The Nation Newspaper

Tag: cash-less

  • Taking cash-less banking to greater heights

    Taking cash-less banking to greater heights

    Telecoms technology and banking services are creating a new growth in the financial services sector via mobile money. This payment module has grown beyond its initial concept and is expected to bridge the gap between the banked and unbanked, writes COLLINS NWEZE.

    The dream of getting financial services to the nooks and crannies of the country is being realised by banks, the Central Bank of Nigeria (CBN), telecoms operators and the Nigeria Communications Commission (NCC) via money.

    That vision, many analysts said, would be driven by mobile money. This refers to payment services operated under financial regulation and performed from or via a mobile device.

    Mobile money system refers to the various components required to deliver mobile money to the banking and non-banking community. The providers of these services and solutions are required to operate within the defined regulatory framework specified in this document and any other regulation/guideline issued by the CBN.

    The CBN is responsible for defining and monitoring the mobile money systems in Nigeria.

    With mobile money, instead of paying with cash, cheque, or credit cards, a  consumer can use a mobile phone to pay for many goods and services.

    In 2008, the global market for various mobile payments was projected to reach more than $600 billion by 2013. In developing countries, including Nigeria, mobile payment solutions are deployed as a means of extending financial services to the unbanked or under-banked. These groups constitute about 50 per cent of the world’s population, according to Financial Access’ Report.

    Analysts insist that financial exclusion persists because of the inaccessibility of the unbanked mostly people in the lower strata of the economy, by the financial services providers.

    The unbanked are often far removed from the centre of commerce, which tends to lower their participation in economic transactions.

    Thus, a combination of low demand for financial services and prohibitive costs without commensurate returns dissuades financial services providers such as banks, insurance, and pension administrators from establishing its presence in these locations.

    However, mobile technology and innovations in the financial services industry, coupled with the phenomenal growth in telecoms’ subscriber numbers, have altered this situation.

    However, financial services providers continue to leverage the reach of telecoms networks to provide mobile money services to otherwise inaccessible locations.

    The spate of agreements on mobile money services among financial institutions and telecoms networks, MTN and Diamond Bank, UBA and Airtel, Stanbic IBTC Bank, FirstBank, Ecobank and Globacom, will, doubtless, ramp up the synergy that should lead to further growth in mobile money.

     

    NIBSS Network

    The CBN insists that Mobile Money Operators (MMO) are required to, henceforth, connect to the Nigeria Interbank Settlement System (NIBSS) otherwise called the National Central Switch (NCS) to ensure ease of communication for schemes in the system.

    In a guideline for the sector, the apex bank said a scheme operator can either be a bank or a licensed corporate organisation.

    It said the NIBSS is responsible for connecting the various players in the financial system using various players, such as banks, MMOs, non-banking financial institutions, payment terminal providers, card acquirers, government institutions and their customers to send, receive and process funds, documents and other instruments electronically through its platform.

    The apex bank said MMOs are the lead initiators for the mobile scheme and shall be responsible for ensuring that the various solutions and services within an approved mobile payment scheme meets the entire regulatory requirements as defined in this framework and as may be specified from time to time.

    The regulator said the MMOs shall be ccountable to the CBN and the end users. The CBN recognises that, with the evolution of the mobile money system, spin-off services would be identified by MMOs, which can be outsourced to entities with specialised skills and resources to support such services in a more efficient and effective manner. The service providers may employ the infrastructures of the MMOs to provide services to the end users.

    “The MMOs shall provide a detailed payments management process that covers the entire solution delivery, from user registration and management, Agent recruitment and management, Consumer protection/dispute resolution procedures, Risk management process to transaction settlement. These processes shall cover the scope of the value chain across all the participants in the mobile money ecosystem,” it said.

     

    The M-Pesa example

    The poster boy of the successful integration of the rural/informal populace into banking system via mobile money services is usually Kenya. M-PESA, Kenya’s mobile money system, has been hugely popular and successful in that country. It has over 40,000 agents and 17 million users (“equivalent to more than two-thirds of the country’s adult population, conducting more than two million transactions daily.

    In 2010, Kenya had just 840 bank branches and 1,510 ATMs to serve a population of 47 million. M-PESA, with its 40,000 agents, helped to plug the supply hole and provide access to financial services to ordinary Kenyans.

    Micro finance institutions piggybacked on M-PESA to penetrate remote areas quickly without increase in costs.

    In other countries, some financial institutions seemed to have found the right mix to ensure the successful deployment of mobile money. Standard Bank (parent bank of Nigeria’s Stanbic IBTC Bank), for instance, has been successful with mobile money in Uganda, Tanzania, and South Africa.

     

    Bank-led model

    The bank-led mobile money model adopted by Nigeria may be slightly different from Kenya’s telecoms-driven model but the underlying peculiarities are broadly similar.

    Access, costs, lower economic activities, and partnerships are common threads. The lessons of M-PESA are not lost though as mobile operators like MTN Nigeria is beginning to play more significant roles in mobile money.

     

    CBN Vs telco-led model

    The CBN said it avoided the implementation of the telco-led model in the mobile money operation to have control of monetary policy operations. The policy, it said will also enable it minimise risks and ensure that the offering of financial services are driven by organisations it licensed.

    In new guidelines, the CBN said the telco-led model, where the lead initiator is Mobile Network Operator (MNO), shall not be operational in the country. The apex bank said the overriding vision of achieving a nationally utilised and internationally recognised payments system necessitates strategies to bring informal payment transactions into the formal system.

    This framework has identified two models for the implementation of mobile money services namely; Bank Led – Financial Institution(s) and/or its Consortium as Lead Initiator and Non-Bank Led- A corporate organisation licensed by the CBN as Lead Initiator.

    “The CBN recognises the importance of Mobile Network Operator (MNOs) in the operations of mobile money and appreciates the criticality of the infrastructure they provide,” it said.

    The CBN said a robust payments system is vital for effective monetary policy implementation and the promotion of economic efficiency. “The introduction of mobile telephony in Nigeria, its rapid growth and adoption and the identification of person to person payments as a practical strategy for financial inclusion, has made it imperative to adopt the mobile channel as a means of driving financial inclusion of the unbanked,” it said.

    Chief Excutive Officer (CEO), MTN Nigeria, Michael Ikpoki, said the network would focus on meeting the significant market demand for financial services and mobile content with an expected positive impact on data revenue.

    “The success of Diamond Y’ello Account and other basic mobile money services is expected to lead to the adoption of more sophisticated mobile payment solutions such as bulk mobile payment designed for corporate organisations. This service makes it easier for organisations to send money in bulk to their suppliers, employees or other business partners without the beneficiaries necessarily having to own a bank account,” he said.

    Mobile money providers are also expected not be shy to adapt and replicate what works in other places but continue to innovate and develop bespoke products and services to excite consumers and boost conversion rate.

     

    Benefits to consumers

    Some of the benefits to the consumer include security, convenience, accessibility, speed and ease of transaction, competitive charges, access to quality advisory services, and integrity of transactions; the customer literally carries his bank in his pocket or bag wherever he goes.

    Other not-so-obvious benefits, which are nonetheless important, are better cash flow management, enhanced financial planning, and inculcation of sustainable savings habit, which boost financial security and comfort in retirement.

    “Mobile payments, which I perform on my phone, help to reduce my travelling costs,” a farmer in the rural area who uses mobile payment services said.

    Mobile money also has the potential to galvanise economic activities, leading to higher socio-economic development, lower cost of transactions and reduction of cash handling costs, among other benefits.

     

    Role of regulators

    CBN Director, Payment Systems Unit, ‘Dipo Fatokun, said apex bank believes that mobile money and agent framework is the frontier of cashless boom.

    “Mobile money is the next thing expected to transform CBN’s cash-less policy. The apex bank believes that such initiative will aid both telecommunications and banking industries to further serve Nigerians better,” he said.

