Nov 4, 2010, 12:29 PM
Many financial and economic fundamentals, alongside nuturing a favourable convergence criteria, have to be put in place before a common currency could be established for the zone. One of these fundamentals is having a sound and efficient payments system in the region.
Last week, an organization called SWIFT, in collaboration with the Central Bank of The Gambia, held a Business Forum in The Gambia on harmonized payments system for the WAMZ region, in which the Deputy Governor of the Central Bank of The Gambia, Oumie Savage-Samba, said in her keynote address that harmonized payments system spurs investment, trade and economic growth.
Another keynote address delivered on the occasion on behalf of the Governor of the Central Bank of Nigeria (CBN) gives a good case in point of how the modernised payments system implemented by the CBN has transformed and continues to transform Nigeria into a cashless society, albeit some human, infrastructure and other impediments.
The importance of the payments system in any market economy cannot be over-emphasized, CBN Governor MALLAM SANUSI LAMIDO SANUSI emphasised.
“In particular, the link between the efficiency of the payments system, the effectiveness with which monetary policy is conducted, the soundness of the financial sector and, indeed, the overall performance of the economy is very strong. Thus, central banks the world over have more than cursory interest in the development of payments and settlement systems,” the CBN governor stated.
Here, following, Governor Sanusi gives a cogent exposition of the relevance and necessity of a sound and efficient payments system in the WAMZ.
He said: “We are all aware that the digital phenomenon is global, we are no longer on the edge of a technological revolution; we are in the thick of it. Advancing technologies are radically shaping the way people engage with the world around them, and that include the way payments are effected.
“In this regard, the Central Bank of Nigeria had adopted a strategic objective of promoting and entrenching electronic payments, as the major channels for payments and settlements, by all economic agents, away from the current dominance of cash based transactions, and in concert with the other stakeholders.”
Evolution of the Payments System in Nigeria: Achievements recorded so far
As you are all aware, the payments system in Nigeria evolved over the years, from the primitive barter system to cowries, metals, notes, etc. But today, payments include cash, cheques, credit and debit cards, electronic funds transfers (ETFs), rewarding points, gift cards, and virtual currencies used online.
The CBN established the first bankers clearing house in 1961 for the Lagos Clearing zone and later extended it to other states and the Federal Capital Territory (FCT). The clearing system was manual in operations and could take as long as twenty-seven days before customers of banks could get value for their cleared cheques.
With the adoption of Magnetic Ink Character Recognition (MICR) technology in 1988, which commenced operations in 1994, remarkable achievements were recorded in the clearing system. This was further modified by the introduction of the state of the art technology called the Nigeria Automated Clearing System (NACS).
The Nigeria Cheque Standards and Nigeria Cheque Printers Accreditation Scheme (NICPAS), which were aimed at addressing the fundamental problem confronting cheque transactions in Nigeria commenced operations in January 2007.
In the year 2010, the Bank introduced a maximum cap of N10 million for cheque payments, to reduce fraud exposure on paper-based instruments and also to encourage the use of electronic payments for large value transactions.
e-Payments Achievements and Proposals
e-Payments in Nigeria started from stand-alone ATMs, prepaid cards and silo solutions, to the present day interoperable solutions. Specifically, the under listed initiatives set the stage for the development of e-payments in Nigeria:
•The Bankers’ Committee in 2006 approved the establishment of a National Central Switch (NCS) to address the issues of interoperability and interconnectivity of different switching networks.
•The development of Payment System Vision 2020 document in 2007 has provided a focused roadmap for efficient payments system infrastructure that is nationally utilised and internationally recognized. It provides a pivotal role for the achievement of the tremendous success recorded in the Nigerian Payments System.
•The Bank recently completed the review of the PSV2020 document which included benchmarking each payments system infrastructure against the new BIS “Principles for Financial Market Infrastructure”.
•The Federal Government’s directive on the implementation of electronic payments system at all Federal Government arms has generated public interest in the use of electronic payments.
•The introduction of the Cash-less initiative has reduced the cost of cash management, increased efficiency of the payments system and financial inclusion.
•Successful implementation of the Cash-less policy, with Lagos as the pilot state, led to the growth of alternative e-payments channels, and has given the CBN the necessary platform to aggressively extend the policy to other States, including Abia, Anambra, Kano, Ogun,Rivers, and the FCT , with effect from 1st July, 2013
•The introduction of N150,000 limit on encashment of 3rd party cheques with effect from June 1, 2013 was aimed at reducing the risks associated with paper-based instruments.
•The phenomenal growth of PoS penetration, from a paltry 5,000 at the inception of the policy in January 2012 to over 180,000 terminals with volume and value of transactions increasing exponentially, is a pointer to the modest achievement of the e-payment policy.
•The appointment of the Nigerian Inter-Bank Settlement System (NIBSS) Plc as a Payment Terminal Service Aggregator (PTSA) and also, the engagement of Payments Terminal Service Providers (PTSP) have enhanced the operations of POS in Nigeria.
•The proposal to adopt mobile technology for financial services, especially in rural areas would ensure that a large percentage of the population outside the formal banking system would have access to financial services.
•CBN has licensed 18 Mobile Money Operators (MMOs) since inception, who are currently doing an average of over N1 billion worth of transactions on a monthly basis.
•As part of our efforts in consumer protection, the Guide to Bank Charges (GBC) has been reviewed. Similarly, in response to the growing complaints on disputed ATM transactions and banks’ delay in responding to the observation on services, the CBN stipulated that such complaints should be responded to, within 72 hours.
•In its efforts to facilitate ease of contact and rapid response to complaints on electronic card transactions, the Bank mandated all Deposit Money Banks to set up effective help desks for handling card-related complaints.
•CBN equally set up a help desk for receiving public complaints on card transactions, with a view to fast-tracking resolutions and monitoring compliance with the 72 hours timeline.