The new cash withdrawal limit of N20, 000 daily from Point of Sale (PoS) channel, effective from January 9, 2023, has been described as a threat to the sales and profits of operators.
The Central Bank of Nigeria (CBN) had, in a letter to banks and other financial institutions on Tuesday, slashed the limits on cash withdrawals over the counter and via Automated Teller Machines (ATMs), PoS, and cheques.
Over the past few years, the number of PoS agents, also known as mobile money agents or bank agents, has surged, with the business serving as a means of livelihood for millions in urban and rural areas.
“It is going to affect agency banking because the volume of transactions will reduce significantly,” Ayorinde Akinloye, an investor relations analyst at Seplat Energy Plc, said.
He said it is now up to the operators to find a way to position themselves better in the value chain.
Globally, agency banking is recognised by policymakers, researchers and development agencies as a financial inclusion initiative that has remained an integral tool in developing economies, particularly in the areas of poverty reduction, employment generation, wealth creation and improving welfare and general standard of living.
The opportunity to make an additional income is a major motivation for becoming an agent, according to a 2020 Enhancing Financial Innovation and Access (EFInA) agent survey.
“Agents surveyed are signed up by different principals/service providers. Nevertheless, First Bank (First Monie), OPay, QuickTeller, and MTN top the list of principals with a majority share of agents,” EFInA said.
Adesola Adeduntan, chief executive officer at First Bank of Nigeria Limited, said last year that more than 1.2 million individuals had been positively impacted economically through the jobs created via their agent banking proposition.
“This initiative has been a very formidable vehicle for job creation and economic development in several communities across the country, as more than 100,000 direct jobs and 300,000 indirect jobs have been created, with an agent earning an average monthly commission income of N85,000,” he said.
In Nigeria, the agents are third-party retail outlets contracted by financial institutions to process clients’ transactions. They are empowered to reduce reliance on over-the-counter transactions while providing convenient personalised services.
The agents are equipped to carry out services, which include account opening, cash deposit, airtime purchase, bills payment, withdrawals and money transfer. Many people prefer to visit PoS outlets to carry out transactions rather than banks as it saves them time and energy.
According to Shared Agent Network Expansion Facilities, the number of bank agents surged by 1,456.9 percent to 1.3 million in 2022 from 83,500 in 2018.
In the nine months to September 2022, PoS volumes rose by 24.3 percent to 878.4 million from 706.8 million in the same period of 2021, according to Nigeria Interbank Settlement System (NIBSS).
NIBSS said the number of PoS terminals in Nigeria grew significantly from 155,000 in 2017 to 1.1 million as at April this year.
Tunde Olatunji, a PoS bank operator, told BusinessDay that the CBN policy would take a toll on his business.
“The policy will not work because people like using PoS. They can withdraw as high as N100, 000 or N200, 000 easily in a day instead of going through the stress of the banks or ATMs,” he said.
Olatunji, who charges N100-N200 for withdrawals of N10,000-N20,000 and N300-N400 for N20,000, said if he increases the charges due to the new policy, it will discourage people from using PoS terminals, causing him losses.
“It will reduce their commissions on transactions. So, for them to cover up, they will need to get more people to use the terminals or increase the charges on the transactions,” said Omobola Adu, investment research analyst at Afrinvest Research & Consulting.
Prior to the announcement of the new withdrawal limits, which take effect nationwide from January 9, 2023, there was no transaction withdrawal limit for PoS transactions.
Read also: CBN slashes individuals’ cash withdrawal limit by 80%
“Some outlets handle single transactions above N30,000, N40, 000 or even more which actually makes it quite a good business depending on the number of transactions executed,” Damilola Adewale, a Lagos-based economic analyst, said.
He said the implementation of the policy will make profits and sales on POS transactions drop drastically. “Alternatively, we might see some of them transiting to electronic channels to execute transactions.”
Apart from the data on the number of bank agents, a recent International Monetary Fund (IMF) survey showed the number of bank agent outlets per 1,000 square meters increased by 380.2 percent to 680.9 in 2021 from 141.8 in 2020.
“Mobile money has several features that can support undisrupted financial transactions during the COVID-19 pandemic, especially in developing economies,” analysts at IMF said.
On the benefits of mobile money, they said it provides high levels of market penetration in many low- and middle-income economies, transactions are carried out with minimal physical contact, and that it has high levels of usage among the unbanked and underbanked, making it a key mode of using financial services for the most vulnerable parts of the population.
A 2021 Global Findex report by the World Bank said the higher adoption of mobile money is driving the growth of account ownership in financial institutions, particularly in Sub-Saharan African countries.
