Nigeria’s Payments System trajectory started with Payments System Vision 2020 (PSV 2020) in 2007 with the objective of making the Nigeria’s Payments System internationally recognised and nationally utilised. The transformation no doubt has been phenomenal.
The phased implementation of the Vision, and other developments in the Nigeria’s financial landscape, including the pursuit of the Financial System Stability Vision 2020 (FSS 2020) has no doubt stimulated an exponential growth in commercial and financial activities.
The rapid growth in the volume and value of financial transactions also became a huge source of revenue for the providers of payment services particularly banks and other stakeholders.
Among other benefits are fostering safety and efficiency of payment, clearing, settlement, and recording systems, promotion of financial system stability, speed of service and transactions, development of new lifestyle products, financial inclusion, etc. The growth has also significantly altered the risks associated with the payment and settlement of these transactions. However, as human economic activities crave for more sophisticated, efficient, and convenient means of exchange, so also is the urge to innovate. Thus, the advent of electronic payments system in the Nigeria financial space became imperative. This crave has changed the mode of how people pay for goods and services, and is ultimately bringing in a larger number of the bankable segment of the economy into the financial net. It has also enhanced the Central Bank of Nigeria’s financial inclusion objectives.
Globally though, electronic channels of payment are advanced, sophisticated, huge and a booming industry particularly in the developed economies and had attracted investments than other financial services sector, and delivering highest returns. These are the FinTechs.
COVID-19, the global pandemic that wreaked socio-economic havoc in its wake also offered the rest of the world the opportunity to lock into that space. As economies locked down globally, electronic and virtual ways of conducting economic and social activities replaced physicality. Nigeria leveraged the auspicious occasion to fledge its bourgeoning electronic channels of payment. Countries in the continent, including Nigeria, during and post COVID-19, witnessed quantum leap in e-payment transactions – mobile transactions particularly witnessed increased volumes to almost 800/900 million per day.
What fueled the surge, and adoption, is the huge infrastructure investment in FinTechs. It helped to advanced and accelerated its usage. The vision of Central Bank of Nigeria, envisioned in its financial inclusion agenda manual also greatly impacted its acceptance, gradually inching to the 85 percent financial inclusion target. The Nigerian economy as we all know is traditionally cash-based despite visible risks and cumbersomeness. This practice is typical of the traders and politicians, the narrative CBN foresaw and wants to change.
The scenario played out during the Naira Redesign and 2022/2023 political campaigns. The intention was misconstrued.
The fulcrum of CBN payments system architecture was to encourage Nigerians to embrace a more convenient, cheap, and safe means of transactions, thereby saving the Bank the huge cost of replacing and reprinting of misfit banknotes.
Thus, it was fitting to expand the e-payment landscape. That desire birthed the introduction and launch of Nigeria’s digital currency – eNaira, the first digital currency in the continent. The introduction was to cut down the emerging influence of cybernetic cryptocurrencies, gaining traction internationally, and in Nigeria. The emerging trend was considered not only inimical to the financial system but its stability. eNaira, the digital currency of the Naira banknotes is not to obliterate the usage or acceptance of the physical Naira banknotes, but to complement it.
A digital currency that provides a unique form of money denominated in Naira. eNaira is to serve as both a medium of exchange and a store of value, offering better payment prospects in retail transactions when compared to cash payments. eNaira has an exclusive operational structure that is both remarkable, and nothing like other forms of central bank money. It will foster economic growth by providing easy access to capital and financial services with potential to increase economic activities at low or probably at no interest transaction.
Nigeria’s eNaira is also secure and cheaper for swift diaspora remittances, traceable, and with capacity to check illicit and fraudulent transactions. The CBN eNaira has the capacity to galvanize both local and international economic activities by making transactions not only cheap, safe, and quickc, but better. It has impenetrable security features that cannot be compromised. And for the government, and other revenue generating agencies, even tertiary institutions, eNaira offers a veritable platform for collection of revenues and school fees, thereby reducing cash handling and incidences of theft and corruption.
Recently, the Central Bank of Nigeria embarked on another phase of its sensitization campaign to tertiary institutions nationwide, organized CBN Sensitization Fairs in Bauchi and Gombe States, and attended the Chambers of Trade and Commerce organized Trade Fairs in Kaduna and Enugu to step up its sensitization and enlightenment of Nigerians on eNaira. The sensitization had also been held in markets and motor parks in Abuja, Lagos and some major cities in the country.
The Bank has thus offered a veritable platform for the government to conduct all its transactions through the platform, and its banker, if it is committed to shoring up its revenue and fighting corruption. It will help the government in its efforts to block all revenue leakages.
Even the private sector stakeholders are leveraging the platform to feather their businesses.
With the successes thus far recorded by Nigeria in the eNaira project, it was therefore not a surprise seeing some countries in the continent turning Nigeria into a pilgrimage to understudy the Central Bank of Nigeria for its adoption and operation in their various sovereignties.
Ademola Oyetunji writes from Ibadan.