Why you should care

Human ingenuity has no bounds, especially when it comes to money. 

When supermarket owner Baba Acheme first bought a Point of Sale (POS) machine in 2014, the entrepreneur in Mubi — the commercial hub of the northeastern Nigerian state of Adamawa — thought it would help him collect payments for the groceries he sold. Now, four years later, Acheme finds that he’s using the machine in a new way — turning himself into a human ATM with it and doling out cash in exchange for card payments in exchange for a commission.

Acheme is part of an alternative banking system that is sprouting in Africa’s largest economy, which had areas overrun by Boko Haram terrorists until three years ago. The terrorists blew up most commercial banks in Mubi with dynamite in November 2014 and carted away N1 billion — $2.6 million — in cash.

After the Nigerian military recaptured the region in 2015, many among the 2.2 million people who had fled the violence have begun to trickle back to their homes. But many of the banks have refused to reopen, forcing residents to travel four hours — one way — to the state’s capital, Yola, in search for functioning ATMs if they want cash.

This is the bank we know for now.

Maina Musa Hong, customer of a POS “bank”

From the ashes of that destroyed banking system, a parallel mechanism is emerging that saves residents time and travel costs, while also helping smart entrepreneurs like 40-year-old Acheme double up as cash machines. Before the Boko Haram attacks, customers only rarely asked him for cash — only when ATMs occasionally ran out of money. But now that’s all they want. He swipes their cards — for the cash amount they want, topped up with his commission and the bank’s fee — waits for the machine beep to tell him the money has hit his account, and then hands them hard currency.

“From July 2015, when they started returning to town after they heard it was safe, they just started coming to only withdraw money directly from us,” says Acheme.

Rebuilding in Adamawa state after one of West Africa’s most bloody recent wars was never going to be easy. Between 2009 and 2015, thousands died in terror attacks launched by Boko Haram. The terrorists even renamed cities they grabbed. Mubi was called Madinatul Islam — the City of Islam — by Boko Haram. Residents who returned after the city’s recapture found Arabic inscriptions on the walls of their houses and burned vehicles dotting roadsides.

But for Nigeria’s banks, the Boko Haram attacks also coincided with a government policy that has also hurt them. Under the Treasury Single Account policy, different government entities are no longer allowed to hold separate bank accounts. Instead, the government consolidates all inflows from its multiple agencies into a single account at the Central Bank of Nigeria. For banks, this has meant a sharp reduction in customers — and so, a dip in revenues. With their margins low, rebuilding operations in a region still viewed as unsafe by some isn’t a priority for many banks. Instead, they are happy to rely on the fee they earn from customers using POS machines, says a senior banker, requesting anonymity.

A band of informal bankers is stepping in to fill that void — and they’re doing so well that they are now hiring staff to help run operations. A business administration graduate, 28-year-old Sedi Kowaji Adamu rented a shop in 2015, bought a generator — the electricity supply is unreliable — and requested for two POS machines from his bank to begin Adamu Enterprises.

He complements POS withdrawals with wire transfers using banking apps, effectively receiving cash deposits and handling cash withdrawals. “Parents come and want to send money to their children, somebody wants to send money to another place, and we do it for them in a few seconds from the app,” he says over the low beeping sounds of credit alert notifications streaming into his phone. He uses SIM cards from different telecom providers in the two POS machines, so that if one isn’t working at any point in time, he can count on the other. But if still neither POS is working, he keeps their credit or debit cards as collateral and hands them cash. “We trust one another,” says Maina Musa Hong, a trader and one of Adamu’s customers. “We know that they are our only access to cash.”

For entrepreneurs like Adamu and Acheme, this alternative banking system brings significant income. Acheme says he handles approximately N9 million ($24,840) daily and takes an additional N400 ($1.09) on every N10,000 ($27.39) or N50 ($0.13) on every N1000 ($2.73). The additional amount works out to between $981 and $1,170 a day. Half that amount goes to the bank as fees — so the bank, which otherwise can’t charge for over-the-counter transactions of up to N500,000, also benefits. And Acheme’s net earnings — at least $490 a day — are at least 70 times the per capita daily income of $7 in Nigeria. He now has a second shop, in the nearby village of Maiha.

Using this alternative to formal banking isn’t cheap for customers. Still, paying a premium is worth it for many. Hong and his family were trying to rebuild a business after returning home from Cameroon, where they had fled from Boko Haram, when his wife was robbed of her money just outside a Yola bank. Others have been robbed on the highway out of Yola. The POS outlets also stay open longer than the few banks that have reopened in Mubi and surrounding towns.

At Adamu’s Mubi outlet, Hong waits patiently for his turn. He isn’t going to the banks again. “This is the bank we know for now”, he says.

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