastructure barriers to accelerate financial inclusion and drive economic growth across multiple sectors.

“Digital innovations are key to advancing financial inclusion. They are the big equalisers, enabling and spearheading financial inclusion for people and small businesses alike,” Mordi said. “The foundation to enable payment technologies for a robust digital economy is being laid one regulation at a time.”

Failed to curb ransom payments, terrorist financing 

However, one of the biggest promises of the CBN cashless policy was that it would curb terrorist financing, money laundering and kidnapping for ransom in Nigeria. The Nigerian Financial Intelligence Unit (NFIU), a CBN subsidiary coordinating anti-money laundering and counter-terrorist financing frameworks, claimed the policy would end ransom payments to kidnap syndicates. 

The NFIU believed the terrorists rely so much on the informal economy and illicit cash circulation to finance their deadly operations. The larger percentage of transactions linked to terrorist financing are initially carried out in cash, which is sourced from legitimate and illegitimate activities,” the government agency said. “However, cash collected is usually placed into the financial system directly through bank deposits and indirectly through POS transactions.”

HumAngle spoke to dozens of victims kidnapped during the cash crunch to understand how they paid ransom to terrorists despite the limitations. Many of them said they were forced to find cash at all costs, elongating their torturous detention in the terrorist camps. Several other captives paid with gold karats, motorcycles, phones, and rams.

At least four terrorist negotiators told HumAngle that in Zamfara, the epicentre of banditry and rural terrorism, various leaders of armed groups were amused when they heard the cashless policy was targeted at them.

James Barnett, a Lagos-based conflict and terrorism researcher, told HumAngle that when the authorities enforced the policy, the terrorists quickly reverted to demanding ransoms in material goods due to the cash shortage.

“The naira redesign was not a success on its terms as a counter-terrorism measure, especially when you consider that it caused significant hardship for ordinary Nigerians and may have therefore pushed more destitute Nigerians to collaborate with bandits as informants or logistics providers,” Barnett said.

This report is produced as part of the DPI Africa Journalism Fellowship Programme, a collaboration between the Media Foundation for West Africa and Co-develop.