The directive comes amid widespread disruption, long queues and gridlock at airport access points, which left travellers frustrated and, in some cases, missing flights.

The policy, branded “Operation Go Cashless”, was introduced earlier this week and required motorists and airport users to pay electronically at toll gates, car parks and other revenue collection points nationwide.

While the move was designed to improve efficiency, reduce revenue leakages and align with broader digital payment reforms, its rapid implementation exposed significant operational challenges, including limited public awareness, card shortages and delays in electronic payment processing, that led to severe congestion at entry and exit points, particularly in Lagos and Abuja.

At the end of a Federal Executive Council meeting, Transportation Minister Festus Keyamo, speaking on behalf of the government, said the President was “concerned about the welfare of Nigerians” and directed that the system be taken back to the drawing board for review and improvement.

He emphasised that the suspension does not signal an outright rejection of cashless transactions, but rather an acknowledgment that the rollout needs to be better planned and executed so as not to inconvenience the travelling public.

Keyamo indicated that the administration may involve private sector partners to help design a more efficient system, suggesting a hybrid approach where those with electronic payment tools can use them, while others may temporarily continue to pay in cash until a seamless digital solution is ready.

The decision stresses the challenge of implementing large-scale digital reforms in high-traffic environments where infrastructure, user readiness, and clear communication are critical for success.

It also highlights the government’s responsiveness to public feedback, even as it continues to pursue broader cashless initiatives across federal revenue systems.

However, the success of startups is often influenced by various external factors, including government policies. 

During President Muhammadu Buhari’s administration, several government policies have had a substantial impact on startups, with one of the most notable being the cryptocurrency ban imposed by the Central Bank of Nigeria (CBN). 

Taking a retrospective look at the positive and negative impact of these policies that have shaped the startup landscape in Nigeria, let’s do a quick review:

1. Cryptocurrency Ban

In February 2021, the Central Bank of Nigeria (CBN) issued a directive banning regulated financial institutions from providing services to cryptocurrency exchanges. The ban affected the cryptocurrency market in Nigeria and raised concerns within the startup ecosystem. 

Many startups operating in the crypto space had to adjust their business models or explore alternative solutions. The long-term impact of this policy on startups and the overall cryptocurrency ecosystem is still unfolding.

The ban limited the ability for Nigerian startups and individuals involved in the cryptocurrency ecosystem, to access banking services and affected their ability to conduct business effectively.

2. Foreign Exchange (FX) Restriction

The CBN also implemented various policies to restrict access to foreign exchange. These policies aim to preserve the country’s foreign reserves, but they have negatively impacted startups that rely on imports or require foreign currency for business operations. 

Limited access to foreign exchange has led to increased costs, supply chain disruptions, and reduced competitiveness for Nigerian startups.

3. Cashless Policy and Naira Redesign

The CBN introduced a cashless policy to encourage electronic transactions and reduce the use of cash in the economy. 

While this policy promotes transparency and financial inclusion, it has posed challenges for startups, particularly those operating in rural areas with limited access to digital payment infrastructure. Some startups have had to invest in costly payment systems or adapt their business models to cater to cash-based transactions.

On the other hand, the redesign of the Nigerian naira currency had a direct impact on startups and individuals generally. 

The new currency design, aimed to enhance security features, improve durability, and increase naira value. While the redesign itself did not have a significant effect on startups, the broader economic factors surrounding the currency, such as inflation and exchange rate fluctuations, directly impacted startups’ operations. 

4. High Interest Rates

The CBN has maintained high-interest rates in an attempt to control inflation and stabilize the Nigerian currency. However, these high rates make it more difficult for startups to access affordable credit, limiting their growth and investment opportunities.

5. Multiple Exchange Rates

Nigeria operates multiple exchange rates, including the official exchange rate, the parallel market rate, and the Investors’ and Exporters’ (I&E) window rate. 

This creates uncertainty and a lack of transparency in the foreign exchange market, making it challenging for startups to plan and manage their finances effectively.

