Nigeria’s attempt to replace its currency notes descends into chaos

Nigeria’s attempt to replace its high denomination currency notes less than a month before a crucial general election has descended into chaos, with long lines of people forming outside cash machines and fights breaking out inside banks as customers demanded access to their own money.

Lengthy queues were visible at ATMs across Lagos, Nigeria’s economic capital, as the failure of the authorities to print enough of the new notes left lenders struggling to meet demand.

One FirstBank branch in the Ikoyi district was closed when the Financial Times visited, with many customers locked out. A security guard said he was ordered to lock the doors after brawls broke out inside. The cash machine at the branch began to dispense cash a few hours later but with a 10,000 naira limit per customer.

Another nearby Lotus Bank was so full that a tent was erected to protect queueing customers from the scorching sun.

Japhet Joshua Babatunde, one of those outside the FirstBank branch, said he had been unable to withdraw his salary despite being paid a week ago. “I’m angry — it’s my own money I came to collect, not a loan,” he added. Another customer, Uhegbu Maria Odichinma, said she had visited the same branch five days in a row to try to get hold of the new notes. Videos circulating on social media showed customers stripping to their underwear at local branches as frustration mounted over the currency scarcity.

Nigeria’s central bank said in October that the N200, N500 and N1,000 notes would be replaced with new designs it said would be more secure. The old notes were due to be taken out of circulation on January 31, but the unavailability of replacements led to the deadline to switch being extended until next Friday, leaving Nigerians struggling to access money in an economy still largely reliant on cash for most transactions.

“We urge [people] to exercise patience as the Nigerian central bank is working assiduously to address the challenge of queues at ATMs,” the central bank said in a statement, acknowledging the chaotic rollout.

Muhammadu Buhari, the outgoing president, on Friday asked Nigerians to “give him seven days to resolve the cash crunch”. But he also blamed banks for being “inefficient” and “only concerned about themselves”.

“Even if a year is added, the problems . . . won’t go away,” he said, adding that he had been reassured by the central bank that it was capable of supplying enough notes. The bank has already collected almost N2tn in old currency.

The head of one of Nigeria’s biggest lenders told the FT that many banks were not supplied with enough of the new notes to meet demand. The new currency is meant to be harder to counterfeit.

A payments industry executive also said that while the central bank was encouraging Nigerians to use other channels, such as cards and electronic payments, many banks did not have the infrastructure to scale up. “Electronic transactions are failing because of the volume increases that no one did anything to prepare for,” the executive said.

The currency crisis comes ahead of the presidential and parliamentary elections to be held on February 25. Bola Tinubu, candidate for the ruling All Progressives Congress, said at a recent campaign event that unnamed opponents were trying to use the controversy over the new naira to sabotage his campaign.

Analysts said the currency redesign had disrupted some politicians’ plans to induce voters with cash bribes they had stowed away ahead of the elections. The bank chief said: “There were multiple objectives that were sold to the president. At the core of it, it was the idea that this could help secure the election from vote-buying. They convinced the president that a lot of people had piled up money to buy votes during the election and that the best way to deal with that was to do the change.”

In a country with a large black market supplying fuel, US dollars and other items, a shadow economy has emerged for the new notes. Banking agents, who typically supply cash in remote areas, have jacked up their commissions. A withdrawal of N5,000 used to attract a charge of N100, now agents are asking for N500.