Musings on CBN’s digitised payment options

The implementation of currency redesign and cash withdrawal policies by the Central Bank of Nigeria (CBN) has come with challenges amidst political pushback and legal heat. It is, however, unmistakable that the intended adoption of electronic payment channels over cash transactions has remained on track. This shift towards digital payment options is in tune with modernising Nigeria’s payment system and aligning with global trends. Notwithstanding the hurdles so far, Nigeria’s growing appetite for digital payments signifies a massive embrace of the convenience, efficiency, and potential economic benefits offered by digital financial transactions.

Economic experts also believe that the policies are desirable in order to modernise the country’s payment system thereby making monetary policy decisions more effective, among other benefits. However, the implementation of these initiatives, especially during the election period, appeared to be one of its shortcomings.

The election year in Nigeria is typically characterised by massive cash spending, and politicians often hoard the bulk of the new naira banknotes released by the apex bank from commercial banks, for electioneering campaigns funding.This situation, expectedly, created scarcity of banknotes for the majority of Nigerians.

In response, the CBN introduced revised cash withdrawal limits in banks and other financial institutions as part of its 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 significant challenges that limited the effectiveness of the cashless policy was the inability of Nigerians to successfully use online and other electronic payment channels for transactions.

This was primarily due to the large volume of processing that overwhelmed the payment infrastructure in banks. The implementation of the cashless policy led to network failures, preventing most Nigerians across the country from carrying out banking transactions. Consequently, transactions were frequently truncated along the line.

However, the now suspended CBN Governor, Mr. Godwin Emefiele, recently acknowledged the hardship encountered by Nigerians due to the network challenges and apologised for all the inconveniences. He assured the public that the apex bank was working with commercial banks to enhance the available payment infrastructure to avoid similar unpleasant experiences, going forward.

Notwithstanding the challenges, there is a positive trend towards digital payments in Nigeria. Projections indicate that Nigeria’s digital payments transaction value is expected to reach $16.69 billion in 2023. Furthermore, the total transaction value is expected to show an annual growth rate (CAGR 2023-2027) of 13.70%, resulting in a projected total amount of $27.89 billion by 2027. The digital commerce segment is expected to be the largest segment, with a projected total transaction value of $14.48 billion in 2023.

In spite of the challenges and controversies surrounding the legality or illegality of the old N500 and N1,000 notes as legal tenders, Nigerians have continued to embrace the use of digital channels for transactions. According to the Nigeria Inter-Bank Settlement System (NIBSS), the volume of transactions through electronic payment (e-Payment) channels has significantly increased. In 2022, the volume of transactions surged to the highest in five years, reaching N5.2 billion compared to N729.2 million in 2018, representing a remarkable 613.1% rise.

This exponential increase in transactions conducted via electronic channels is a testament to the innovative value propositions offered by products and services in the country’s payments landscape. It indicates a growing preference for convenience, speed, and security in financial transactions among Nigerians. Additionally, the rise of digital payments reflects the increasing penetration of smartphones and internet connectivity, which have made digital platforms more accessible to a larger portion of the population.

The benefits of this transformative journey towards a digital payments landscape require collaboration and commitment from various stakeholders. The CBN plays a crucial role in shaping regulations and establishing an enabling environment. Financial institutions, telecommunications providers, government agencies, and industry associations all have responsibilities in promoting digital payments. By focusing on cybersecurity, trust, and data privacy, Nigeria can unlock new opportunities for economic growth, bridge the urban-rural divide, and drive socioeconomic progress. Embracing the potential of digital payments will empower individuals, businesses, and the nation as a whole.

Nigeria’s increasing appetite for digital payment options reflects the nation’s commitment to modernising its payment system and aligning with global trends. Despite the challenges faced during the implementation of cashless policies, Nigerians are embracing the convenience, security, and efficiency offered by digital platforms. The adoption of digital payments not only enhances individual convenience but also contributes to financial inclusion, economic growth, and the overall development of the country.

To further promote digital payments in Nigeria, several key recommendations need to be implemented. First, it is crucial to develop and enforce favourable regulatory frameworks that create a conducive environment for digital payments. The CBN and government agencies play a vital role in this aspect. Second, investments in digital infrastructure and technology by the CBN, financial institutions, and telecommunications providers are necessary to support the growth of digital payment options.

Enhancing customer education and awareness is another important aspect. The CBN, financial institutions, and consumer education initiatives should focus on educating Nigerians about the benefits and proper usage of digital payment options. Promoting interoperability and collaboration among stakeholders is also essential for seamless digital payments. The CBN, financial institutions, fintech companies, telecommunications providers, industry associations, and collaborations should work together to establish interoperable systems and foster collaboration.

Expanding access to digital payment services in rural and underserved areas is crucial to bridge the gap in financial inclusion. The CBN, financial institutions, and telecommunications providers need to make concerted efforts to ensure that all Nigerians have access to digital payment options. Foster partnerships between financial institutions and fintech companies to drive innovation in digital payment solutions.

The CBN and financial institutions should actively foster partnerships with fintech companies to develop and offer innovative payment solutions.
Enhancing security measures and consumer protection is paramount to instilling trust and confidence in digital payments. The CBN, financial institutions, government agencies, and consumer education initiatives must prioritise implementing robust security protocols and educating users about best practices for secure digital transactions.

