Nigeria: Payment Journey and Key Trends
In 2007, Nigeria commenced the reform of its payment industry to strengthen this critical element of the fi nancial services industry by launching the Payments Systems Vision (PSV) 2020. This was driven by the vision to ensure Nigeria becomes one of the top twenty economies by 2020.
Since then various components of this strategy have been implemented and are at various levels of implementation producing interesting changes to the payments landscape as shown in the line graph on the next page. Some of these changes to the payments landscape have been boosted by positive infrastructural changes in the economy such as the availability of Global System for Mobile Communications (GSM) technology (Nigeria issued GSM license in 2001 and now has an estimated 130 million mobile phone subscribers), increased internet penetration, deployment of ATMs, consolidation of banks (resulting in the better working capital for the banks) and so on. Specifically, there has been a significant increase in the volume and value of ATM transactions reflecting the increase in ATM deployments.
In the last 12 years, Nigeria has witnessed the deployment of an estimated 15,000 ATMs. Furthermore, Central Bank of Nigeria (CBN) statistics indicate that the ATM is the most utilised channel of payment in the country. The value of transactions carried out at ATMs increased signifi cantly from ₦399.71 billion in 2010 to ₦3,619 billion [est] in 2014. However, the value of ATM transactions remains comparatively low. Nigeria Instant Payments (NIP) and Nigeria Electronic Funds Transfer (NEFT) were introduced in 2011 and 2004 respectively and these have become the most popular modes of payment for high-value transactions, representing 42.9% and 31.7% of the total value of payment transactions in 2014.
There has been a steady decline in the use of cheques with a significant deep in 2012 due to the cashless Nigeria initiative. The cashless Nigeria initiative placed a limit on encashment of 3rd party cheques to ₦150,000 and in 2010, a cheque cap of ₦10 million. This has helped in reducing the use of the cheque as a preferred mode of payment. CBN statistic indicate that transaction values fell 63.27% between 2010 and 2014 from ₦19,675 billion to ₦7,227 billion [est]. POS payments grew 2,275% in terms of value and 80.1% in terms of transaction volumes between 2010 and 2014.
Mobile payments showed the highest growth in transaction values increasing by 4,934% between 2010 and 2014. This has been driven by the mobile money initiative designed to improve Nigeria’s fi nancial inclusion record from 49% to a target 71%. On the other hand, the transaction values for mobile payments still remain comparatively small at ₦335 billion [est] in 2014 compared to ₦3,619 billion [est] for ATM transactions, ₦7,227 billion [est] for cheques and ₦14,432 billion [est] for NEFT payments.
Payments Moving from Physical to Electronic
The payments business in Nigeria continues to show significant growth, specifically in mobile and has become a key source of revenue for banks and other payment service providers. Below, are some of the key payment trends that will drive not only the payments business in Nigeria but also see the gap narrowing between the banked and unbanked population. Payments are likely be the catalyst that will drive true “Financial Inclusion” in Nigeria.
About David Okwara
Africa, Africa brief, Africa challenges, Africa opportunities, African countries, agriculture, Angola, challenges, China, development, e-payments, East Africa, economic growth, economy, FDI, financial services, Foreign Direct Investment, investment, Kenya, KPMG, KPMG Africa, mobile payment systems, Nigeria