    Nigeria’s telecoms subscriber base, put at 131 million as of September, last year by the Nigerian Communications Commission (NCC) should play a major role in bringing the unbanked into the formal banking system.

    With over 50 per cent of Nigeria’s unbanked adult population, mobile banking could be the catalyst that will help quicken the adoption of banking services by this critical segment of the population.

    Offshore portfolio managers appear to be similarly persuaded and they are already positioning to take advantage of the expected growth in mobile money.

    For instance, Carlyle Group, a United States-based global alternative asset manager with $203 billion of assets under management across 129 funds and 141 fund of funds vehicles, recently acquired a $147 million (about N27 billion) minority stake in Diamond Bank, partly on the strength that the bank’s new mobile banking service “will help rapidly boost the lender’s customers and profits.”

    Also strengthening mobile money is the Nigerian Deposit Insurance Commission (NDIC’s) extension of deposit insurance cover of up to N500,000 to mobile money account holders.

     

  • Cash-less banking must grow to global standard, says Emefiele

    Cash-less banking must grow to global standard, says Emefiele

    How has  cash-less banking fared three years after its introduction? It has not done well says Central Bank of Nigeria (CBN) Governor, Godwin Emefiele who has tasked stakeholders to ensure the payment system meets global standard.

    Emefiele, who inaugurated members of the Payment System Strategy (PSS) Board, Payment Scheme Boards and Initiatives Working Groups of the Nigerian Payment System, meant to drive the restructured Payments System Vision 2020 (PSV2020), said despite growing the mobile payment channel by 8,400 per  cent to N296.9 billion in 2014 from N3.5 billion in 2012, there are still gaps to be filled.

    He said Point of Sale (PoS) transactions also rose to N312 billion last year from N48 billion in 2012, representing about 550 per cent increase; the Nigeria Interbank Settlement System (NIBSS) Instant Payment (NIP), increased by 423 per cent to 19.9 trillion last year from N3.8 trillion in 2012.

    The web channel grew by 108 per cent from N31.5 billion in 2012 to N65.6 billion last year, while Nigerian Electronic Fund Transfer (NEFT), rose by 7.5 per cent  to N14.6 trillion from N13.6 trillion.

    “There is no doubt that we have indeed, recorded many successes along the way; however, we do not intend to rest on our oars. In that sense, looking in retrospect, and interpreting the future of our payments system in the light of the present, we see our accomplishments as a stepping stone, bearing in mind that there’s  still a great deal of work to be done,” Emefiele said.

    He listed agriculture, smart cities, government flows, hotels and entertainment, transport, education, health, bill payment and direct debits, as areas that need strengthening in the payment system to improve results in the years ahead.

    He described the PSV2020 as part of the CBN’s efforts to transform the nation’s payment system, adding that a  functional national payment system is essential for an efficient financial sector.

    Emefiele listed some of the achievements made in the electronic payment to include implementation of the Nigeria Uniform Bank Account Number (NUBAN), deployment of a new Real Time  Gross Settlement system (RTGS) built on the Society for Worldwide Interbank Financial Telecommunication (SWIFT), messaging standards and Introduction of the cash-less policy, among others.

    He said the PSV2020, was created to make the Payments System ‘Nationally Utilised and Internationally Recognised’. “It is gratifying to note that our country is acknowledged as a major economic force within Africa, but also increasingly becoming an active player in the global economy. To participate actively, our payments system must be successfully benchmarked against the global best practices, as in most developed nations of the world. We have made some significant achievements so far  in this journey, but a lot still remains to be done,” he said.

    The Board, he said, shall be   chaired by the CBN Governor. It has the Honourable Minister of Communications & Technology; the Accountant-General of the Federation; the four Deputy  Governors of the CBN; the Chairmen of the four Payment Scheme Boards, among others as members.

    “The PSV2020 initiative is intended to benchmark the existing core payments infrastructure in Nigeria against international best practices.  The primary reference point was the Core Principles produced by the then Committee on Payment and Settlement Systems (CPSS) of the Bank for International Settlements (BIS),” he said.

    He, however, said through the implementation of the original PSV2020 initiatives by the CBN, in association with the banking community, the country has witnessed an impressive growth of electronic payments and a shift from the overwhelming dominance of cash as a means of payment.

     

  • Cash-less banking: Still a long way to go

    Cash-less banking: Still a long way to go

    Cash-less banking was introduced with fanfare three years ago, but it has yet to make an impact. It is being undone by erratic Automated Teller Machines (ATMs), Point of Sale (PoS) and internet banking downtime hitches. Many customers have lost confidence in the scheme, writes COLLINS NWEZE.

    The introduction of the cash-less banking was one of the biggest news that hit the sector in January 2012. The objective, the Central Bank of Nigeria (CBN) says, is to change the cash-driven economy and reduce the rising cost of banking operations.

    The policy is also designed to promote financial intermediation, financial inclusion, minimise revenue leakages, eliminate robbery and encourage e-payment.

    But three years after, feedback from customers shows that these objectives are far from being met.

    Some bank customers said the policy is yet to gain their confidence because of rising cases of fraud through the channels and additional costs that come with the implementation.

    A cashier at SMAT Electronics, Computer Village, Lagos, Maureen Onyekachi, told The Nation that poor network in the use of e-payment channels and the 1.25 per cent charge on merchants’ accounts when Point of Sale (PoS) is used have depleted some of the benefits that come with the system.

    She said the merchant fee wouldn’t have mattered if the network were to be seamless and trusted by customers. She said on several occasions, customers got debit alerts after paying through PoS, but at the merchant’s end, the transactions were declined.

    Onyekachi said though such hitches were resolved between the customers and their banks, they create doubts on the feasibility of achieving a viable e-payment system in the country.

    “Remember we pay 1.25 per cent fee for every successful transaction done via PoS, which translates to N125 for every N10,000 transaction or N1,250 for every N100,000 transaction. Still, that wouldn’t have mattered if the networks are working well,” she said.

    Mrs. Olatunji Alima, an egg distributor based in Lagos, also recounted her experience. She has been using ATM since 2012, but does not feel safe with it anymore.

    “I own a boutique and I am also a sole distributor of eggs. It has been two years. I don’t feel secure using the device anymore because robbers are attacking ATM subscribers daily at the point of withdrawal. I am always scared of using my ATM cards,” she said. Mrs Alima recounted  when her ATM card refused to work.

    “There was a time I came to withdraw money to pay off a debt. When I slotted in my card, it refused to neither slip out nor pay me. It was a bad experience. I am always very careful and time conscious every time I am about to make withdrawals from ATM. That is why I do not withdraw in the night. Anytime past 6:00 pm, I don’t get close to the ATM,” she said.

    She called for more security by the banks. “I know they are trying their best but they need to do more in terms of security provided for withdrawers and less technical difficulties should be expected,” she advised.

    Like Mrs Alima, Damilare Oshibajo, a technician, and Jeremiah Amaukwu, an information technology specialist, are also not comfortable using ATM. Oshibajo conceded that though ATM has made banking easier for Nigerians, he regretted that dispensing error is a major challenge. “The other day, I wanted to withdraw N20, 000 from the ATM. The machine debited my account but did not dispense the cash. I was told it will reverse the transaction within 24 hours. It never did until after 21 days,” he said.

    Amaukwu said there were several times when his account was debited and the money was not dispensed, a situation he described as worrisome. “It was N10, 000 they took from my account. I did not get it back until two months after,” he said.

    Chief Executive Officer, Forenovate Technologies Ltd, Don Okereke, said cybercriminals were using skimming and trapping devices to steal credit/debit card details of individuals without such persons knowing. He said there have also been several cases of online account takeover, where an unauthorised party gains access to an account by stealing the access codes and conducting illegal funds transfer to a designated account.