6. Loan-to-Deposit Ratio (LDR) Policy

The CBN implemented the LDR policy, which requires banks to maintain a minimum loan-to-deposit ratio. While this policy aims to stimulate lending to the real sector, it has led to increased lending to low-risk sectors, such as government securities, rather than startups and small businesses. This has limited access to financing for startups in need of capital.

7. Tax Incentives and Support Programs

The Nigerian government recognized the importance of startups in driving economic growth and job creation, leading to the implementation of tax incentives and support programs. 

In recent years, initiatives such as the Pioneer Status Incentive (PSI) have provided tax holidays and exemptions for qualifying startups, reducing their financial burden during the early stages. These incentives have encouraged investment and fostered an environment conducive to startup growth.

8. Ease of Doing Business Reforms

In an effort to enhance the ease of doing business in Nigeria, the government introduced several reforms that aimed to simplify bureaucratic processes and reduce regulatory bottlenecks. 

Initiatives like the Presidential Enabling Business Environment Council (PEBEC) set up by President Muhammadu Buhari in 2016 and the introduction of the Nigerian Single Window for Trade have streamlined procedures, making it easier for startups to register their businesses, obtain licenses, and access necessary permits. 

These reforms have positively impacted the overall startup ecosystem by reducing red tape and improving efficiency.

9. Intellectual Property Rights Protection

Protection of intellectual property (IP) rights is crucial for startups that heavily rely on innovation and technological advancements. 

The Nigerian government has taken steps to strengthen IP protection through legislation and improved enforcement. 

The introduction of the Trademarks Act and the Copyright Act amendments has provided startups with legal frameworks to safeguard their innovations and creative works, fostering an environment that encourages innovation and investment.

10. Access to Funding and Investment

Access to funding remains a significant challenge for startups in Nigeria. Recognizing this, the government has initiated various programs to address the funding gap. The establishment of the Development Bank of Nigeria (DBN), and the creation of intervention funds for sectors like agriculture and technology have increased the availability of financing options for startups. Additionally, government-backed investment platforms like the Nigerian Investment Promotion Commission (NIPC) have attracted foreign direct investment (FDI) into the startup ecosystem, providing startups with additional funding opportunities.

11. Nigeria Startup Act

On October 11, 2022, the President, Muhammadu Buhari signed into Law, the Nigeria Startup Bill (NSB), developed by the administration to provide stable legal framework and incentives for technology innovation. 

The NSA was an Executive Bill, initiated by both the Office of the Chief of Staff and the Office of the Minister of Communications & Digital Economy. 

The development aims to reduce bureaucratic and funding barriers and has been long-awaited by the burgeoning tech startup ecosystem. 

According to the Nigerian Startup Ecosystem Report 2022, there were at least 481 active startups with 19,334 employees across the country by August 2022.   

An interesting fact is that 173 (36%) of these startups are in fintech. Other sectors presented include e-commerce & retail, e-health, ed-tech, mobility & logistics, recruitment & HR, agritech, entertainment, marketing, energy, prop-tech, legal-tech, waste management, auto-tech, events and printing.

Expert believe that with the Nigeria Startup Act Nigeria is headed in the right direction as a nation

Mohammed Ibrahim Jega, Founder, of Startup Arewa, told TechEconomy:

“The Act tends to focus on providing more access to startups to grow and scale”. 

He said the sections that describe the Startup Portal, Incentives, Regulatory Support from NITDA, etc., clearly indicate a forward-thinking approach to regulation in Nigeria.

12. National Blockchain Policy

In a bid to fast track the adoption and utilise the gains of emerging technologies, the Federal Government of Nigeria, few weeks back, launched a National Policy on Blockchain Technology and inaugurated Implementation & Steering Committee to oversee its implementation.

The policy, which was launched by the Minister of Communications and Digital Economy, Professor Isa Ali Ibrahim (Pantami), is to promote the adoption of blockchain technology in Nigeria and to position the country as a leading player in the global blockchain ecosystem.