Encouraging investment in research and development will drive the creation of innovative payment solutions. The CBN, financial institutions, and fintech companies should encourage investment in research and development to continuously evolve and improve digital payment options in Nigeria.
Simplifying regulatory compliance processes for digital payment service providers will facilitate their growth. The CBN and government agencies should streamline regulatory compliance processes, encouraging more providers to enter the market and offer diverse digital payment options.

Collaboration and knowledge sharing among industry stakeholders are also crucial for fostering innovation and driving the growth of digital payments. The CBN, financial institutions, fintech companies, and industry associations should actively collaborate and share knowledge to collectively advance the digital payment ecosystem in Nigeria.
By implementing these recommendations and fostering collaboration among these key actors, Nigeria can establish an inclusive and digitally-driven financial ecosystem that benefits individuals, businesses, and the economy as a whole.

The increasing appetite for digital payment options in Nigeria signifies a transformative shift towards a more advanced and inclusive financial ecosystem. The convenience, efficiency, and economic benefits associated with digital payments are driving their widespread adoption across the country. Nigeria’s investments in digital infrastructure, regulatory frameworks, and consumer education hold immense potential for transforming the economy, enhancing financial inclusion, and fostering sustainable development.

By embracing and harnessing the power of digital payments, Nigeria can position itself as a leader in financial technology innovation and drive economic growth. The benefits extend beyond individuals and businesses to include the government as well. Digital payments provide opportunities for increased transparency, reduced corruption, and improved revenue collection for the government. By digitizing government payments and services, Nigeria can enhance efficiency and accountability in public administration.

Furthermore, the growth of digital payments in Nigeria can attract foreign investment and stimulate economic development. Investors are increasingly interested in countries with advanced digital infrastructures and a thriving digital economy. By creating an enabling environment for digital payments, Nigeria can position itself as an attractive destination for investment and foster entrepreneurship and job creation in the technology sector.
It is essential to address the challenges and risks associated with digital payments to ensure their sustainable growth. Cybersecurity threats, fraud, and data privacy concerns are areas that require continuous attention and investment.

The CBN, financial institutions, and other stakeholders must collaborate to establish robust security measures, implement advanced fraud detection systems, and educate users about safe digital payment practices. Building trust and confidence among users is paramount to the long-term success of digital payments.

Additionally, as digital payments continue to evolve, it is crucial to monitor and adapt regulations accordingly. The regulatory framework should strike a balance between fostering innovation and protecting consumers’ rights and interests. Regular assessments of the regulatory landscape and proactive adjustments can help create an environment that encourages competition, ensures consumer protection, and fosters sustainable growth.
In conclusion, Nigeria is witnessing a significant shift towards digital payments, driven by technological advancements, changing consumer behaviour, and government initiatives. The adoption of digital payment options offers numerous benefits, including convenience, financial inclusion, economic growth, and increased transparency.

However, realising the full potential of digital payments requires collaboration among stakeholders, investment in digital infrastructure, robust security measures, consumer education, and supportive regulatory frameworks. By embracing these opportunities and overcoming the challenges, Nigeria can pave the way for a digitally-driven and inclusive financial ecosystem that propels the nation towards sustainable development and prosperity.

To further enhance the adoption and acceptance of digital payments in Nigeria, it is crucial to focus on financial literacy and education. Many individuals, especially those in rural areas or with limited access to technology, may not be familiar with digital payment methods or feel comfortable using them. Initiatives that promote financial literacy, such as workshops, training programs, and awareness campaigns, can help educate the population about the benefits and safety measures associated with digital payments. This will empower individuals to make informed decisions and actively participate in the digital economy.

Collaboration among stakeholders is key to driving the digital payment ecosystem forward. The Central Bank of Nigeria (CBN), financial institutions, payment service providers, technology companies, and government agencies must work together to establish interoperable systems, standardize processes, and promote innovation. By fostering collaboration and knowledge sharing, stakeholders can collectively address challenges, develop best practices, and create a seamless and user-friendly digital payment experience for all Nigerians.

Furthermore, partnerships with international organizations and technology providers can bring valuable expertise, resources, and innovation to Nigeria’s digital payment landscape. Learning from the experiences of other countries that have successfully transitioned to digital economies can provide valuable insights and guidance. International collaboration can also open doors to cross-border payment solutions and facilitate global trade and financial integration.

Lastly, continuous monitoring and evaluation are essential to track the progress of digital payments in Nigeria. Regular assessments of the adoption rates, usage patterns, and user feedback can help identify areas for improvement and guide future strategies. Data-driven insights will enable policymakers and stakeholders to make informed decisions, refine initiatives, and ensure that the benefits of digital payments are maximised for all Nigerians.

Conclusively, the continued growth of digital payments in Nigeria holds immense potential for economic development, financial inclusion, and improved governance. By prioritizing financial literacy, fostering collaboration, leveraging international partnerships, and monitoring progress, Nigeria can create a robust and inclusive digital payment ecosystem. Embracing digital payments as a fundamental part of the nation’s financial infrastructure will not only empower individuals and businesses but also drive Nigeria’s progress towards becoming a digitally advanced and prosperous nation.

Dambatta, a veteran journalist, writes from Kaduna via [email protected]*