James Emejo writes that the cashless policy may have recorded some drawbacks in its implementation, but the increasing patronage of digital/electronic payment channels has created a new-found love in the country’s payment landscape and necessitated the need to boost infrastructure to further engender confidence.
No doubt, the implementation of the currency redesign and cash withdrawal policies of the Central Bank of Nigeria (CBN) has had some challenges following the pushback by politicians leading to the legal tussle at the Supreme Court, one of the objectives of the scheme – to embrace the use of electronic payment channels from cash and other transactions is on course.
Analysts believed that though the policies are desirable in order to modernise the country’s payment system in line with global trend as well as make monetary policy decisions more effective among others, the implementation of the initiatives especially during the election period appeared to be one of its shortcomings.
The election year was normally characterised by cash spending and politicians mopped up the bulk of the new naira banknotes released by the central bank from the commercial banks for election activities – a development which resulted to scarcity of the banknotes for the majority of Nigerians to access.
The CBN had introduced revised cash withdrawal limits in banks and other financial institutions following its recent currency redesign project, restricting the maximum cash withdrawal over the counter (OTC) by individuals and corporate organisations per week to N500,000 and N5 million respectively.
One of the challenges that limited the cashless policy was the inability of Nigerians to use the online and other electronic payment channels successfully for payment transactions largely due to the large volume of processing that overwhelmed the payment infrastructure in banks.
Following the implementation of the cashless policy, most Nigerians across the country were unable to carry out banking transaction because of failure of networks as most transactions were truncated along the line.
However, as pointed out recently by the CBN Governor, Mr. Godwin Emefiele, who apologised for the hardship encountered by Nigerians following the full commencement of the policies during to network challenges, the apex bank is currently working with the banks to boost the available payment infrastructure going forward.
· Positive trend in digital payment
According to projections, Nigeria’s digital payments transactions value is expected to reach $16.69 billion in 2023.
Total transaction value is expected to show an annual growth rate (CAGR 2023-2027) of 13.70 per cent resulting in a projected total amount of $27.89billion by 2027.
The market’s largest segment remained the digital commerce with a projected total transaction value of $14.48 billion in 2023.
· Soaring patronage for digital payments
In spite of the challenges and controversies around the legality or illegality of the old N500 and N1,000 notes as a legal tender, Nigerians have continued to embrace the use of digital channels to carry out transactions.
The latest figures released by the Nigeria Inter-Bank Settlement System (NIBSS) revealed that the use of electronic payment (e-Payment) channels is on the increased as the volume of transaction through this medium surged to the highest in 5-years of N5.2 billion in 2022 from the N729.2million in 2018 representing a 613.1 per cent rise.
The exponential increase in transactions conducted via electronic channels is testament to the innovative value propositions offered by products and services in the country’s payments landscape.
Also, following the implementation of the cashless programme, many petty traders have become used to the use of electronic channels of transactions.
A car wash operator recently told this reporter that he now preferred cash transfers because of the ease and the fact that it enables him to gather and save his income on a daily basis, adding that it has also prevented him from unnecessary spendings.
· eNaira patronage on the increase
The Central Bank Digital Currency (CBDC) eNaira, which represents one of these e-Payment channels had sustained consistent growth over time in adoption, transaction volumes, and value amidst the currency redesign policy action and revised cash transaction limits.
eNaira’s acceptability continues to spread, as evidenced by mass adoption by a number of associations cutting across, government, academic and transportation sectors. Its acceptability sprawled down to the industrious and ancient city of Kano, where the Keke Napep Association has fully embraced the use of Africa’s first Central Bank Digital Currency, eNaira as a means of payment for transport fare.
The eNaira Quick Response (QR) code could be boldly seen at the back of Keke Napep across the town.
Emefiele recently disclosed that N22 billion had been recorded in eNaira transactions representing 68 per cent increase since the beginning of the year, out of which N10 billion had been minted and N3.42 billion currently in circulation.
He said, “So I will say that we have seen good progress in the adoption of eNaira. We’re happy that as we move more and more towards financial inclusion and get people away from being excluded from the financial system, eNaira remains one portable option for you to adopt.”
· Adoption among pedestrians
One of the Keke Napep drivers identified as Aminu revealed that the eNaira had helped resolve persistent challenges around ‘change’ which usually arose when commuters settle their transport fare using high denomination banknotes.
According to the CBN, the eNaira QR code had been specially programmed for commercial tricycle operators to feature the flat fee of N100 common on most routes, hence the passenger simply scans the code and makes the payment for the fare into the eNaira wallet of the driver.
Aminu further stated that commuters without internet-enabled phones typically take advantage of the eNaira Unstructured Supplementary Service Data (USSD) code ‘*997#’ to make payments, which allows for quick transaction completion turnaround time of one minute on the average.
He further stated that a significant driver of adoption is the absence of transaction charges on the eNaira platform, alongside the reliability and convenience it provides for receiving and saving funds.
According to the data from NIBBS, there had been a 142 per cent increment in mobile transfer transactions at a total of N19.4 trillion in 2022, relative to N8 trillion in 2021.
Furthermore, it is likely that the volume/value of transactions settled via electronic channels will maintain the observed upward trend, particularly taking into account the revised cash withdrawal limits which came into effect January 9, 2023.
However, the sustained advocacy and awareness on the functionality and advantages of the eNaira, such as an absence of charges and a 50 per cent reduction on the Merchant Service Charge (MSC) for merchants, more Nigerians will join the eNaira bandwagon, making it the channel of choice for their daily transaction needs.
However, analysts believed that for the digital payment to sustain its current growth trajectory, the infrastructure and networks must be greatly improved.
The CBN governor had admitted challenges faced by bank customers following the limit on cash withdrawals and apologised for the deluge of online transaction failures in the country, and further assured that efforts were ongoing to improve the outcome going forward.
He said, “I must apologise. Yes, online channels fail. But no doubt it is as a result of the deluge of online transactions that hit the banking industry. But it is being resolved.
“On a daily basis, our Payment System Management Department monitor the online payment platforms so as to make sure that when there is a downtime, they are quickly resolved so that transactions can go on smoothly.”
According to data from the National Bureau of Statistics (NBS), a total volume of 3,464,811,083 transactions worth N356.47 trillion was recorded on electronic payment channels in the fourth quarter of 2020 (Q4 2020).
The performance was dominated by online transfers with over 2.23 billion in volume of transactions valued at N120.27 trillion in the review period while transactions using Automated Teller Machine (ATM) amounted to N4.54 trillion.
Point of Sale (PoS) transactions amounted to N1.52 trillion or 25.49 per cent increase over the preceding quarter.
Also, National Electronic Funds Transfer (NEFT) transfers stood at N96.08 trillion while Real Time Gross Settlement (RTGS) transfer was valued at N112.99 trillion as well as the Unstructured Supplementary Service Data
(USSD) transfers of N1.63 trillion in the review period.
According to the NBS, mobile apps transfers (not mobile money), amounted to N9.91 trillion while direct debits stood at N500 billion as well as transactions by Mobile Money Operators (MMOs) which stood at N4.82 trillion.