Godwin Emefiele, CBN governor

By Adebayo Obajemu

Central Bank of Nigeria’s directive for fintech companies to drive financial inclusion has importantly positioned Fintechs in the centre to drive the Bank’s financial inclusion policy, and in the past two years, there has been significant growth in the e-payments eco-system.
An e-payment system is a way of making transactions or paying for goods and services through an electronic medium, without the use of checks or cash. It’s also called an electronic payment system or online payment system.
The electronic payment system has grown increasingly over the last decades due to the growing spread of internet-based banking and shopping. As the world advances more with technology development, we can see the rise of electronic payment systems and payment processing devices. As this increase, improve, and provide ever more secure online payment transactions the percentage of check and cash transactions will decrease.
One of the most popular payment forms online is credit and debit cards. Besides them, there are also alternative payment methods, such as bank transfers, electronic wallets, smart cards or bitcoin wallet (bitcoin is the most popular cryptocurrency).
Business Hallmark’s findings showed that Nigeria recorded $428 billion worth of e-transactions in 2020, 42% much higher than in 2019
Recall that in 2020, the coronavirus pandemic caused significant disruptions for several business and social activities. Without doubts, electronic transactions were also affected when the Nigerian government implemented a lockdown; they bounced back almost immediately with electronic transactions reaching an all-time high in December 2020.
BusinessHallmark’s survey of data from the Nigeria Inter-Bank Settlement System (NIBSS), revealed that in 2020, Nigerian business men and women and mobile money operators processed over 655 million point of sale (POS) transactions valued at ₦4.7 trillion ($13 billion). This number significantly represents a 50% increase from 2019.
It could be recalled that at the time of Nigeria’s lockdown in April 2020, NIBSS Instant Payments (NIP) transactions declined by ₦3.8 trillion ($10 billion) and POS transactions by ₦96 billion ($252 million).
As it can be granted that this decline was in line with the trend in the past four years, the huge amount could be attributed to a decrease in purchasing power.
Going by reported figures from the likes of OPay and TeamApt, agency banking was hugely successful in 2020, despite the arrival of COVID-19. More POS terminals were registered, and more business men and women seemed to embrace cashless payments due to the pandemic.
In 2020, total inter-bank transactions attained a record high of two billion valued at a whopping ₦158 trillion ($415 billion). Besides the notable dip in April, Nigerian financial institutions witnessed growth in monthly transactions before a predictable rise in December 2020.
As of Q4 2020, transactions worth 3.46bn and N356.47tn were done through Electronic Payment Channels (EPC) in volume and value, respectively.
Recently, the National Bureau of Statistics (NBS) released selected banking sector data for Q4 2020. The report was on sectoral breakdown of credit, e-Payment channels, and staff strength of Deposit Money Banks (DMBs) in Nigeria. The report showed, as of Q4 2020, transactions worth 3.46bn and N356.47tn were done through Electronic Payment Channels (EPC) in volume and value, respectively.
Online transfers constituted 64.1% of the total volume of transactions. Credit to the private sector grew 2.5% q/q to N20.37tn within the period of which Oil and Gas (N3.93tn), and Manufacturing (N3.19tn) sector took the major chunk of Bank credits (N20.37tn) to the private sector in Q4 2020. Non-performing loans were reported at 6.02% as of Q4 2020 from 6.41% in Q2.
In total, 5.55mn cheques were drawn on the bank for payments totalling N4.22tn, representing a respective volume and value growth of 10.72%q/q and 10.28%q/q on Q3 2020. Furthermore, Point of Sales (POS) transactions continued to grow on the back of limited transactions in the banking hall, hence, the growth in volume (32.1% q/q) and value (25.49% q/q) in Q4 2020.
Similarly, online transaction volumes were up 39.67% q/q while value was up 19.24% q/q. NEFT volume grew 18.41% q/q and value was up 25.48% q/q just as USSD volume grew 9.00% q/q and value was up 22.46% q/q. Mobile app volume grew 10.80% q/q while value grew 10.86% q/q.
The sustained growth in e-payments transaction volume and value in Nigeria evidenced increased adoption of technology in payments and cash transfers by the Nigerian populace. This is driven by increasing internet & mobile penetration as well as investment by banks and other payment-based fintech in payment technology infrastructure.
Furthermore, the reduction to the fees payable on mobile and internet payments/transfers announced by the Central Bank of Nigeria (CBN) which came into effect in January 2020 had a mild impact on the increased usage of these platforms. In addition, with the onset of the pandemic, there was a reduction in the use of physical cash for settling payments. Thus, we think e-payments benefitted significantly from this.
After a slide, electronic transactions began to rebound in February, and by March 2020, Nigerian financial institutions processed over 135 million NIP transactions and 52 million POS transactions.
