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Promoting e-payment system in Nigeria

Mobile money in action

Mobile money in action

By Emmanuel Okwuke

Technology has never reached or impacted as many people as it has today. For example, the social network- Facebook is recorded as having over one billion monthly active users, or one out of every seven persons, at the end of June 2013.

There are also over 500 million tweets daily on the average across the globe, in addition to the about 8.6 trillion Short Messaging Services (SMS) sent a year.

Technology is indeed changing everything – the way people interact, shop, learn, bank, entertain, and live.

Nigeria is not left out in the technology revolution, going by the steady increase in internet and mobile usage in Nigeria. Besides playing active parts in the above parameters, electronic payment transaction surpassed the N1trillion mark in the first six months of 2012, according to the economic report of the Central Bank of Nigeria (CBN) for the first half of that year. This invariably has resulted from the increased use of e-payment channels for transactions among Nigerians in line with the cashless policy initiative championed by the Bankers Committee to move shift from cash to other payment modes, thereby enhancing economic growth and development.

In the said half-year 2012 economic report, the CBN reported: “The value of electronic card (E-card) transactions rose by 32.8 per cent to N1, 014.71 billion in the first half of 2012, up from N764.14 billion in the first half of 2011, while the volume increased from 167,962,665 in the first half of 2011 to 185,078,223 in the period under review.”

Fundamental to the growth of internet banking and e-payment is the confidence which the public now has in its convenience and security. This much was stressed at the E-PPAN second annual e-payment for government summit 2013, held last week in Abuja.


Financial inclusion

In a goodwill message, CBN Governor, Mallam Lamido Sanusi said the summit is designed to drive the efficiency of Government to People (G2P) services through efficient payment system.

The Conference theme: “E-Payment: A Step Forward in Government Efficiency,” he said, is complementary to ongoing efforts of the CBN to realise the National Payments System Vision 2020 of promoting electronic payments in Nigeria.

In particular, Government to People payment, he continued, is expected to drive financial inclusion which is one of the core policy initiatives of the apex bank, recalling that a 2010 survey “by EFInA indicated that 46.3 per cent (or 39.2 million of the total adult population of 84.7 million) of Nigerian adult population is excluded from financial services.

“This places Nigeria behind South Africa, Kenya and Botswana that have 26.6 per cent, 32.7 per cent and 33.0 per cent respectively. The implication of this exclusion is that a large proportion of Nigerians has been overwhelmingly reliant on cash based transactions, thereby causing a negative impact on documentation of the economy, the tax-base, efficiency of economic transactions; and others”.

For Sanusi therefore, this definitely calls for immediate and collaborative action among all stakeholders, and underscores the importance of the forum.

He maintained that the Federal Government’s directive that the electronic payments system be implemented by all Federal Government Ministries, Departments and Agencies (MDAs), effective January 1, 2009, generated public interest in the use of electronic payments.

“The interpretation of the policy is that payment from an account of Federal Government Ministries, Department and Agencies (MDAs) shall be applied directly to beneficiary’s account without recourse to cheques or cash. However, prior to this era, the (CBN), as a forward looking institution, in anticipation of the prominence of electronic payments in the future, inaugurated the Government Supplier and Salary and Pension Working Groups to facilitate the development of a veritable framework as a guide for the implementation of electronic payments in government circles.


Clog in the wheel

The CBN Governor maintained that efforts of the government notwithstanding, five years down the line, only 209 or 35 per cent of over 600 MDAs have fully complied, despite the numerous benefits derivable from the initiative, which can only be ignored at immeasurable expense.

He listed some of the benefits are: Elimination of  delays in the payment processes, minimizing  people interaction (contractors and government officials), improving controls and supervision, improving process efficiency and effectiveness and increased transparency in payments processing. Others are: elimination of delays associated with clearance of salary/pension cheques and faster salaries/pension and supplier payments, as it gives a next day value to beneficiaries. It is also less cumbersome, eliminating the rigours of cheque writing and transportation of paper-based payment schedules and cheques.

Furthermore Sanusi noted, it facilitates the achievement of Payments System Vision 2020 which aims at displacing cash as the most preferred payment method in Nigeria.


Banking the un-banked

The 2011 Government E-Payments Adoption Ranking (GEAR) Report, global index and benchmarking study by the Economist Intelligence Unit, sponsored by VISA, rated Nigeria among the bottom three, along with Uganda and Ukraine in a list of 62 countries. The United States of America, United Kingdom and Norway were at the top of the chart.

The CBN Governor noted that a safe and efficient payment system not only facilitates the exchange of goods and services among economic agents at lower costs but also helps to integrate markets within and across regions. Most importantly, it enhances the effectiveness of the transmission mechanism of monetary policy and the overall financial stability of an economy. Hence, the Bank has put together a number of policies and guidelines to effectively channel the Government to Person (G2P) payments in such areas as salaries disbursements, pensions, relief funds, social security, and others.

These policies and guidelines, amongst others, include: Mobile Money Operations. Presently, only about 22 million individuals have bank accounts out of over 160 million Nigerians, which translate to a high ratio of 22,710 customers per bank branch, and over 67 per cent exclusion level. With over 110 million mobile phone subscribers, based on the Nigerian Communication Commission’s 2012 data, which presents an opportunity to bring financial services to the nation’s over 86 per cent unbanked population.

“In this regard, the CBN has licensed 20 Mobile Money Operators (MMOs) since inception. The operators are currently doing an average of over N1 billion worth of transactions on a monthly basis.

“Agent Banking – the guidelines for Agent banking and Agent relationship  has been put in place and the stage is now set for financial institutions to extend financial services through their agents. The Agents who may be individuals, small retail shops, post offices, or large retailers can offer customers a convenient and affordable opportunity to cash-in and cash-out of an electronic payments system” Mallam Sanusi said.


The cash-less way

The implementation of the cash-less policy with Lagos as the pilot state, saw the growth of alternative e-payments channels, particularly with Point of Sales terminals penetration soaring from a paltry 5000 at the inception of the policy to over 180,000 units. This is responsible for the exponential growth in volume and value of transactions. In the same vein, achievements in NIBSS Instant Payments (NIP), NIBSS Electronic Funds Transfer (NEFT) and other e-channels have given the CBN the necessary comfort to extend the policy to five other States namely; Abia, Anambra, Kano, Ogun and Rivers, including the Federal Capital Territory with effect from July 1, 2013.

This is also in line with the National Financial Inclusion Strategy, designed in collaboration with key partners in the spirit of Maya Declaration, with the CBN setting a target of reducing the rate of those excluded from financial services in Nigeria to 20 per cent by 2020.

This initiative was launched by the President, Dr. Goodluck Jonathan, in October, 2012. The Financial Literacy Framework’s primary objective is to educate Nigerians and improve their understanding of financial products, develop their skills and confidence to become more aware of financial risks and opportunities, enhance consumer protection and lead to higher financial inclusion of the un-banked.

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