CBN And The Changing Payment System In Nigeria - NIGERIAN TRIBUNE
Electronic payment service has become a global phenomenon. But in Nigeria there is still a long way to go as some groups of people prefer to transact businesses running into tens of millions of naira in cash. To facilitate nationwide adoption of electronic payment, the Central Bank of Nigeria (CBN), working in concert with the Bankers’ Committee, Nigeria Inter-Bank Settlement System and other payment industry players, is putting measures in place to enhance the payment system infrastructure. SULAIMON OLANREWAJU reports.
At the unveiling of the redesigned naira notes last Wednesday, governor of the Central Bank of Nigeria (CBN), Mr Godwin Emefiele, promised that going forward the apex bank would take its cashless policy more seriously and would do all within its powers to ensure strict compliance.
He said, “Our policy of redesign and reissue (of naira notes) is not targeted at anyone. But of course we have the laws and we will indeed be more intense in ensuring that the provisions of the law and our CBN regulations about the size and volume of currency that people can carry, or hold or withdraw, we will insist that this is done going forward.”
11He added, “The problems we have had in the past is that we say this is a cash economy. There is no economy that is inbuilt thinking that it has to be cash economy. The world has moved away from predominantly cash to cashless economy. And I think Nigeria and the Central Bank of Nigeria are prepared at this time to move towards a cashless economy.
“And that is the reason for the reissue of these notes. We will insist that cashless would be nationwide. We will restrict the volume of cash that people can withdraw over the counter.
“If you need to withdraw large volume of cash, you will fill uncountable forms. We will take your data, whether it is your BVN, your NIN so that enforcement agencies like EFCC or ICPC can follow you and be sure that you are taking that money for good purpose.
“We have to work as a country. Nigeria is the biggest country both in population and economy in Africa and we have to ensure that we do things the right way that also positions us as the leader in Africa and one of the leading countries in the world. We must do things right and I think it would start from today.”
Emefiele has always expressed concern over the volume of currency outside the banking vault, a development that makes it difficult for the monetary policies of the apex bank to be really effective. Consequently, the CBN has come up with a number of policies to change the trend and stop Nigerians from stockpiling the currency.
The process started in 2007 with the launch of the Payment Systems Vision 2020 (PSV 2020), which identified series of recommendations to increase the resilience of the payments system infrastructure and work-streams to encourage the usage of electronic payment methods. PSV 2020 was targeted at facilitating economic activities by providing safe and efficient mechanisms for making and receiving payments with minimum risks to the CBN, payment service providers and end users, extending the availability and usage to all sectors and geographies, banked and unbanked, and conforming to internationally accepted regulatory, technical and operational standards.
To achieve its objectives, the apex bank came up with a number of guidelines to facilitate the process and regulate the operators. These include guidelines for interoperability and interconnectivity of Mobile Money Operators, instituting e-payment dispute arbitration framework, emplacing a timeline for Payment Card Industry Data Security Standards (PCIDSS), and implementation of maximum cap for cheque payments, among others.
In addition, the CBN, in conjunction with the NIBSS and Bankers’ Committee, came up with the NIBSS Instant Payment (NIP) platform. NIP is an account-based, online real-time Electronic Funds Transfer (EFT) platform which enables financial institutions to provide online real-time funds transfer services to their customers through all available electronic channels. Its touch points include bank channels – mobile and internet banking, POS and ATM – USSD, web and internet platforms as well as agent and third party channels. The introduction of NIP has transformed the way Nigerians choose to pay for goods and services at all levels. Leveraging this, NIP has provided more opportunities for financial institutions and other players within the ecosystem to innovate and provide more options for payments.
To further deepen the cashless policy, CBN with its partners in the project, came up with the Bank Verification Number (BVN). The BVN, launched in 2014, was developed to harmonize the financial sector, improve banking operations, enhance credit advancement to bank customers and also encourage financial inclusion. With strong collaboration across the ecosystem, NIBSS facilitated the growth and proliferation of BVN with the management and issuance of unique identification number to bank customers across the country.
In addition, in 2015 and 2019 respectively, the Industry Fraud and Trapped Card portals were developed by NIBSS as portal services provided to the financial industry for stakeholders to monitor and report fraud; and for proper management of debit/credit cards trapped at various ATMs across stakeholders’ service point. Addressing the need for speed and transparency in platform integration and certification as well as industry efficiency for KYC, in 2020 and 2021 respectively, NIBSS created an Industry Sandbox and a centralized address verification service that gives access to all NIBSS services in a single suite and allows financial institutions proactively carry out KYC (Know Your Customer) to verify their customers respectively.
Financial experts as well as bankers have commended the introduction of these innovative solutions pointing out that the Nigerian payment system has evolved significantly over the years, leveraging the wide spread technology advancement to simplify payments and deepen financial inclusion.
Sequel to the COVID-19 Pandemic, globally, research has shown a major shift to contactless payment options with a number of countries like China, India, Thailand, Ghana, Singapore, Malaysia pioneering solutions with Quick Response Code. To bridge the gap within the fast-evolving payment landscape, Nigeria has launched a National Quick Response Code (NQR); another initiative driven by the Central Bank of Nigeria (CBN) and implemented by Nigeria Interbank Settlement System Plc (NIBSS).
NIBSS has also provided efficient integration process for financial institutions which enables them to leverage APIs. NQR delivers instant value for P2B, P2P and B2B transactions with a more improved customer experience. This payment option has empowered bank customers who own smartphones to easily access information provided by merchants for the purpose of making payments. This has boosted cashless transactions. To make more people buy into the idea, the Nigeria payment industry has continued to introduce initiatives geared towards creating convenient ways of making payments and extending electronic payment benefits to Nigerians even at the bottom of the pyramid where usage of cash has been predominant.
The efforts of the CBN and its partners in the electronic payment service in the country have been producing pleasing results.
According to an NBISS report, bank customers in the country transferred a total of N12.8 trillion over mobile devices between January and September this year. This is indicative of an increase in the use of mobile devices for financial transactions, as the value of deals through the channel surpassed the N8 trillion recorded in 2021.
The NIBSS report also shows that the value of mobile transactions grew by 153 per cent in the first nine months of this year compared with the N5.06 trillion recorded in the same period of 2021.
According to the report, the volume of mobile inter-scheme transactions also rose by 133 per cent year on year from 188 million recorded between January and September last year to 438 million in the same period this year.
With this trend, coupled with the determination of the CBN to make large withdrawal of cash unattractive, there is no doubt that more Nigerians will toe the path of electronic payment and that would position the apex bank to have better control over the currency in circulation.