While launching the Policy on behalf of Federal Government of Nigeria, Professor Pantami recalled that the journey of Blockchain Technology officially started in Nigeria on 28th November, 2019 at the International Conference Centre, Abuja where President Muhammadu Buhari unveiled and launched the National Digital Economy Policy & Strategy (NDEPS) for a Digital Nigeria.

Conclusion

Government policies play a critical role in shaping the startup ecosystem in Nigeria. While several policies have positively impacted startups by providing tax incentives, streamlining processes, and enhancing IP protection, challenges related to funding, infrastructure, and power supply persist. 

Continuous collaboration between the government, private sector, and startups is essential to address these challenges, ensuring a conducive environment for entrepreneurial growth and innovation. By implementing targeted policies, Nigeria can further accelerate the development of its startup ecosystem, fueling economic progress and job creation.

While some government policies and regulations are aimed at maintaining financial stability and promoting economic growth, the impact on startups in Nigeria has been mixed. 

The cryptocurrency bans and other CBN policies, such as foreign exchange restrictions and high-interest rates, have created significant challenges for startups. 

Sofri recently trended on Twitter for its uptime and optimal services to the customers. Well, could it be because the player is relatively new in the block with fewer customer base since it was launched only about a year ago?

In this interview, Barnabas Okwudibie, the Chief Operating Officer of Sofri powered by Links Microfinance Bank, a subsidiary of DLM Capital Group, expatiate on how they did it and the plans for the future after hitting 60,000 customer base in just seven months; insisting that Sofri as a Lifestyle Digital Bank is prepared for Africa-wide expansion.

Barnabas spoke to Peter Oluka:

For the sake of our reader, kindly, tell us a brief of your background

My name is Barnabas Okwudibie, the Chief Operating Officer of Sofri powered by Links Microfinance Bank, a subsidiary of DLM Capital Group.

Links Microfinance Bank launched Sofri Bank a few months back; What has been the penetration rate (in the market)?

Thank you for this question. It has been a great journey actually. Like you rightly said, Links Microfinance Bank was acquired by DLM Capital Group about two years ago and we went ahead to launch Sofri Digital Bank last year. Since then, we have been able to prove to the markets our intentions; today, our customers trust us. We’ve been able to come up with innovation around the digital banking lending space. We built a one stop shop for our customers to bring banking closer to them. Despite that glorious journey we believe there’s too much to do when we look at the Nigerian market.

What are the unique offerings of Sofri digital Bank?

Sofri offers bespoke digital banking experience. We do both online and offline lending. By online lending, we lend via our digital mobile app.

We also loan to customers in the public service and the private organisations. Our customers have access to transfer money with ease. They can make multiple transfers at the click of a button. We are one of the few banks in our space that offer this service.

Aside from that, you can make payment with Sofri via a card which is our ATM card. It is very effective. The downtime is about zero. So you can enjoy prominent banking with ease; top up data or recharge, pay utility bills on the Sofri app.

Looking at the elephant in the room: The cashless policy implementation by the CBN/banks was greeted by cries by many Nigerians. Is it that the people are not prepared or the technology is not robust enough. What do you think led to the transactions’ failures?

For me, I’ll take that question from a personal perspective. So, the cashless policy has very good objectives. However, considering where we are, we must have observed some issues in the implementation. It is a learning curve for Nigeria; the regulators, the operators, and other stakeholders in the system. I can’t say the policy has failed; it is just that we keep learning and improving the system. We see areas we have to make-up and ensure that everything goes well. We operators in the banking sector need to ensure that yes, we have good technology in place to be able to serve the customers while the public should quickly embrace the cashless policy, embrace the use of technology to improve the transactions.

The other aspect is the enlightenment of the people. I don’t think if the regulator had carried out enough orientation for the people, probably we should have experienced less issues.

