The soon to be launched Digital Currency by the Central Bank of Nigeria (CBN) would no doubt revolutionise the Nigerian payments system.
Recall, CBN announced the postponement of its eNaira launch in October 1, 2021 to mark the 61st Independence Anniversary of the country.
Speaking recently at the 31st Seminar for Finance Correspondents & Business Editors in Enugu State, the CBN Governor, Mr Godwin Emefiele expressed confidence that the digital currency would positively change the payments system in Nigeria.
Mr Emefiele said, the Central Bank Digital Currency (CBDC), the eNaira, would make Nigeria one of the first countries in Africa, and indeed, the globe, to adopt the digitization of its national currency.
Represented by the Deputy Governor, CBN, Edward Adamu, Emefiele said, the payments system of any country plays a pivotal role in its economy, being the channel through which financial resources flow from one segment of the economy to the other. Thus represents the major foundation of the modern market economy.
He acknowledged that the theme of the seminar: Trends in Nigerian Payments System: Regulating The FinTech Digital Playing Field was apt in view of an increasingly evolving banking landscape characterized by acceleration in the digitalization of financial services which is facilitated by Fintechs, Open banking and emerging new technologies.
The Governor said, the bank’s mandate, as encapsulated in the Central Bank of Nigeria Act, 2007, the CBN regulates the Payments System, while banks, the Nigeria Inter-Bank Settlement System (NIBSS), the Nigerian Exchange Group, payment service providers and switching companies are the other major players in the system.
He said, the CBN, complemented by the Nigeria Deposit Insurance Corporation (NDIC) provides the necessary oversight function to ensure the efficiency and effectiveness of the payments system.
He said, the year 2007 marked a turning point in the country’s payments system terrain with the launch of the CBN’s Payment Systems Vision 2020 (PSV 2020), which identified series of recommendations to increase the resilience of the payment system infrastructure and work-streams to encourage the usage of electronic payment methods. Since then, the country has continued to introduce initiatives that would help simplify payments and deepen financial inclusion.
He said, over the past 14 years, the Nigerian payment system has evolved significantly with extensive technological development backed by deliberate enabling regulation by the CBN. This has, no doubt, accelerated the development of novel financial products, services and channels all of which have placed Nigeria at the fore of the financial innovation race.
Mr. Emefiele said, due to the lockdowns associated with the management of the Corona Virus (COVID-19) pandemic, financial traffic to digital platforms increased significantly in 2020. He said, the spread of the virus at the time accelerated the speed of digitalization of many sectors of the economy. Expectedly, discussions have increased around the issue of the digital economy just as more opportunities have come up for financial institutions and other players within the payment ecosystem to innovate and provide more efficient options for payments and settlements.
He said, “the post-COVID economy was predicted to be dominated by certain trends including a radically altered financial industry landscape as the accelerated shift towards
digital financial services will attract more fintech investment and encourage competition to traditional financial institutions. This calls for an Increased and intensive regulatory scrutiny on the part of regulators to proactively monitor developments and ensure the continuous safety and soundness of the financial ecosystem. It is therefore imperative that Regulators must keep pace with these exponential developments and leverage new knowledge and technology tools such as Regtech and Suptech to enhance the efficiency and effectiveness of their mandate.
“From all indication, digital revolution will be a focus for Financial Institutions in the months ahead therefore making Fintechs a major driver of the industry. Technology continues to change the face of the financial services industry. The advent of digital financial services, for example, has created faster, more efficient, and typically cheaper transactions compared to traditional financial services. As the global economy recovers from COVID-19, it is obvious that FinTech will play a more important role towards resilient and sustainable recovery.
“Studies have already shown that only 1 percent of FinTechs have been critically affected by COVID-19 and 2 percent severely affected. By comparison, around 17 percent of other high-growth companies fall into these categories. It is therefore unsurprising that many FinTechs have experienced a surge in demand as working practices and customer banking habits changed. As a country with one of the largest millennial population in the world- (an estimated 62% of the Nigerian population below 25 years of age), fast Smartphone growth driven by increasing affordability, Increasing mobile penetration and fast transition to 5G technology, Nigeria remains primed to be an active playground for digital transformation and cannot afford to ignore the Fintech challenge”, he said.