    “In today’s increasingly connected world, convenience, speed, technology adoption, and payment options allow people and businesses to conduct online financial activities with ease. Fraudsters are taking advantage of this trend, fleecing customers of their funds. “A leading bank has been bragging of its capacity to open instant bank accounts via Facebook. I advise banks not to sacrifice security and safety of their customers for speed,” he said.

    Okereke said many bank customers are illiterates who are yet to be accustomed to the dictates of cashless banking and all the issues associated with it. He said many of these customers lost confidence in their banks after many reported cases of e-frauds. “There is also another category of discerning, security conscious Nigerians who are abreast with the weaknesses inherent in cashless banking. For instance, I am yet to download any of my banks mobile banking Apps because of security concerns,” he said.

     

    Cash-less banking policy

    The Central Bank of Nigeria (CBN) launched the Cash-less Nigeria Project in Lagos State, in January 2012 and extended the policy to the Federal Capital Territory (FCT), Abia, Anambra, Ogun, Kano and Rivers States in June 2013. The policy was initiated against the backdrop of cash dominance in the payments system, a development which encouraged the circulation of huge sums of money outside the banking system and imposed huge currency management cost on the economy.

    The policy was meant to ensure price stability through effective monetary policy; sound financial system and efficient payments system. It was a critical part of the payment system modernisation, designed to promote the use of ATMs, PoS terminals, web payment, online transfers and even mobile money in banking transactions instead of relying on cash.

    CBN Governor Godwin Emefiele, on June 5, last year removed the three per cent charge on cash deposits above N500,000 for individuals and N3 million for corporate customers — the sanctions for defaulters —but said the nationwide rollout would hold.

     

    CBN’s position

    Aware of these dangers, the CBN has decided to set up a five-year Information Technology (IT) Standards for banks. CBN’s Director, Information Technology, John Ayoh, said the exercise would help banks identify and adopt global IT standards that address industry problems. He said banks were expected to implement the plan on continuous basis and in accordance with set timelines.

    CBN’s Director, Banking Payment and Systems Dipo Fatokun said the introduction of chip-and-pin payment cards have led to drastic drop in ATM card fraud. He said the CBN and other relevant institutions have been able to reduce card frauds considerably by instituting ATM Fraud Prevention Group and the Nigeria Electronic Fraud Forum (NeFF). The groups are to enable banks to collaboratively share data on fraud attempts and proactively tackle them to reduce losses.

    According to Fatokun, the CBN, instructed banks to set and implement mandatory daily limits for ATM cash withdrawal, while other related transactions, including PoS and web purchases should be subjected to stringent limit as agreed and documented between the banks and customers. He said it was the responsibility of the banks to ensure that a trigger was automatically initiated when limits were exceeded.

     

    Banks, others react

    In an emailed statement to its customers, GTBank said the policy would drive the development and modernisation of Nigeria’s payments system. It said individuals and corporate outfits would be encouraged to adopt electronic payment and other banking options.

    The policy, it added, is aimed at promoting the use of electronic-based transactions instead of cash for payments for goods, services, transfers, among other services.

    Skye Bank Plc has underscored the importance of deploying innovative technology in providing a secured and more convenient direct banking solution to its customers. In a statement, the bank said such action is to promote the cash-less policy. The lender has also unveiled its ‘SkyePLus’ to support the initiative.

    Visa’s Group Executive, Central and Eastern Europe, Middle East and Africa, Kamran Siddiqi, said the cash-less banking initiative is modernising the payment system and creating economic development for the country. He was in Nigeria last year to support Visa’s financial literacy and cashless payments drive.

    “Nigeria is a very important market for us. It is exciting for me to be here to support the progress Visa has made in driving financial inclusion and making electronic payments more accessible to everyone everywhere,” he said.

    He said Visa is dedicated to increasing financial literacy among the unbanked through strategic partnerships and educational programmes. “This was the motivation behind the recent highly successful Financial Literacy Challenge with the Co-Creation Hub. It was geared at stimulating the development of innovative web and mobile applications to teach money management skills and support the advancement of financial literacy in Nigeria,” he said.

     

    Incentives

    The Nigeria Interbank Settlement System (NIBSS), collaborating with banks, is working out modalities that will ensure that customers that use their e-payment cards to pay for goods and services on PoS terminals and web platforms get cash refund of 50 kobo for every N100 spent.

    Already, lenders are serious about the offer, as they look at more ways of rewarding users of e-channels, such as PoS, ATMs or even web payments.

    However, in most banks, withdrawing less than N100,000 across the counter attracts a surcharge. Customers are expected to use ATMs or make direct online transfer into beneficiaries’ accounts. Despite these approaches, a majority of bank customers still prefer cash transactions, mainly because of fear of losing their money in what they see as unsecured platforms.

    Vice President, IBM Tivoli Storage, Software Group, Steve Wojtowecz, advised banks to adopt efficient and quality banking software despite their high cost to effectively fight fraudsters.

    He said banks should ensure that people responsible for data security are highly efficient to achieve maximum protection. He said the cost for acquiring software would be upset in a matter of months from efficiency and security benefits. He advised banks to acquire several layers of data security and authentication so that should one layer fail, the other can sustain their operations.

    “There are many mechanisms a bank can implement to limit fraud, including having several layers of data security and authentication, because preventing fraud is very difficult. Limiting fraud is the best case option at the moment,” Wojtowecz said.

  • For a cash-less campus

    For a cash-less campus

    Seven university students have presented their proposals on how to promote the cash-less policy of the Central Bank of Nigeria (CBN), using Verve e-Cash tool. They made their presentation during the My Cash-less Campus Challenge organised by Verve International and Enactus Nigeria. WALE AJETUNMOBI reports.

    They came from different higher institutions but their motive was the same- to develop business strategies aimed at entrenching the cash-less policy of the Central Bank of Nigeria (CBN) in tertiary institutions.

    The seven undergraduates presented their designs on ways to launch cash-less transactions on their campuses atthe My Cash-less Campus Challenge, a business-oriented contest, organised by Verve International and Enactus Nigeria.

    The event was held at Verve’s head office on Victoria Island, Lagos, last Thursday.

    The contest, according to the organisers, was to promote the adoption of Verve e-Cash, an innovative electronic tool that allows users to conduct online transactions, including cash transfers and payments.

    As part of the strategy to drive the cash-less campus campaign, Enactus has held several workshops on campuses to empower students with information on how to explore the Verve e-Cash product. To enable students to drive the strategy, the contest was introduced to challenge them to develop innovative solutions on their campuses.

    Michael Ajayi, the acting Country Director of Enactus, said more than 400 students sent in proposals to participate in the competition. He said: “After the physical and online workshops held for students, we received more than 400 entries but we trickled them down to 20 after preliminary screening. We finally got the seven undergraduates whose proposals could help drive the Verve e-Cash product.”

    The seven contestants were attached to mentors for two weeks, during which they learned tips on how they could improve the marketability of their strategies.

    Ajayi added that the whole process took more than 12 months before the competition was finally held.

    The seven finalists presented their proposals on a projector, detailing how they would achieve the cashless economy on their campuses. Their proposals were perused by a panel of judges comprising Information Technology (IT) and business development experts.

    Tony Ossai, a student of the University of Port Harcourt (UNIPORT), said theft by employees was rampant in the university and threatened the growth of small-scale businesses on the campus. He designed an IT strategy on how to solve the problem.

    The first task, he said, is to design a quick-teller application for smart phones that would make it possible for customers to make payments via online platform. After this, Tony said: “There would be campus-wide awareness to orientate students on how they can use the interface to make payments for the services without having to carrying cash.”

    If there is no cash exchange between customers and employees of small-scale businesses, Tony said sharp practices would be reduced and students would be encourage to invest.

    For Gbolahan Ajijola, a student of the Federal University of Technology, Akure (FUTA), the use of electronic ticket for the payment of transport fare, could provide jobs and save time. He designed a Mobile Ticket Interface, an electronic platform that would enable commercial drivers on campuses collect fare without exchange of cash.