Links Microfinance Bank through Sofri rolled out a campaign at the heat of the cashless policy implementation challenges. The reward campaign in which 100 customers get 10,000 a week. Tell us more about it?

Sofri is a lifestyle digital bank. We are proud to be one of the banks in Nigeria that give back to the customers. What we have decided to do is to see that we have encouraged the under-digitized population in the market. When they come to us to open an account we are able to ‘give back’ to them.

So, we thought of the best way to do this which gave rise to the reward promo. Just download the app on the iOS or Google Play Store to create and account, you qualify for a raffle. The raffle is done every Thursday by 12 Noon.

Just follow us on social media for a live stream. Once you are among the winners you get credited N10,000. We have been doing this for the past three weeks which has been a wonderful experience. We roll out N1 million every week.

You know we are talking about cash crunch; do you give the winners cash or it is transferred to their Sofri account?

They get credited instantly via the account they provided. We want to encourage more people to embrace digital payment. They are also encouraged to get the Sofri ATM card for cash withdrawal. It is a very transparent process and everything is Live streamed on social media.

What’s been the feedback from the customers (winners) so far?

It has been wonderful. Like I said earlier, in our society today people want to trust institutions to do business with them. The customers who have won from the raffle exercise have given good testimonials about the bank and they’ve come to understand that yes, it’s not just having an account with Sofri, they cherish the relationship. The Sofri Bank account holders see themselves as part of this family. We take feedback from them on areas we need to improve. We made our platform very interactive.

What is the spread of the (promo) customer participation because when it comes to financial inclusion, most times, rural dwellers are not adequately covered?

The spread of this promo is nationwide (from every location in Nigeria). We’ve seen customers calling us from the Southern part of Nigeria and from the Northern part. It is exciting. Sofri brand, our vision is to see that we can grow from Nigeria to other Sub-Saharan African countries. So, we’re not restricting ourselves to just Lagos.

The promo is open to everyone in Nigeria. Our push, like you said, is to see that we take care of the unbanked.

That is why we’ve made our process so simple. We leverage innovative technology to see that we get more people into the Sofri Bank ecosystem irrespective of where they are. Our customer acquisition has been top notch. Sofri Bank’s customer base has grown to around 60,000 in less than a year. The transfer success rate on the app is around 99%.

As a result, ATMs are becoming fewer, and those that are available often run out of cash with little warning. The few that dispense cash are always crowded and lots of people don’t mind as POS vendors have parachuted their prices; you now use money to collect money – way beyond the initial N100 for N5,000 and below.

Bank transfers are expensive and slow, while app downloads are high pending issues with connectivity in most parts of the country. 

In the past few years, Nigeria has seen an increase in the number of mobile money leverage but the few days following the naira redesign and disposal of old notes has seen an even higher increase in this aspect. 

E-payment transactions in Nigeria hit a monthly all-time high of N33.2 trillion in August 2022. By November of the same year, there was a 145% surge.

Total transaction value in the Digital Payments segment was projected by Statista to reach $14.25 billion in 2023 — but it has gone beyond this following the naira redesign.

However, the recent hiccups put together have placed a spotlight on the lack of an efficient banking system in the country.

Connecting this to sustainability and resilience, an adequate banking system should be able to withstand stress irrespective of the situation that comes up. This just explains that we have a lot of work to do in the sector.

A lot of Nigerians are complaining about the poor working of ATM networks in Nigeria. They say that if you don’t have enough money, it is difficult to get access to your own money – reference to the exorbitant prices placed on cash withdrawals. If you can’t make a transfer, it is difficult for anyone to spend their money.

The success or failure of reforms depends on whether they can be put into practice. The Naira redesign is a good example of this; it has been implemented with some difficulty, but it shows that Nigeria’s banking system needs to put in more effort.

Conclusion

Nigeria’s banking system is not completely broken, but it could be better. A lot needs to be done to improve the network, make it more accessible, bring down costs, increase efficiency and transparency, as well as help people get access to their own money.