There are various payment instruments in the Nigerian payment landscape which
enables the holder/user to effect payments. These are made up of cash and
non-cash media. Over the years, cash has continued to be dominant in Nigeria
despite the growing use of other payment channels.
After cash, cheque is the most widely used payment mode. In 2004, cheques
represented 86.32% (in volume terms) of all non-cash retail payments with
payment cards and Automated Teller Machines (ATMs) accounting for 6.5% and 6.23%
respectively.
The Inter-Bank transfers also constitute a major channel of payments in
Nigeria. Also banks' customers make transfers among themselves through the Bank
via the Nigeria Inter-Bank Settlement System (NIBSS) Electronic Funds Transfer (NEFT).
A breakdown of the contribution of the various payments instruments in 2004
revealed that in volume terms:
Cheques: - 86.32%
Cards: - 6.50%
ATMs - 6.27%
Inter-bank fund transfers: - 0.90%
Value terms
Inter-bank fund transfers: - 63.88%
Cheques: - 35.91%
Cards: - 0.20%
ATMs: - 0.01%
Components of the Nigerian Payments System
Retail payments, consisting cash, cheques, cards, ATMs/POS networks and
other forms of ACH payments.
Large Value Payments that is largely inter-bank payments.
Securities clearing and settlement, comprising Government and private
securities and stocks.
Cash payments Cash is the most common form of payment media in Nigeria. More than 20% of
the total monetary liabilities of the CBN are in currency outside the banking
system (COB). Money outside the banks cannot be subject to regulatory and
operational procedures, and the ability of monetary policy to achieve set
objectives in the presence of sizeable COB is therefore limited. By promoting
the use of the formal payment systems, the ability to execute and manage
monetary policy is enhanced.
Non-cash payments.
Cheques
Cheque remains the most dominant payment mode accounting for 76.30% of the
volume of non-cash payment in the country. While the average monthly volume
and value of cheque transactions in 2005 stood at 1,221,954 and N1, 159.62
billion, the clearing cycle for local and up-country remains 3 and 6 days
respectively. Notable initiatives towards the increased usage of cheques
transactions witnessed over the years include the commencement of Nigeria
Automated Clearing System (NACS) in 2002, introduction of two clearing
sessions in Lagos clearing zone, introduction of
cheque standard and cheque
printers accreditation scheme. These have contributed to the tremendous
increase in the cheque usage over the years as depicted below:
Payment Cards: Payment Cards were introduced into Nigeria some years ago but suffered low
acceptability at the initial stage due to a number of factors which included
amongst others: lack of shared network, epileptic services, limited ATM and
Point of Sales (POS) Terminals and high cost of operations.
The Central Bank of Nigeria in an attempt to promote the use of cards for
making secured payments in Nigeria, issued the guidelines on e-banking in
Nigeria in 2003. This has encouraged e-payment initiatives such as the
establishment of switching companies that facilitate interconnectivity,
introduction of shared ATMs and the establishment of Independent Service
Operators (ISO) for massive deployment of ATMs and POS, which gave rise to
significant growth in the use of payment cards.
Types of Payment Cards
Debit Cards: This enables holder access to his bank account online. It
is commonly used in Nigeria at POS terminals (for payment of goods or
services) and at ATMs for cash withdrawal and account balance enquiry.
Examples of different brand of debit cards in use in Nigeria include the
MasterCard Maestro, Visa V-Pay, Interswitch enabled cards (including Quickcash
brand of the ATM Consortium Limited) and the various proprietary ATM Cards
issued by various banks.
Credit Cards: This type of card enables holders to make purchases
and/or withdraw cash up to a prearrange ceiling, based on the line of credit
granted to him. It is the least used of all the available payment cards in
Nigeria, due to the stringent conditions and collaterals attached to it. Like
other payment cards, it is also used on POS and ATM at the accredited outlets.
