Hate them or love them, the agents are here to stay

Every morning, Raheem, a banking agent, a.k.a POS agent at Mile 12, one of Nigeria’s largest markets, must get cash for his two stalls. He can withdraw some money over the counter, but since early 2024, most commercial banks have capped daily withdrawals at ₦100,000. He can’t rely on customer deposits because those are inconsistent, and getting money from other agents is expensive.

“The banks do not give out more than ₦100,000 cash now if you have a savings account, so we meet supermarkets, wholesalers, and filling stations for cash. It is a mutual agreement; they need to lodge cash, and we need cash for our business, so I don’t charge them,” a POS agent in Ketu, Lagos, told TechCabal.

Banking agents began buying cash from these businesses in February 2023, when the Central Bank’s hasty currency change created a massive cash squeeze. They paid ₦5,000 for every ₦100,000 to fuel stations and other cash-heavy businesses and transferred the cost to customers who were paying between ₦500 and ₦700 for a ₦5,000 withdrawal.

A court ruling in March 2023 compelled the CBN to modify timelines for the currency change, solving the cash crisis. While that stopped agents from buying cash, they still source money from these businesses in exchange for waiving deposits.

It’s a win-win situation that works but creates an unintended consequence: a cash shortage at commercial banks.

A central bank policy capping weekly over-the-counter withdrawals at ₦500,000 also contributes to the cash shortage. The regulator has tried to wean Nigerians off their cash dependence and has cut cash disbursements to bank branches. The resulting cash scarcity at the banks drives businesses to the agents, who rarely run out of cash.

Bank branches, which rely on cash deposits from the central bank and customers, have had to cap over-the-counter withdrawals as cash-heavy businesses take their deposits to agents instead of banking halls, further driving Nigerians to POS agents.

“Even though the central bank has a ₦500,000 limit, we cannot give out more than ₦100,000 for each customer. Sometimes we open with only ₦600,000 or ₦1,000,000, and we have to make sure people get cash when they come to the banks, so we ration it,” a banker told TechCabal. They added that the central bank delivered cash to their Ojodu branch only twice the previous week.

With withdrawal limits at bank branches and ATMs, customers now visit bank branches for customer care issues, as foot traffic at branches has “dipped,” a banker at Wema Bank told TechCabal.

“We have reduced the stress of going to the banks,” said Raheem. There are 120 POS terminals for every ATM in Nigeria, as there are less than 23,000 ATMs in the country and 2.7 million active POS terminals.

When he secures cash for his stalls, Raheem, like most agents, provides Cash-In Cash-Out services for many traders, charging ₦100 on withdrawals under ₦5,000 with fees of up to ₦5,000 depending on the transaction size. Agents say they include the cost of rent, local government taxes, data, transport and the risk of holding cash in those fees.

Daily profits vary and can be as low as ₦1,000. At least five agents in Mile 12 told TechCabal they earn enough to sustain their families daily. Some agents can make as much as ₦25,000 daily, more than a third of Nigeria’s newly approved monthly minimum wage.

Nigeria has approximately 1.5 million banking agents; low entry barriers and subsidised POS terminals help drive agency banking’s popularity. Their ubiquity has also helped drive the growth of digital payments in Nigeria, as the value of cash transactions dropped by 36% from 2019 to 2023.