Sanusi Lamido Sanusi, governor of the Central Bank of
Nigeria, has made the reinvigoration of
Nigerias payments system, and the reduction of its
reliance on cash, a priority of his governorship.
The policy is intended to increase the countrys
economic sophistication, closing the gap on and
ultimately overtaking the west in payments
convenience and security.
In the short term, the cashless policy is
designed to improve Nigerias tax collection and enhance
control over FX flows. By making payments more traceable, it
should also help to reduce corruption one of the primary
reasons Sanusi has pushed these changes.
The scheme imposes caps and penalties for transactions
involving more than N500,000 (2,000) daily or N3 million
for corporates. Exceeding this limit draws a 3% penalty fee
or 5% for corporates charged by the bank.
Introduced as a pilot scheme in Lagos in 2012, on July 1 it
was extended to Ogun, Rivers, Anambra, Abia, Kano and
The policy has begun forcing more transactions on to electronic
payments, from a very low base, and there are around 120,000
point-of-sale (POS) electronic payment machines in the country.
Sanusi has a said biometric authentication of POS terminals
and ATMs will be introduced in 2015.
The value of POS transactions grew from N100 million in May
2011 to N3.34 billion in May 2013, according to Globasure, a
Nigerian payments systems vendor.
However, this is still a small number of machines for such a
vast and populous country at 180 million.
Even ATM machines are hard to come by for those wishing to
use banks. There are 12 ATM machines per 100,000 Nigerians in
the country, says Globasure, compared to 169 per 100,000
Nevertheless, whether intentionally or not, the policy might
be contributing to a shortage of smaller currency
denominations, with reports on the ground suggesting local
merchants are struggling to provide change for cash
The changing face of Nigerian cards is also helping to bring
corruption and fraud under control.
The change from magnetic stripe-based cards to
chip-and-pin-compliant channel and tokens in 2010 has resulted
in over 90% reduction in card-related fraud incidences,
says Bola Adesola, CEO at Standard Chartered in Nigeria.
Another flagship policy is the phasing out of commission on
turnover, a charge of N5 on every N1,000 credited or debited to
a retail Nigerian current account. This is to be reduced to
three per mille this year and two per mille in 2014, one per
mille in 2015 and then abolished in 2016.
This is forcing Nigerian banks to think and be more
creative by removing this easy income for which they do
not have to work, says Charles Weller, Nigeria country head at
Deutsche Bank. It will make them more delivery orientated
by taking away their easy income.
Ultimately, it should lead to increased choice and
sophistication in the Nigerian bank market, bring many of the
countrys unbanked into the system and improve services
There are other initiatives being piloted too. One,
pioneered by MasterCard and the government, provides Nigerians
with a National Identity Smart Card, simultaneously an ID and
electronic payment card.
Announced in May, this represents the largest roll-out of a
formal electronic payment system in Nigeria and the broadest
financial inclusion initiative of its kind in Africa, according
The card is being given to Nigerians aged 16 and older and
foreign residents in the country for more than two years. It is
accepted in 210 countries and territories, at more than 35
million locations around the world, according to
In addition, in July, the central bank commenced with
image-based clearing to reduce the clearing cycle for cheques
a payment system most Nigerians are comfortable with
to one day.
In the same month, United Bank for Africa introduced
personalized debit card All About U, allowing customers to
personalize their payment card with a photograph of their
choosing, a service that has been offered with some success in
Europe and elsewhere.
Ultimately, monetary authorities in Nigeria will continue to
drive electronic payment systems to reduce banks and
customers transaction costs, boost transparency and
sharpen policy tools to control domestic credit conditions.
Nevertheless, Nigerias payment culture is at a nascent
stage, with few customers tied to existing systems, which means
there is a healthy battle between cards and mobile money.
Although card-use is growing and making headway into the
rural areas, mobile money has much greater potential in
Nigeria, says Sachin Shah, head of cash management, at Standard
Cards will be disintermediated as they are squeezed on both
sides, he concludes, with smaller transactions gravitating to
mobile money, and larger sums transferred between bank