    How would this happen? Gbolahan said: “Mobile Picket Interface can only work in a controlled environment. The number of drivers and passengers must be known before the application can be operated. Staff and students who use commercial transport will register on the platform through their mobile phones and make payments for their journey. With this, the drivers get their money without hitch and argument with anyone.”

    At the end of the two hours challenge, Gbolahan’s proposal was declared the most feasible by the judges. He got N500,000 cheque.

    Rowland Briggs, a student of UNIPORT, came second  and went home with N300,000 cheque; Emmanuel Chikaodiri, a student of the University of Nigeria, Nsukka (UNN),  got N200,000 cheque for coming third.

    Ms Oremeyi Akah, Country Manager of Verve International, described the students’ proposals as “brilliant ideas”, saying the firm held the contest to develop students’ innovative minds to drive the cashless policy on campuses.

    She said: “We are leveraging on the Verve e-Cash platform to explore the innovative minds of the youth and I got excited as I listened to the students’ presentation. I could see the youth are endowed in so much potentials, given the detailed researches they did on how cashless policy can work on their campus. If we implement just one of the ideas, the impact would be so enormous and how much more could we get if we invest in all the proposals.”

  • The many sides of cash-less banking

    The many sides of cash-less banking

    Cash-less banking comes with varied benefits, but grassroots campaign and enlightenment must be sustained to fully tap the opportunities it presents. The nationwide roll out on July 1, presented a huge opportunity for banks, regulators and other stakeholders to collaborate to achieve the desired objectives, writes COLLINS NWEZE.

    Michael Abiodun, a 32 year-old entrepreneur, spends a part of his business time in banking halls making payments to his suppliers of goods.

    During one of such visits to a bank in Central Lagos, a cashier who has been monitoring him for months, including his frequent visits to the banking hall, decided to tell him about electronic payments.

    “You don’t need to be physically here to pay your suppliers. You can do it at home, or even in your shops or through mobile phone,” the cashier told Abiodun.

    The use of Automated Teller Machines (ATMs), Point of Sale (PoS) terminals, web payment, online transfers and even mobile money, are just getting popular in Nigeria, after years of relying heavily on cash for payment for goods and services. Although e-payment saves costs and time, just about four per cent of transactions done in Nigeria are carried out through the process.

    The figure was less than one per cent until January 2012 when the Central Bank of Nigeria (CBN) launched the cash-less banking initiative in Lagos. The ‘Cash-less Lagos’ as it is called, was later replicated in six other states and Federal Capital Territory last January. The nationwide implementation of the policy began on July 1.

    As electronic payments gain ground, the number of connected card readers has increased to about 158,000 from 5,000 before 2012, according to the CBN statistics. The value of transactions rose 26 per cent to N1.4 trillion ($8.5 billion) in the first half of last year from the position, a year ago.

    The CBN said it is targeting an increase to 375,000 readers by the end of next year. For him, improved e-payment would make monetary policy more efficient because of ease in which cash movement is monitored.

    The rise of online-shopping websites, such as Jumia and Konga.com, has also spurred Nigerians to consider electronic payments. The value of online retail transactions, estimated at N62 billion in 2011, may rise to N150 billion this year, according to Euromonitor International, a London-based researcher.

     

    ATMs gain ground

    ATMs withdrawals accounted for 93 per cent of electronic payments by volume in the first half of 2013, according to CBN data. Mobile money also hasn’t taken off in Nigeria, with phone payments accounting for just 3.7 per cent of all electronic transactions. The mobile money which allows mobile phones to be used to send and receive money, buy recharge cards, pay subscription fees for DStv, pay electricity bills, use of PoS terminals to pay for goods and services among others is under threat.

    The telecommunication companies (Telcos) and banks which are expected to drive the process are not doing so. Both sectors want to drive the mobile money business and have found it extremely difficult to work together.

    General Manager, IBM Africa, Taiwo Otiti, said the strategy being adopted by the key stakeholders is stifling the success of mobile money in the country.

    He said: “The approach we have taken in mobile money is the challenge. We have over 30 million unbanked, compared with over 100 million mobile phone users, the people who are unbanked, may have mobile phones, but how would you get them into the financial system. You must be able to get into his lifestyle for you to be able to get him subscribe to mobile money scheme. But many of the stakeholders are not doing that”.

    Otiti said the getting the mobile money scheme running requires both the payment and supply chain properly defined and implemented by the stakeholders. He said there is need for a paradigm shift that sees all the stakeholders working together. “The telcos can’t also do without the banks, so also are the banks. It is only by collaboration, will the mobile money project begin to deliver the needed results,” he said.

    The Executive Vice-Chairman of NCC, Eugene Juwah, said critical success factors for mobile payment in the country are the integrity and security of the end-to-end transition during a payment transaction process. He said the chain of transaction must be secured from initiation to authentication. Therefore, confidentiality and integrity of the data transition are critical factors in mobile payment.

    While mobile payments increased more than threefold in recent years, only N6 million was transacted using mobile money, compared with N57.2 billion ($352.5 million) on ATMs, and PoS.

    The central bank wants commercial lenders to drive growth rather than phone operators because they regulate the banks and not the telecommunication companies, Moghalu said.

    Even among Nigerians with ATM cards, cash still dominates daily business as connection and network difficulties and delays in transaction times get worse. There have been cases where consumers are debited twice for the same purchase.

    About 50 per cent of card-reader transactions also crash because of patchy radio and phone networks, Moghalu said. The CBN is trying to reduce failure to below 10 per cent over time, he said.

    Fixing botched transactions causes “quite a bit of frustration” because they can take months to resolve, Bisi Lamikanra, a partner and head of management consulting at KPMG Advisory Services, said adding that with these hitches, consumers typically rather withdraw cash from the ATM, even if they’re withdrawing it outside the shop. The start of chip-and-pin-card technology in 2010 helped lower incidents of ATM fraud by more than 90 per cent.

     

    Incentives for e-payment

    The Nigeria Interbank Settlement System (NIBSS) is encouraging the use of cards to pay for goods and services via PoS terminal. The agency, collaborating with banks is working out modalities that will ensure that bank customers that use their e-payment cards to pay for goods and services on PoS terminals and web platforms will now be rewarded with cash back of 50 kobo for every N100 spent.

    Chairman, Committee of E-Banking Industry Heads (CEBIH), Mr. Chuks Iku, the committee and  member-banks have partnered with NIBSS for an incentive scheme for members of the public. The scheme, he said, will allow cash back rewards to card holders for using their cards to make payments on alternate channels. “The objective is to encourage usage of cards on PoS and the Web,” he said.

    Banks are also taking steps that would ensure the security of customers’ transactions. The lenders are discussing with Microsoft Nigeria to extend security features in Microsoft XP being used by most Nigerian ATMs.

    With the expiration of the April 8 deadline set by Microsoft for users of Windows XP to migrate to Windows 8 Operating System (OS), there are fears that the ATMs of most of the lenders in the country may be vulnerable to fraud. Iku said Microsoft Nigeria had directed banks to migrate to the improved platform, which, he said would allow for enhanced banking benefits and security.

    The banker said despite failure to comply by some lenders, ATMs remain secured and safe for transactions. He however said non-compliant ATMs might not be able to carry out improved service delivery.

    “By upgrading, we are taken to a higher version, but that does not mean that the version that you have will not run. The ATMs are still working, and are not going to go down. “But the migration will only enhance the features of the ATMs. There is really no cause for alarm, the important thing is that we should do it quickly to ensure that our ATMs are in top performing levels,” he advised.

    General Manager Microsoft Nigeria, Kabelo Makwane said several banks have identified non-migration to the new technology as a priority for them and are taking steps to address the challenge. He said non-migration to the Windows 8 could open the banks up for potential security vulnerability and threats.

