Nigeria: E-Payment Transactions Decline to N32.84trn On Network Glitches, Worsening Economic Downturn

Banks network malfunction, among other factors, contributed to N396.18billion or 1.19 per cent decline in Nigeria Inter-Bank Settlement Systems (NIBSS) Instant Payment Platform (NIP) to N32.84 trillion in September 2022 from N33.2 trillion reported by NIBSS in August 2022.

The latest data released by the NIBSS revealed that total value of transactions worth N271.56 trillion were performed electronically in nine months of 2022, an increase of 26 per cent when compared to N215.76 trillion reported in nine months of 2021.

The NIBSS NIP is an online real-time Inter-Bank payment solution developed by NIBSS and Banks, Other Financial Institutions (OFI) customers preferred funds transfer platform that guarantees instant value to the receivers.

Meanwhile analysts believe worsening macroeconomic conditions contributed to decline in electronic transaction in September.

A finance expert, Mr. Rotimi Fakayejo attributed the decline in Instant Payment Platform (NIP) transactions in September to glitches witnessed by some banks in September, stressing that the exit of Information Technology (IT) staff caused unrest in the banking sector daily business activities.

He added that the recent increase in electronic transactions shows that Nigerians, most especially the Youths are embracing the cashless policy of the Central Bank of Nigeria (CBN).

On his part, the Vice President, Highcap securities Limited, Mr. David Adnori said, “The marginal decline in electronic payment for September 2022 is because of worsening macroeconomic conditions which eroded the quantum of financial transactions by businesses and households.”

He added that the rising inflation has severely curtailed the financial health of all economic elements, resulting in dwindling financial activities.

The data by NIBSS had revealed that the N33.2trillion report in August 2022 was the all-time high e-payments value recorded since 2018.

Compared to the N29.3 trillion recorded in July, this shows a 13.3per cent growth from the reported figure in August.

According to NIBSS, the decline in value of e-payment recorded was a reflection of the decline in volume of deals in the month under review.

The NIP volume dropped to 438.17 million in September, representing a decline of 2.2 per cent over 448.13million recorded in August.

As electronic transactions drop in September, value of cheques transactions also fell by 8.52 per cent to N265.94billion from N290.69billion in August.

However, the Year-on-Year (YoY) performance of cheques transactions in nine months rose by 0.43 per cent to N2.39trillion from N2.38trillion in nine months of 2021.

The data by NIBSS showed that cheque transactions in 2022 have been hovering at an average of N265.56billion with March and July 2022 reporting the highest and lowest respectively.

On the contrary, an analysis of the nine months data just released by NIBSS showed that the volume of cheque transactions dropped by 6.3 per cent to 358.193million in September from 335.786million in August, while YoY performance showed a decline of 7.6 per cent to 3.07million in nine months of 2022 from 3.33million in nine months of 2021.

Cheques transactions over the years have been dropping as most bank customers adopted e-payment means of transactions.

Specifically, the total value of cheque transactions dropped by 11.45per cent to N4.13trillion in 2019 from N4.66 trillion reported by NIBSS in 2018. It further dropped to N2.99trillion in 2020 and closed 2021 at N2.95trillion.

The CBN in December 2001, introduced the cashless policy in a move to reduce the amount of physical cash in circulation thereby encouraging the use of electronic platforms for settlement or payment for goods and services.

The apex had introduced cash-based transactions which stipulate a cash handling charge on daily cash withdrawals that exceed N500,000 for individuals and N3,000,000 for corporate bodies.

The policy on cash-based transactions (withdrawals) in banks, aims at reducing the amount of physical cash (coins and notes) circulating in the economy and encouraging more electronic-based transactions (payments for goods, services, transfers, etc.)

The pilot was run in Lagos State from January 2012 while the policy took effect in Rivers, Anambra, Abia, Kano, Ogun and the Federal Capital Territory (FCT) on July 1st, 2013.

The policy was implemented nationwide on July 1st, 2014.

Analysts attributed the steady decline in cheque transactions to individuals and Corporate bodies adopting NIP championed by the apex banking regulating body.

The President, the Bank Customers Association of Nigeria (BCAN), Dr. Uju Ogubunka in a chat with THISDAY had explained that, “Cheque transactions will never go out completely from the banking sector. In advanced economies, people are still using cheques and there are certain transactions bank customers will want to do that require cheques.

“The law on cheques in Nigeria is very strong. We have the Bill Exchange /Cheque Acts and both are fundamental laws that can never be repelled from the banking sector. The old generation still cherish their chequebooks and transact businesses with it as long as banks are offering them. We await the day bank will totally suspend cheque transactions and I do not see that happening very soon. Cheque transactions will gradually be phasing out in the system but not completely until the generation familiar with cheque transactions are out of the system.”

He added, “It is not a surprise that cheque transaction between 2018 and 2021 has dropped amid the CBN policy of cashless policy. There has been a shift in ways bank customers transact business and the decline in cheque transactions is another change everyone must embrace.”

The CBN in June 2022 raised the limit for ‘Highly Secured Online Funds Transfers from N100 million to N250 million for Companies and from N10 million to N25 million for individuals.

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