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POS transactions crash by N226 billion in Q1 2024 as cash outside banks climbs

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Point-of-Sale (POS) transaction values witnessed a downturn in Nigeria for the first quarter of 2024, registering a N225.73 billion drop when compared to the corresponding quarter of the previous year.

This significant decline marks a 7.94% fall in the use of POS systems for transactions within the country as the currency outside banks surged.

The contrasting trends of POS transaction values and volumes—sourced from the Nigeria Inter-Bank Settlement System (NIBSS) with the data of the Central Bank of Nigeria (CBN) on currency circulation offer a complex picture of the financial habits of Nigerians in the first quarter of 2024.

While this analysis encompasses the first quarter of 2024, the CBN has not yet released the data for March 2024. This limits the analysis for cash outside banks to February 2024.

This decline in POS transaction values and volumes can be seen in the context of the cash scarcity that hit Nigeria in the first quarter of 2023.

The cash shortage during that period led to a surge in cashless transactions, including the use of POS systems, as citizens sought alternatives to conduct their daily business in the absence of sufficient cash circulation.

The recent decline in POS usage suggests a reversal of the cashless trend, possibly indicating that the aftereffects of the previous year’s cash scarcity might be normalizing, or that new patterns in consumer transaction behavior are emerging.

Despite the downturn in POS transaction values and volumes in Nigeria for Q1 2024, there has been an uptrend in the registration of POS terminals during the same period.

This rise in terminal registration seems counterintuitive given the simultaneous decrease in transaction value and volume. It could suggest that while the immediate usage of POS systems has dropped, the infrastructure continues to expand.

Amid the decline in POS transaction values and volumes, alongside the significant rise in registered POS terminals in Nigeria for Q1 2024, the scenario is further compounded by the increasing trend of cash outside the banking system.

Approximately 92% of all currency in circulation in February 2024 was outside the banking system. This is a notable increase from February 2023, when the figure stood at 86%. The growth in the proportion of currency held outside banks is significant and suggests a deepening trend of cash retention by Nigerians, a pattern that may have influenced the observed decrease in POS transaction activities despite the expanding availability of POS terminals.

Together, these figures from NIBSS and CBN suggest a period of adjustment and a possible recalibration of trust in cash-based transactions, likely still echoing the cash scarcity challenges of the previous year.

With more cash being held outside the banking system, the reliance on POS transactions seems to have diminished, yet the infrastructure for cashless transactions continues to grow, as evidenced by the increased registration of POS terminals.

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