  • The many sides of cash-less banking

    The many sides of cash-less banking

    Cash-less banking comes with varied benefits, but grassroots campaign and enlightenment must be sustained to fully tap the opportunities it presents. The nationwide roll out on July 1, presented a huge opportunity for banks, regulators and other stakeholders to collaborate to achieve the desired objectives, writes COLLINS NWEZE.

    Michael Abiodun, a 32-year-old entrepreneur, spends a part of his business time in banking halls making payments to his suppliers of goods.

    During one of such visits to a bank in Central Lagos, a cashier who has been monitoring him for months, including his frequent visits to the banking hall, decided to tell him about electronic payments.

    “You don’t need to be physically here to pay your suppliers. You can do it at home, or even in your shops or through mobile phone,” the cashier told Abiodun.

    The use of Automated Teller Machines (ATMs), Point of Sale (PoS) terminals, web payment, online transfers and even mobile money, are just getting popular in Nigeria, after years of relying heavily on cash for payment for goods and services. Although e-payment saves costs and time, just about four per cent of transactions done in Nigeria are carried out through the process.

    The figure was less than one per cent until January 2012 when the Central Bank of Nigeria (CBN) launched the cash-less banking initiative in Lagos. The ‘Cash-less Lagos’ as it is called, was later replicated in six other states and Federal Capital Territory last January. The nationwide implementation of the policy began on July 1.

    As electronic payments gain ground, the number of connected card readers has increased to about 158,000 from 5,000 before 2012, according to the CBN statistics. The value of transactions rose 26 per cent to N1.4 trillion ($8.5 billion) in the first half of last year from the position, a year ago.

    The CBN said it is targeting an increase to 375,000 readers by the end of next year. For him, improved e-payment would make monetary policy more efficient because of ease in which cash movement is monitored.

    The rise of online-shopping websites, such as Jumia and Konga.com, has also spurred Nigerians to consider electronic payments. The value of online retail transactions, estimated at N62 billion in 2011, may rise to N150 billion this year, according to Euromonitor International, a London-based researcher.

     

    ATMs gain ground

    ATMs withdrawals accounted for 93 per cent of electronic payments by volume in the first half of 2013, according to CBN data. Mobile money also hasn’t taken off in Nigeria, with phone payments accounting for just 3.7 per cent of all electronic transactions. The mobile money which allows mobile phones to be used to send and receive money, buy recharge cards, pay subscription fees for DStv, pay electricity bills, use of PoS terminals to pay for goods and services among others is under threat.

    The telecommunication companies (Telcos) and banks which are expected to drive the process are not doing so. Both sectors want to drive the mobile money business and have found it extremely difficult to work together.

    General Manager, IBM Africa, Taiwo Otiti, said the strategy being adopted by the key stakeholders is stifling the success of mobile money in the country.

    He said: “The approach we have taken in mobile money is the challenge. We have over 30 million unbanked, compared with over 100 million mobile phone users, the people who are unbanked, may have mobile phones, but how would you get them into the financial system. You must be able to get into his lifestyle for you to be able to get him subscribe to mobile money scheme. But many of the stakeholders are not doing that”.

    Otiti said the getting the mobile money scheme running requires both the payment and supply chain properly defined and implemented by the stakeholders. He said there is need for a paradigm shift that sees all the stakeholders working together. “The telcos can’t also do without the banks, so also are the banks. It is only by collaboration, will the mobile money project begin to deliver the needed results,” he said.

    The Executive Vice-Chairman of NCC, Eugene Juwah, said critical success factors for mobile payment in the country are the integrity and security of the end-to-end transition during a payment transaction process. He said the chain of transaction must be secured from initiation to authentication. Therefore, confidentiality and integrity of the data transition are critical factors in mobile payment.

    While mobile payments increased more than threefold in recent years, only N6 million was transacted using mobile money, compared with N57.2 billion ($352.5 million) on ATMs, and PoS.

    The central bank wants commercial lenders to drive growth rather than phone operators because they regulate the banks and not the telecommunication companies, Moghalu said.

    Even among Nigerians with ATM cards, cash still dominates daily business as connection and network difficulties and delays in transaction times get worse. There have been cases where consumers are debited twice for the same purchase.

    About 50 per cent of card-reader transactions also crash because of patchy radio and phone networks, Moghalu said. The CBN is trying to reduce failure to below 10 per cent over time, he said.

    Fixing botched transactions causes “quite a bit of frustration” because they can take months to resolve, Bisi Lamikanra, a partner and head of management consulting at KPMG Advisory Services, said adding that with these hitches, consumers typically rather withdraw cash from the ATM, even if they’re withdrawing it outside the shop. The start of chip-and-pin-card technology in 2010 helped lower incidents of ATM fraud by more than 90 per cent.

     

    Incentives for e-payment

    The Nigeria Interbank Settlement System (NIBSS) is encouraging the use of cards to pay for goods and services via PoS terminal. The agency, collaborating with banks is working out modalities that will ensure that bank customers that use their e-payment cards to pay for goods and services on PoS terminals and web platforms will now be rewarded with cash back of 50 kobo for every N100 spent.

    Chairman, Committee of E-Banking Industry Heads (CEBIH), Mr. Chuks Iku, the committee and  member-banks have partnered with NIBSS for an incentive scheme for members of the public. The scheme, he said, will allow cash back rewards to card holders for using their cards to make payments on alternate channels. “The objective is to encourage usage of cards on PoS and the Web,” he said.

    Banks are also taking steps that would ensure the security of customers’ transactions. The lenders are discussing with Microsoft Nigeria to extend security features in Microsoft XP being used by most Nigerian ATMs.

    With the expiration of the April 8 deadline set by Microsoft for users of Windows XP to migrate to Windows 8 Operating System (OS), there are fears that the ATMs of most of the lenders in the country may be vulnerable to fraud. Iku said Microsoft Nigeria had directed banks to migrate to the improved platform, which, he said would allow for enhanced banking benefits and security.

    The banker said despite failure to comply by some lenders, ATMs remain secured and safe for transactions. He however said non-compliant ATMs might not be able to carry out improved service delivery.

    “By upgrading, we are taken to a higher version, but that does not mean that the version that you have will not run. The ATMs are still working, and are not going to go down. “But the migration will only enhance the features of the ATMs. There is really no cause for alarm, the important thing is that we should do it quickly to ensure that our ATMs are in top performing levels,” he advised.

    General Manager Microsoft Nigeria, Kabelo Makwane said several banks have identified non-migration to the new technology as a priority for them and are taking steps to address the challenge. He said non-migration to the Windows 8 could open the banks up for potential security vulnerability and threats.

     

     

  • As cash-less banking goes nationwide

    As cash-less banking goes nationwide

    Ahead of the July 1 nationwide implementation of the cash-less policy, banks and the Nigeria Interbank-Settlement System (NIBSS) have been enlightening customers on the benefits of using the e-payment platform. COLLINS NWEZE examines the challenges.

    Oladipo Abiodun, a 32-year-old entrepreneur, spends part of his business time in banking halls sending money to his suppliers. On one of such visits to a bank in Central Lagos, a cashier who has been monitoring him for months, told him about electronic payment.

    “You don’t need to be present here to pay your suppliers. You can do it at home or even in your shops or even through your mobile phone,” the cashier told Abiodun.

    The use of Automated Teller Machines (ATMs), Point of Sale (PoS) terminals, web payment, online transfers and even mobile money is just getting popular in Nigeria after years of relying on cash payment for goods and services. Although e-payment saves costs and time, just about four per cent of transactions in the country are carried out through this platform.

    The figure was less than one per cent until January 2012 when the Central Bank of Nigeria (CBN) launched the cash-less banking initiative in Lagos. The ‘Cash-less Lagos’, as it was called, was later replicated in six other states and the Federal Capital Territory (FCT) last January. The policy will be implemented across the country from July 1.

