Nigeria’s current cash crisis, evident by naira scarcity following a now-controversial move to replace three higher-denomination currency notes, has sparked a rise in e-payment transactions in the country, according to the latest data from the Nigeria Inter-Bank Settlement Systems (NIBSS).
For one, the currency redesign, in line with a cashless policy spearheaded by the Central Bank of Nigeria (CBN) has been trailed by many controversies: rejection from prominent politicians, long queues and fights inside banking halls and ATM centres, protests in some cities in the country, and a Supreme Court judgment that pushed the already extended deadline to February 15.
The apex court today adjourned the case on the naira redesign policy to February 22, a fresh respite to the entire cash redesign process.
Many Nigerians have opposed the implementation of the Naira redesign policy, like they did the new withdrawal limits proposed late last year. On the flip side, these policies have opened the floodgates for e-payment transactions.
Per data from the NIBSS, Nigerians spent a total of N38.7 trillion over electronic channels in January 2023, representing a 45% year-on-year increase from N26.6 trillion in January 2022.
While it is true that this figure reflects significant growth and a win for the CBN’s cashless policy, it is still a drop compared with the previous month.
In December 2022, the NIBSS recorded an all-time high monthly record of N42 trillion. However, this growth is likely due to the increased spending activities of Nigerians during the festive period. In total, e-payment transactions in Nigeria hit an all-time high of N387 trillion last year.
In its 2023 – 2025 Medium Term Expenditure Framework and Fiscal Strategy Paper, the Budget Office of the Federation projects that the Federal Government will generate ₦484bn from e-payment channels by 2025.
Read also: Nigerians made to wait as Supreme court adjourns case on Naira redesign till Feb 22.
Lilian Phido, Head of Corporate Communications, NIBSS said “It is very clear that more and more people are accepting the channels of payment that are available and the platforms are stable. With stability, these components have grown.”
E-payment transactions on the rise
The latest NIBSS data also shows that the volume of transactions processed through the NIBSS Instant Payments (NIP) platform in January 2023 was 541 million, which represents a 55% year-on-year increase compared with the 348 million recorded in January 2022.
Total NIP transactions for the period rose by 45.52% year-on-year from N26.65 trillion as of January 2022 to N38.77 trillion as of January 2023.
This is hardly surprising considering that the initial deadline for returning the old N200, N500, and N1,000 notes was January 31, before a decision from Nigeria’s highest court botched the entire process.
Frustrated by the struggle to get cash from banks and the ridiculously high transaction fees demanded by POS operators, Nigerians turned to payment solution providers, such as Opay and Palmpay.
According to NIBSS, registered mobile users in Nigeria did transactions worth N2.37 trillion in January 2023, a 125% increase from the previous year.
However, the switch to digital comes with another layer of problems. Many Nigerians have expressed concerns about the technical glitches in e-payment transactions, raising serious questions about the readiness of both traditional and modern banks regarding infrastructure.
Win for PoS merchants
NIBSS data reveals that Point of Sales transactions in Nigeria jumped to N807.16 billion in January 2023, a 40.69% year-on-year increase compared to the N573.72 billion reported in January 2022.
While it is true that this figure reflects significant growth, it comes with a dark side.
Left with no option to get cash, Nigerians turn to PoS merchants who charge high transaction fees, adding more salt to the injury of the already impoverished citizens. Over 133 million people live in multidimensional poverty, according to the National Bureau of Statistics (NBS), and Nigeria’s inflation rate just rose to 21.82%.
Meanwhile, the CBN has vowed to prosecute POS operators who take exorbitant charges on transactions, though how this will play out remains unstated.
Related post: All you need to know about the Naira redesign policy and CBN’s promise to sanction PoS operators.
Toward a cashless Nigeria
The endpoint of the controversial policies of the CBN, as often expressed by its Governor Godwin Emefiele, is achieving a cashless Nigerian economy.
When he announced the plan to redesign naira notes last October, he aimed to mop physical cash away from private vaults. The public supposedly held about N2.73 trillion out of the N3.23 trillion of currency in circulation at the time.
Last month, Emefiele revealed that the apex bank had been able to reduce the currency outside the banking system to N900 billion from a whopping N2.7 trillion. In its Payments Vision 2025 document (pdf), the CBN aims to achieve “a cashless and efficient electronic payment system infrastructure to service all the sectors of the economy.”
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