The first quarter of 2024 witnessed a notable decline in Point-of-Sale transaction values in Nigeria, reflecting a decrease of N225.73 billion compared to the same period in the previous year.
This decline, amounting to a 7.94% reduction in POS usage within the country, coincided with a surge in currency circulation outside of banks.
The juxtaposition of declining POS transaction values and volumes, sourced from the Nigeria Inter-Bank Settlement Systemand data from the Central Bank of Nigeria on currency circulation, paints a nuanced picture of Nigerians’ financial habits in early 2024.
Although the analysis spans the first quarter of 2024, the lack of data for March 2024 restricts the examination of cash outside banks to February 2024.
The quarter commenced with a modest increase in POS transaction values, reaching N850.09 billion in January 2024, surpassing the figures from January 2023.
However, this growth was short-lived, as transaction values declined to N805.05 billion in February 2024, down from N883.45 billion in the same month of the previous year.
The downward trend persisted into March 2024, with transaction values further decreasing to N961.86 billion, compared to March 2023’s N1.15 trillion. Overall, the total value of transactions for Q1 2024 amounted to N2.62 trillion, failing to match the N2.84 trillion recorded in the same period in 2023.
The decline in POS transaction values and volumes is mirrored by a corresponding decrease in transaction volumes. While January 2024 witnessed an initial rise in transaction volumes to 112.78 million, February and March 2024 saw volumes decline to 97.57 million and 103.65 million, respectively.
Consequently, the first quarter of 2024 saw a total of 314 million POS transactions, marking a significant decrease of 73.81 million, or 19.03%, from the same period in 2023.
This decline in POS transactions may be contextualized within the backdrop of the cash scarcity experienced in Nigeria in the first quarter of 2023.
During this period, cashless transactions, including POS usage, surged as individuals sought alternatives amidst insufficient cash circulation. The recent downturn in POS usage suggests a potential normalization of post-scarcity transaction patterns or the emergence of new consumer transaction behaviors.
Despite the decline in POS transaction values and volumes, Nigeria witnessed an uptrend in the registration of POS terminals during Q1 2024. This seeming paradox implies that while immediate POS usage has declined, the infrastructure for cashless transactions continues to expand.
However, this scenario is further complicated by the increasing trend of cash being held outside the banking system. CBN data reveals a substantial preference among Nigerians to retain cash at home, with cash outside banks soaring to N3.28 trillion in January 2024 and further to N3.411 trillion in February 2024.
Additionally, currency in general circulation followed a similar trajectory, reaching N3.65 trillion in January 2024 and N3.69 trillion in February 2024. The proportion of currency held outside banks rose to 92% in February 2024, indicating a deepening trend of cash retention and potentially influencing the observed decline in POS transactions despite the expanding availability of POS terminals.
Taken together, these figures suggest a period of adjustment and a potential recalibration of trust in cash-based transactions, likely influenced by the challenges of cash scarcity in the preceding year.
While reliance on POS transactions appears to have diminished amidst increased cash retention, the infrastructure for cashless transactions continues to grow, as evidenced by the rising registration of POS terminals.