     

    CBN’s position

    CBN Head, Shared Services, Chidi Umeano, said the cash-less policy which runs in six states and Abuja would be implemented nationwide on July 1.

    He said: “A decision was reached today that the cash-less initiative would now be deployed nationwide. As you are all aware, the pilot phase was done in Lagos about two years ago and last year we implemented in six other states namely Abia, Anambra, Ogun, Kano, Rivers and FCT.”

    Continuing, he said from the success recorded in those states, the CBN decided to move to other states. “By July 1, we are going live in all the states of the federation. As you well know, this is a critical part of the payment system modernisation and the success registered so far has been very impressive,” he said.

     

    Incentives for customers

    To get more people interested in using the e-payment platforms, the Nigeria Inter-bank Settlement System (NIBSS) is encouraging the use of cards to pay for goods and services via PoS terminal. The agency, in collaboration with banks, is working out modalities to ensure that bank customers using e-payment cards to pay for goods and services on PoS terminals and web platforms will be rewarded with cash back of 50 kobo for every N100 spent.

    Chairman, Committee of E-Banking Industry Heads (CEBIH), Mr. Chuks Iku, said the committee and member-banks have partnered with NIBSS for the incentive scheme for members of the public. The scheme, he said, will allow cash back rewards to card holders for using their cards to make payments on alternate channels.

    “The objective is to encourage usage of cards on PoS and the Web,” he said.

    As electronic payments gain ground, the number of connected card readers has increased to about 158,000 from 5,000 before 2012, according to the CBN statistics. The value of transactions rose 26 per cent to N1.4 trillion ($8.5 billion) in the first half of last year from the position, a year ago.

    CBN Deputy Governor, Operations, Kingsley Moghalu, told Bloomberg, an online news medium, that the bank was targeting 375,000 readers by the end of 2015. For him, improved e-payment would make the policy more efficient because of the ease of monitoring cash movement.

    The rise of online-shopping websites, such as Jumia and Konga.com, has also spurred Nigerians to consider electronic payments. The value of online retail transactions, estimated at N62 billion in 2011, may rise to N150 billion this year, said Euromonitor International, a London-based researcher.

    Some customers have expressed displeasure over services at PoS and web payments. Monday Adeoye, a civil servant, in Lagos, who was at the defunct Power Holding Company of Nigeria (PHCN), now Ikeja Distribution Company, Ogba unit to pay his bill, said it took him more than two days to pay because the PoS was not working.

    He said the challenge, which is becoming a daily occurrence, made users to abandon the device and reverted to cash payment. This, he said, led to long queues.

    “We have a long queue because there is only one person that is attending to us; besides the PoS is not working. There is need to get more people involved in bill collection, and also get the PoS working too. I have been here several times today and was told that the server is down,” he told The Nation.

     

    ATMs gain ground

    ATMs withdrawals accounted for 93 per cent of electronic payments by volume in the first half of last year, according to CBN data. Mobile money also hasn’t taken off in Nigeria, with phone payments accounting for a mere 3.7 per cent of all electronic transactions. The mobile money which allows mobile phones to be used to send and receive money, buy recharge cards, pay subscription fees for DStv, pay electricity bills, use of PoS terminals to pay for goods and services among others is under threat.

    The telecoms firms and banks, which are expected to drive the process, are not doing so. Both sectors want to drive the mobile money business and have found it extremely difficult to work together.

    General Manager, IBM Africa, Taiwo Otiti, said strategy being adopted by the key stakeholders is stifling the success of mobile money operation in the country.

    He said: “The approach we have taken in mobile money is the challenge. We have over 30 million unbanked, compared with over 100 million mobile phone users, the people who are unbanked, may have mobile phones, but how would you get them into the financial system? “You must be able to get into his lifestyle for you to be able to get him subscribe to mobile money scheme. But many of the stakeholders are not doing that.”

    Otiti said getting the mobile money scheme running requires both the payment and supply chain properly defined and implemented by the stakeholders. He said there is need for a paradigm shift that sees all the stakeholders working together. “The telcos can’t also do without the banks, so also are the banks. It is only by collaboration, will the mobile money project begin to deliver the needed results,” he said.

    So far, the CBN has licensed 21 mobile money operators, but the challenge remains how to link mobile money to the PoS, among other issues.

    “That is a challenge that we are also working on. If mobile phones can serve as a touch point, our transactions would go up rapidly. So, these are some of the things we are looking at, hoping that by next year, as we roll out more PoS machines, we have to see how we integrate the mobile phones into the network because in the hinterlands, the challenges would be more. We hope to roll-out to all the state capitals by the second quarter of this year,” the CBN said.

    It explained that the second anniversary is an opportunity for operators and regulators to come together and talk about how to continue to transform the payment system in the country.

    “Of course we have ratcheted up transactions around electronic payment. We haven’t done badly at all, but there are still a lot to be covered and we have made significant progress in the area of infrastructure provision, particularly led by the cashless programme of the CBN. We believe that if we continue to drive this, then we will make the payment system a lot more efficient,” it said.

    Also, the CBN said an efficient payment system is good for the transmission of monetary policy adding that it underscores its importance to the apex bank. “It is also good for financial stability because a stable financial system is seen through how efficient the payment system is,” the CBN added.

    While mobile payments increased more than threefold in recent years, only N6 million was transacted using mobile money, compared with N57.2 billion ($352.5million) on ATMs, and PoS.

    The CBN bank wants commercial lenders to drive growth rather than phone operators because they regulate the banks and not the telecoms firms, Moghalu said.

    Even among Nigerians with ATM cards, cash still dominates daily business as connection and network difficulties and delays in transaction times get worse.There have been cases where consumers are debited twice for the same purchase.

    Between 40 and 50 per cent of card-reader transactions also crash because of patchy radio and phone networks, Moghalu said. The CBN is trying to reduce failure to below 10 per cent over time, he said.

    Partner and Head, Management Consulting at KPMG Advisory Services, Bisi Lamikanra, said fixing botched transactions causes “quite a bit of frustration” because they can take months to resolve, said adding that with these hitches, consumers typically rather withdraw cash from the ATM, even if they’re withdrawing it outside the shop. The start of chip-and-pin-card technology in 2010 helped lower incidents of ATM fraud by more than 90 per cent.

    Analysts said critical success factors for mobile payment in the country are the integrity and security of the end-to-end transition during a payment transaction process. They insist that the chain of transaction must be secured from initiation to authentication. Therefore, confidentiality and integrity of the data transition are critical factors in mobile payment.

  • ‘Cash-less policy has reduced cost of fund’

    Interswitch, an electronic transaction switching and payment processing company, has said the cash-less policy of the Central Bank of Nigeria (CBN) has reduced the cost of banks’ operations.

    It said the direct cost of handling, processing and managing cash across the nation as at 2009, stood at N114 billion and could have increased if the cashless policy had not been introduced.

    Responding to e-mailed questions, the firm said cardholders must be constantly educated on keeping their banking details protected.

    “The good thing we have also done as stakeholders in the e-payment industry are to also introduce solutions that would drive adoption of the cash-less policy. These solutions have been designed to address the specific needs of the ordinary Nigerian towards the adoption of e-payment,” it said.

    The firm said it is seeking for an upgrade in the technology processes and systems for early detection of fraud.

    This, it said, had become imperative because fraudsters were developing new mechanisms to circumvent new security measures.

    Interswitch said as a second layer of defence, it has introduced Scorebridge, which is a fraud management system that enables Electronic Financial Transaction (EFT) messages to be processed through predefined Artificial Intelligence in order to determine the transaction’s risk and probability of a fraud.

    It said: “Banking security has got so many banks thinking about safety and reliability of their networks. What steps do you think that lenders need to take to guarantee customers’ transaction security and trust? Over the years, the banks have invested a lot in different security measures to guarantee customer transactions, but as a minimum, all banks should have the following measures in place: Defining a baseline security standard (such as PCIDSS) Educating customers on safe security practices when using their cards Investing in a fraud management system.”