To deepen the credit card business in Nigeria, arrangement are at the advance
stage to establish a credible credit bureau that would manage information on
credit customers.
ATM Cards: Debit and Credit cards could be used by the cardholders on
ATM for cash withdrawal or account balance enquiry without having to visit a
bank. In Nigeria, there are over 530 ATMs belonging to some Nigerian banks and
Independent Service Operators (ISO).
The volume and value of ATM transactions for 2005 stood at 3, 489, 843 and
N17.31 billion, while that of POS stood at 1,063,915 and N41.93 billion
respectively.
Dollar Denominated debit/credit cards: It is noteworthy that both debit
and credit cards are being issued in local and foreign currency under the
platform of Nigerian Switching Companies using the network of MasterCard and
Visa International. This has brought international e-commerce to the comfort
of homes in Nigeria. Cardholders can stay in Nigeria to participate in auction
across the globe, shop and make payment in over 210 countries in the world.
With this, Nigerians traveling abroad do not necessarily need travelers'
cheque. The volume and value of dollar denominated card transactions has been
on the increase, reflecting the
potentials of cards market in Nigeria as shown
in the chart below:
Switching Companies Before a switch can operate in Nigeria, the existing regulations require
that it should obtain the prior approval of the CBN. There are currently two
major transactions switching companies, namely Cards Technology Limited (which
switches all MasterCard International and local related transactions) and
InterSwitch Limited which switches transactions done with a host of domestic
cards including the QuickCash brand of ATM cards, as well as those of the
member banks of the Interswitch consortium. Valucard Nigeria Plc has recently
obtained approval to serve as switching company for all transactions done with
Visa International.
The transaction switching companies facilitates online ATM transaction
processing, online POS transactions processing and e-purse transactions
processing. In doing that, they interconnect parties to card scheme operators'
network, document transactions and generate reports to member banks including
transactions settlement reports, keep and check "hot card" list amongst other
activities.
Approved Switch/Card Scheme Operators
Valucard Nigeria Plc was approved to serve as a card scheme operator on
February 18, 1998 while approval was given to them on December 14, 2005 to
serve as a switching company.
Smartpay was granted the CBN approval to operate an electronic purse
scheme on November 1, 1999.
Card Technology Limited was licensed by the CBN on April 7, 2004 as the
first switching and transaction processing company with five member banks.
Interswitch as transaction switching companies was approved on April 24,
2004 and currently has 21 participating banks out of the 25 banks and 9
Independent Service Operators (ISO).
ATM Consortium Limited was established on November 8, 2004 to deploy
shared ATMs in the country. It currently has over 10 banks in their
consortium and had successfully deployed over 100 ATMs in the country.
Electronic Funds Transfer
Electronic Fund Transfers are used in transferring value between banks on
behalf of customers. The Nigerian Third Party Transfer (NIBSS Fast Fund) was
launched in 1999 to provide same day third-party transfers to individual and
Corporate Organizations with minimum amount transferable as N100, 000.00. The
NIBSS Electronic Funds Transfer (NEFT) was also introduced in 2004. NEFT
operates GIRO payments for retail transfers of banks customers.
International Payments (SWIFT)
In Nigeria, international money transfers are largely through Telegraphic
All the twenty five licensed banks are members of SWITF and therefore on the
SWIFT network.
5.4.2 Mobile and Internet Banking Services
Mobile phones and Internet are increasingly being used for financial
services in Nigeria. Deposit Money Banks are enabling their customers to
conduct some banking services such as account inquiry and funds transfer
using these media
Facts : 1/1/1900
Paris Club of Creditors:The club represents only government guaranteed creditors. Members include the United States of America, United Kingdom, Germany, France and Canada, who guarantee the export activities of their nationals. When the recipient nation s government is unable to pay the equivalent of the imports domestic currency cover, it becomes government debt owed to creditor nations. The first Paris Club meeting was held in 1956.
Payment System 
