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Cash Economy

A Cash Economy

One aspect of life in Nigeria that takes a little getting used to is the cash economy of the place. Nearly everywhere you go everything is based on payment of cash. They say there is little or no credit within the financial framework of this land. However the times they are a changing, more and more ATM cards are in circulation and Credit Cards are on the increase in a very serious way. But what is so interesting is the fact that this cash economy is actually so much in debt.

According to the IMF Nigeria has an external nation debt of over $40billion, and that in an superbly oil rich nation. One seriously wonders how that can be allowed to happen. It is obvious why other countries and overseas banks would want to lend to Nigeria, the oil guarantees the return, but the real question is why does a nation with such oil revenue ever borrow money, expensive money, in the first place.

Another aspect of life in such a cash dominated nation is the impact it has on the economy of vast amounts of SME businesses. Cash flow here in Nigeria is remarkable poor. It appears that everyone owes everyone else, that every business is owed nearly as much as they owe, it is almost like the benefits of a cash economy are being diluted and that while people do not feel like they live in a credit society, the fact is they are as much in it as any other nation.

The saddest aspect of trying to live and work in a land where cask is king is the massive impact, the seriously damaging impact that corruption has under these circumstances. Corruption is such a national pastime, it is so deep into the fabric of life in Nigeria that it is almost as accepted as night follows day. Cash is not traceable, it has that easy come easy go feel to it, and even your average Nigerian knows how to make their “petrol money”, it is so common they have phrases for it, not one, but several different ways of describing and securing their corrupt money.

One of course therefore has to ask where is all the money gone, is a cash economy is to work it needs the cash to flow around the system, but the system is not working and that is because the cash is not flowing, so where is it all. This is a country where just over 70% live below the poverty line, and maybe that is a starting point to where the cash now sits. They say there are around 2.5million “elite” Nigerians, those with real disposable finances, with the cash. But to me that is a little surprising, especially if you compare it to say a country like India. An oil rich country of over 120million people and yet where are the super rich, where are those that are really creaming the top line of a cash focused nation.

I do find it really interesting to see the way it works, or should that not works here in Nigeria. When you talk to a local about the subject they are quick, and correct, to point out the failings of the so called “developed” nations. The recent “credit crunch” and global economic downturn is something most Nigerians see as nothing to do with them, and proof that their system is better and that the other ways are wrong. Maybe they have a point, perhaps in some ways they are very right and maybe the rest of the world could learn something from Nigeria. If you don’t have the cash, you can’t have the car, or the iPod, or the dress, or the meal out, if you don’t have the cash you cannot spend what you don’t have, and surely that makes sense.

So yes a part on Naija life is the aspect of carrying around with you massive wads of cash, you can feel superbly rich with a big lump in your pocket, but is it the right way and just watch as this country converts and changes, which it already is, to a more western mentality, watch the problems of the two economic cultures as they clash and change the face of this powerful African nation. Could be fun, could be quite sad, wait and see.


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© 2008 Paul Kavanagh. All rights reserved.