     

  • Cash-less has raised retail payments to 20%

    Cash-less has raised retail payments to 20%

    Varied reactions have greeted the recent United States government’s shutdown and its impacts on the global economy. Central Bank of Nigeria’s Deputy Governor, Operations, Tunde Lemo, said although the effects may not be immediately felt, it has long-term implications for the Nigerian economy. He spoke on the effects of e-payment on transactions and other issues on the sideline with reporters at the just-concluded International Monetary Fund/World Bank meeting in Washington DC. SIMEON EBULU was there. Excerpts.

    What are your concern on the recent US government’s shutdown with respect to Nigeria?

    We should not exaggerate the effects of the fiscal face-off in the US and its effects on the global economy, particularly, Nigeria. The United States of America is aware of the implications of a default, which is highly unlikely.

    Talking directly about the possible impact on our economy, it doesn’t have a direct impact on the Nigerian economy because we are a sovereign country and our monetary policy, our fiscal policy, they are not tied to the US policies. Except that if they are unable to resolve the problem in good time and the rating in the US drops, it can snowball into a recession, and if that happens, it may affect commodities’ prices, and that is perhaps the only channel where Nigeria’s economy, like any other economy, may be affected. It may affect commodity prices and so the trade flows, the income flows may be impacted, apart from the fact that about 70 per cent of our reserves are denominated in dollars, and if there’s significant depreciation of the dollar, then that means that proportionately, the value of our wealth will go down.

    What are the Nigerian financial authorities doing about our bonds?

    Well there’s not much we can do at the moment because investors are holding it, except that if there is any spike and investors are cutting back, then there may be some value depreciation and even at that, it is the investors that will take the heat and not the Nigerian government. The bonds are not due for redemption.

    So, we could be impacted in two ways, namely commodity prices may be affected and that may affect the revenue flow of government and secondly, the reserve that is heavily denominated in dollar may shrink in real terms in value like that of other economies. But that is very unlikely in the light of recent developments on the issues at stake.

    Will you contemplate keeping more of Nigerian reserves in Chinese currency?

    The point is, you will not because of little hiccups like this begin to take very far reaching decisions that may affect a lot of other things. Of course Nigeria, like several other countries are becoming more and more bullish on Remimbi but we would need to make progress slowly. We already have an approval to invest up to 10 per cent of our reserves in remimbi. We have commenced the investment, the bulk of which is in Hong Kong. We would begin movement to mainland China because we got a quota but you cannot overnight because of what is happening in the US now, move all your reserve to China. Don’t forget the reminbi is not yet a convertible currency, although it would be at some time in the future.

    The second point we need to note is that you may not have enough instruments to absorb the transfers because if everybody in the globe begins to swing to Chinese remimbi, there will be no instrument for people to buy because it is not as if the market is liquid, or deep enough for that kind of transaction.

    It is just that this has confirmed our decision that strategically, we would need to begin to diversify the basket of currency of our reserves.

    There’s concern in some quarters that the stock of Nigeria’s domestic debt is rising. Shouldn’t there be some restraint?

    I don’t think you are right to say there is no fiscal restraint with respect to government borrowing which is why if you look at our borrowings, relative to the GDP and compare with our competitors, its still very low. But in Nigeria, we like to look at things in absolute terms. But don’t forget that the Nigerian economy is very huge and today we are talking of the American economy that runs in trillions of dollars.

    In Nigeria its just a little fraction of our GDP that is being borrowed and that means that we still have the fiscal space. But that is not to say that we should be unmindful of government’s borrowing because I think government is doing that pretty well.

    Part of what they are doing in that direction of course, you will hear from the Minister of Finance at the press briefing soon. But we will continue to collaborate with the government and we do not see any need to worry

    What’s the MoU with China on investment about?

    The agreement is for us to invest in mainland China. There is a need for Nigeria to have a bilateral agreement, indicating how much you are investing, when to exit, and when to increase your holding, .that is part of the reason we say the remimbi is not yet a convertible currency. That agreement will determine the tenure of the investment, the time to pull out, but this is an agreement that is beneficial to all parties.

    How is the government addressing leakages in the system?

    I think that we need to put things in perspective. The difference between previous loans and what we are seeing now is that most of the loans are project tied. If you look in the economic literature you will always find out why countries borrow. If you borrow for capital accumulation to enhance your capacity to produce higher capital in future of course, you will get better return. The nature of the government finance today is that there are some mega projects that if you wait, the money you need, you may not be able to achieve them because it is like a moving target, you will not be able to get there at any rate which is why you need to borrow to bridge a gap. You borrow so that as the stream of income improves, you begin to pay back, but then you can see the things you have achieved in terms of infrastructure that are strategic to wealth creation, like electricity, roads, railways, hospitals and so forth.

    Those things are the projects that can enhance the productivity of the economy and the people, because today, we are talking of the major impediment to our development being structural constraints. Today we don’t have good roads, we don’t have electricity, education and schools for our children and when you compute what you need to put those things in place, you will then need to wait ad-infinitum to be able to earn those revenues. But you could be smart and borrow to provide, and as your revenue stream begins to improve you then begin to pay back.

    It is even better when you get the borrowing at concessional rate, you need to take the money to fix those infrastructure and then pay later. However in doing this, you need to be mindful of the terms of such loans and I am impressed by the numbers that the Minister of Finance gave with respect to the loans that Nigeria took to finance certain infrastructural projects.

    Some of the loans came at zero-interest, some are pretty long term and came with basically no stringent conditions, and these are smart ways we can finance our development needs.

    It does not then mean you will continue to borrow until the loans become too heavy. What is important is that we would constantly look at the size of Nigeria’s economy, things that need to be fixed and then of course that such loans are used for capital accumulation and not for consumption.

    And so far I have not seen any of our present borrowings going into consumption and for me, I believe that is the right thing to do.

    What’s your reaction to the saying that our politicians are mopping up the dollar?

    First, I don’t think it is right to demonise politicians. But our role as regulators of the Nigerian financial system is to fix problems where we see them. We only discovered that gradually we were beginning to dollarise the economy. Nigerians were importing dollars without approval of the regulatory authorities because people are now beginning to prefer dollars to our local currency, the naira.

    We discovered that besides Angola that imports about $24billion dollars per annum,, Nigeria happens to be the next importer of dollars in Africa and we felt that the trend would not help our economy.

    The reason was our currency is fundamentally misaligned which was the reason we brought the idea of N5000 note but unfortunately we threw the baby and the berth water away.

    Let us not cry over spilt milk because had we implemented the N5000, there would not have been need to dollarise as much as we are doing today. We then decided to pull back a bit to say we already have other channels like electronic payment scheme which we can use to improve our spending habits.

    From Whole Sale Dutch option (WDAS), we moved to the retail (RDAS). Under the WDAS, banks, could on their own bid for dollars and pass over to their customers. Today they have got to have all the customers with detailed documentation of their need showing the total sum on demand at every auction to be able to get allocation. We experimented and that has eliminated the element of speculation because the demand fell drastically.

    We have been able to tighten the noose around bureau de change because of their peculiar mode of operation because it was convenient for anybody wanting to do any form of round-tripping to go through the bureau de change by avoiding the official channels that will not allow them to do that. We are monitoring and we discovered that demand has dropped drastically. There is however a little bit of spike in the interbank and parallel market but we believe this is the normal process of adjustment, but over time they would converge. There may not be a 100per cent convergence anyway, so long as the difference between the BDC and parallel market is tolerable we believe we will make progress.

    When there is a new policy the tendency is for people to say let us hold back something because we don’t know how bad it is going to be, and that leads to a spike in rates. However when they observe the trend is stabilising over time, they will then offload and begin to operate in line with prevailing market trends.

