Nigeria's Cashless Push Hits Small Traders With 10% Fee Burden

Nigeria’s transition to a cashless economy has gained momentum in recent years, driven by government initiatives promoting digital payments, the introduction of the eNaira, and the expansion of Point of Sale (POS) terminals. This shift is evident across various sectors, from open markets to intra-city transport, where digital transfers, mobile banking apps, and wallet-based payments are becoming integral to daily transactions, even in the informal economy.

However, this transition comes with a significant cost: transaction fees that erode the already thin profit margins of small vendors, artisans, and riders. For these informal traders, embracing cashless payments does not translate to savings or safety but rather to a gradual erosion of profit. The convenience of digital payments is offset by the financial burden they impose, making affordability a critical issue.

Each POS withdrawal or bank transfer typically incurs charges ranging from ₦10 to ₦100, depending on the platform and transaction size. For traders selling items like sachet water or roasted plantain, these fees can significantly impact their daily earnings. A trader making a ₦200 profit on a ₦2,000 sale could lose ₦20 to a bank transfer, which is a 10% hit on top of rising fuel costs, market levies, and inflation. This financial modernisation, while beneficial on paper, often feels like a slow financial bleed for those on the ground.

These costs are not isolated to the traders. POS operators also pass their service charges to end-users, affecting how people buy and sell at the most basic level. A customer buying tomatoes worth ₦500 might be asked to pay ₦550 to cover transfer fees, leading many to refuse and insist on paying cash. This resistance forces traders to continue handling physical cash, not out of preference but out of necessity.

In the bustling Oshodi market in Lagos, a pepper seller highlights the issue: “If I collect money by POS, I lose part of my profit. The customer will not pay the charges, and I cannot force them.” This sentiment is echoed across various markets, from fruit sellers in Magboro to food spices traders in Ketu market. A corn seller in Arepo bluntly states, “POS people charge us. Banks charge us. But customers still expect the same price.”

Digital tools are present, but trust in their reliability is not guaranteed. Several artisans speak of failed transfers, delayed alerts, or funds disappearing during network failures. The cost of chasing a ₦2,000 reversal with a bank branch visit or customer care call is rarely worth it, further discouraging the use of digital payments.

Cashless transactions were meant to simplify commerce, but for many micro-entrepreneurs, they do the opposite. High transaction charges, combined with unpredictable service reliability, have created a system that benefits banks more than those who earn by the day. Several traders now treat digital payments as a fallback, not a default. A POS operator in Oshodi shared that her busiest hours are in the morning when small traders collect physical cash to avoid charges on transfers.

She noted, “People will pay ₦100 extra to withdraw ₦5,000 just to avoid the transfer drama.” This workaround may be inefficient, but it preserves value, something the digital process often does not. Countries like India and Kenya have structured small digital payments to be zero-fee or subsidised for low-income users. Nigeria, however, has taken a different path, pushing adoption while allowing banks and fintech entities to set fees without protective caps. The result is a lopsided ecosystem where digital payments are promoted but not made viable for those who need them most.

When charges eat into working capital and reliability is low, traders disengage, not out of resistance to technology, but in defence of their survival. A quantitative illustration comparing a pepper seller who uses digital payments versus one who deals only in cash over three months highlights this issue. A digital-leaning seller loses ₦20,200, almost 10% of total profit, to transaction fees. Scaling this across thousands of micro-traders reveals why digital adoption stalls unless charges are restructured.

Nigeria’s push for a cashless economy often frames digital access as progress. However, for millions in the informal sector, this access comes at a cost they quietly absorb each day. When transferring ₦1,000 costs ₦20, and that ₦20 is a trader’s margin, inclusion becomes theoretical. Transaction fees may seem small in isolation, but their cumulative impact distorts how the poor engage with finance. It’s not enough to provide digital channels; they must be designed to reflect the realities of low-margin, high-volume livelihoods.

A real inclusion strategy would ask: Can micro-businesses use digital tools without losing value? Until that answer is yes, adoption will remain partial, reluctant, and burdened by quiet disincentives. Policy needs to move beyond rollout and start addressing affordability. A regulatory review of transaction charges, especially for low-income and high-frequency users, is long overdue. Cashless can work, but only if it works for those who use it the most.