A significant bounce led to 141 million NIP and 48 million POS transactions in May followed a decline in April when Nigeria gradually eased its lockdown.
The volume was less in March than May the former’s transactions were of a much higher value.
Between July and September 2020, the value of NIP transactions hit ₦44.2 trillion ($116 billion). In October 2020, NIP transactions crossed the 200 million mark (205 million), and POS hit 68 million transactions.
In December, inter-bank transactions hit 264 million with a value of ₦20 trillion ($52 billion), and POS hit 77 million transactions valued at ₦574 billion ($1.5 billion).
Dr. Olufemi Omoyele, an analyst said a growth in cashless transactions and a shift from cash-based payments could save Nigeria billions of naira and possibly generate huge revenues.
“Recall that banking agents use POS and accept transfers when customers want to withdraw cash. So it might be a little bit more difficult to determine which transactions were truly cashless”, Omoyele noted.
However, most Nigerian adults still do not have access to a bank account. The majority of cashless transactions are concentrated in popular urban areas like Lagos, Port Harcourt, and Abuja.
Since the NIP launch in 2011, electronic transactions in Nigeria have significantly moved forward, and fintech experts like Adeola Atoyebi claim that Nigeria’s payment structure rivals the world’s best. But Nigeria remains a predominantly cash-based economy.
Hakeem Adeniji-Adele, eTranzact Deputy Managing Director, was recently quoted as saying that attitude can be attributed to people’s culture.
As of Q4 2020, transactions worth 3.46bn and N356.47tn were done through Electronic Payment Channels (EPC) in volume and value, respectively.
Recently, the National Bureau of Statistics (NBS) released selected banking sector data for Q4 2020. The report was on sectorial breakdown of credit, ePayment channels, and staff strength of Deposit Money Banks (DMBs) in Nigeria. The report showed, as of Q4 2020, transactions worth 3.46bn and N356.47tn were done through Electronic Payment Channels (EPC) in volume and value, respectively.
Online transfers constituted 64.1% of the total volume of transactions. Credit to the private sector grew 2.5% q/q to N20.37tn within the period of which Oil and Gas (N3.93tn), and Manufacturing (N3.19tn) sector took the major chunk of Bank credits (N20.37tn) to the private sector in Q4 2020. Non-performing loans were reported at 6.02% as of Q4 2020 from 6.41% in Q2.
In total, 5.55mn cheques were drawn on the bank for payments totalling N4.22tn, representing a respective volume and value growth of 10.72%q/q and 10.28%q/q on Q3 2020. Furthermore, Point of Sales (POS) transactions continued to grow on the back of limited transactions in the banking hall, hence, the growth in volume (32.1% q/q) and value (25.49% q/q) in Q4 2020.
Similarly, online transaction volumes were up 39.67% q/q while value was up 19.24% q/q. NEFT volume grew 18.41% q/q and value was up 25.48% q/q just as USSD volume grew 9.00% q/q and value was up 22.46% q/q. Mobile app volume grew 10.80% q/q while value grew 10.86% q/q.
The sustained growth in e-payments transaction volume and value in Nigeria evidence increased adoption of technology in payments and cash transfers by the Nigerian populace. This is driven by increasing internet & mobile penetration as well as investment by banks and other payment-based fintech in payment technology infrastructure.
Furthermore, the reduction to the fees payable on mobile and internet payments/transfers announced by the Central Bank of Nigeria (CBN) which came into effect in January 2020 had a mild impact on the increased usage of these platforms. In addition, with the onset of the pandemic, there was a reduction in the use of physical cash for settling payments. Thus, we think e-payments benefitted significantly from this.
Going forward, we expect the e-payments industry to continue to record significant growth even beyond the pandemic as many of the new methods of transacting remains. The e-payments sector of the fintech ecosystem is expected to serve as the growth frontier.
On the whole, many Nigerians have embraced e-payments, but the e- financial inclusion growth is only recorded in the urban areas, rural Nigeria has no knowledge of e- transactions.
Omoyele says the country is uniquely positioned to reap the benefits of the digital economy. According to him, Nigeria accounts for 47% of West Africa’s population, and half of the country’s 200 million people are under the age of 30. Nigeria has the largest mobile market in Sub-Saharan Africa, supported by strong mobile broadband infrastructure and improved International connectivity; yet minimal fixed
broadband infrastructure and connectivity in rural areas is leaving a significant number of the most marginalized segments of the population without Internet access.
He stated that accelerating access to digital technologies spurs innovation, efficiency, and productivity, and as a result brings about choice and opportunities for greater growth and financial inclusion.
He warned that many Nigerian citizens and businesses remain excluded from the digital ecosystem as a
result of limited access to broadband and non-availability of adequate devices (mobile devices and computers) to fully utilize the Internet.