    There was this allegation by the National Assembly that banks inflate their operating cost. Is it true?

    Well since it is an allegation, we will wait and have it proved because we can’t speculate on that.

    I’ll be surprised if any Nigerian bank will deliberately inflate operating cost to pay lower taxes. What I expect is that they will post better performance to get better patronage. The point is, it is an allegation, which I have not read myself, but if there is strong evidence that this is happening, we will not hesitate to investigate and address it. We have examiners and there are several other ways we can get information on how the operators are. We have told banks not to play funny games, because they know the repercussion. They also know the present CBN management has zero-tolerance for unethical practices. We can say whoever is doing that will be doing that at its own peril.

    Many users of the cashless system complain of challenges in accessing funds from Point of Sales (POS). What’s the position?

    For the e-Payment system. we can say we still have challenges but I would not agree with you that most of the PoS terminals are not working..

    Let me give you some statistics on the study done by Financial Derivatives. that the company is not in any way connected to the CBN because it has been very critical of the CBN. They are likened to be very credible.

    Prior to the introduction of the electronic payment system, only about two per cent retail transactions were settled electronically. If you visit a typical supermarket or retail outlet, just about two per cent of what happens there were settled electronically. But as at 2-3 months ago when they conducted that study, we ratcheted that number from two per cent to 20 per cent. Yes we can say that 20 per cent is still low because in developed countries, the numbers are up to 70 – 80 per cent but I think we should celebrate the rapid improvement from two to 20 per cent within one and half years of its implementation.

    Besides the challenges of connectivity, the banks in Nigeria have moved from a little over 5000 terminals in January of last year, to over 200,000 POS terminals, 77,000 of which are in the Lagos area. Don’t forget that we rolled out to six other states across the country on the first of July, including Abia, Kano, Abuja, Anambra, Ogun and Rivers. In those geographies we have had rapid growth in POS deployment.

    How are you addressing connectivity problems and attitude of desk officers?

    On connectivity we have challenges about bandwidth of the telecommunications service providers largely because of the rapid deployment of the terminals. We spoke to the service providers on the need to improve bandwidth which they did and we saw improvement in the Lagos area. We have started talking to NICOMSAT, and they did a test-run in Lagos area and we are satisfied about their proposition. So within the next few weeks, you will notice improvement in connectivity in Lagos area at least.

    However, the human element is there. The reward system in those supermarket is such that an average staff in the shop goes home daily with N1500 and he will be lucky if his take home monthly is up to N45000. So based base on the commission he gets, by the fact that you leave him with 50k or N40, he does not like that machine that will not allow him access to the tips he gets from customers because the pos is electronic, there will be no opportunity to collect free left over cash. So on that bases he will not like the machine to work. So what he does he does is to sabotage the system and tell you it is not working. I went a supermarket and tried to transact using the pos but the attendant told me it was not working but by the time I introduced myself, he smiled and the machine started working.

    In one of our meetings with the merchants, we have told them to build-in some reward system that will still allow the attendants access to the free change they get from customers even as tips without compromising the standard of service. When we do that, you will discover that these thing work.

    There appear to be frequent policy changes at the apex bank. Why is it so?

    We respond when we see a pattern, a particular behavior among customers, some of which may be bank induced, but many are induced, in most cases by the customers.

    What’s your reaction to the burgeoning autonomous forex market the CBN Governor promised to address?

    The CBN is not a law enforcement agency. We deal with the supply side, and once you deal with the supply side, then you’ve dealt with 90 per cent of the issue. The rest of course we can’t do, because we are not a law enforcement agency, and the Governor of the Central Bank does not have power of arrest. We have the extant laws which show that this shouldn’t happen, which is why we are appealing to the law enforcement agencies to work with us so that we can be able to deal with this matter.

    You’ll recall that when we identified the 20 Bureau de Change that did not succeed in convincing us about the details of their transactions (mark my words, I have not demonized them, it’s just that I’m not satisfied with the documentation that I saw), and then we passed them over to those who will investigate further, and in the event that any of them has any case to answer, then they would be the ones to take it up.

    So, to answer your question, the Governor is right, and that is basically what we are doing, to deal with the supply side, then we would have dealt with 90 per cent of the case, with the hope that the other relevant government agencies will do same, so that we’ll no longer have this situation.

    There’s one disturbing trend today in Nigeria. The lower denominations of our currency have virtually gone out of circulation. Even the banks don’t have them, and the ones available are so dirty and mutilated. Why is this so?

    If you come out to say, I can’t find the N5, N10 and the N20 notes, my answer may be, there’s nothing to do with those currency denominations any more. But I can tell you that if I open my vault, you’ll see a lot of that denomination in the Central Bank of Nigeria, and they are available to commercial banks. Commercial banks are not asking for it because their customers are not asking for it, that is one.

    Two, about mutilated notes, our apologies. I think I must have said it several times apologizing on behalf of the Central Bank to Nigerians that we had delays in reprinting existing generation of notes and I gave the reason. This time last year we contemplated changing the face of the Nigerian currency, the entire family, unfortunately, because of the issues around the coinage of those three denominations you talked about and the inclusion of the N5,000 note, we have to put a halt to that, and because of that we have to go back to the drawing board. That was the time we should have replaced the old notes, but we held on to that hoping that we will now print them in new seals.

    But because that was not going to happen, we lost about six months, which was why we saw those mutilated notes, but the good news now is that from September, we’ve started taking delivery of the reprinted old notes, it’s getting better. We now see the emergence of crispy notes from Central bank.

    There’s also scarcity of N100, N200 notes?

    We are also taking delivery of that. What we try to do was to take delivery of lower denominations at first, because those were the ones that were really very badly affected. Don’t also forget that because of the issues that we had in the Mint, we closed Lagos Mint for a few months, which has been reopened, and they largely produce the N100 and the N200 notes, and they are going to raise the level of production now that they have resumed.

    Is the CBN still engaging Securrency in printing our notes?

    You did not quote me correctly. Yes, I said polymer notes, we are taking another view, not because it didn’t last long, but because the ink fades early, the subscript is still as strong as ever. But you are also right in saying that the disposal was a major issue.

    We are not working with Securrency, indeed the company has since sold their interest to another interest. You’ll remember that Securrency was indicted for corporate governance flaws, and so and they have since moved on, and so they are out of the stage.

    Don’t forget Central Bank of Nigeria does not deal with producers of substrate, we deal with printers of notes and currencies, we deal with the mint and other foreign currency printers. These other printers are the ones that deal with Securrency and the like, so Central Bank of Nigeria, at no time dealt with Securrency, and we don’t intend to deal with producers of substrates.

     

  • Cash-less campaign goes to Ogun

    The Bankers’ Committee has taken the cash-less policy campaign to Ogun State to enlighten the people on the use and benefits of the policy.

    The scheme, which was introduced to Lagos State a year ago, was extended to Ogun, Kano, Anambra and Abia states as well as the Federal Capital Territory (FCT) on July 1.

    The initiative, which has entered its second phase, saw the CBN and bank officials staging road shows in six delineated zones (Ilaro, Mowe/Ibafo, Ota, Abeokuta, Sagamu and Ijebu-Ode)  in Ogun, to create awareness on how to use different payment channels such as Automated Teller Machines (ATMs), Point of Sales (PoS), and money transfers.

    According to a statement from the Bankers’ Committee, the six-day activities saw market men and women, Small and Medium Scale Enterprises (SMEs) among others, being educated on how to transact business electronically.

    ”It was, indeed, a very interactive session across boards as bankers were on hand to throw more light on the puzzles in the mind of stakeholders,” the statement added.

    The cashless policy, whose implementation began in Lagos in January, last year, is aimed at reducing the dominance of cash in the system. The policy specifies penal charges for individuals and corporate organisations that want to withdraw or lodge cash above prescribed limits.