Despite the fact that the number of e-payment transactions climbed dramatically in February 2023, growing by 121% year over year, persistent issues with electronic payments have reduced the value of transactions completed in the second month of the year. According to the most recent statistics provided by the Nigerian Inter Bank Settlement System (NIBSS), although NIBSS Instant Payment (NIP) traffic increased by 45.5% last month, the value of transactions completed via the channel decreased by 5.12%.
According to MINIECHAT, when fresh naira notes were hard to come by, many Nigerians opted to internet banking to complete their financial activities. This increased the strain on banks’ internet banking systems and overtaxed Deposit Money Banks’ insufficient online banking infrastructure (DMBs).
Mohammed Adeleke, co-founder and project manager of VPD Money, a digital fintech, told MINIECHAT that the lack of reliable technology or infrastructure among Nigerian banks at this time of cash shortage is the only cause of the subpar online banking services users have encountered.
Adeleke said that the majority of banks are using outdated technology, which is why they are unable to handle the pressure.
“Picture all of people attempting to pass through a little door, it is either they shatter the door or they slowly pass through it. That is what took place. Most banks’ infrastructure was unable to handle the influx. That was why transaction was not proceeding. Since the online banking platform is not opening, you wish to transfer money. Even if you transfer money successfully, it may take several days for it to appear in the recipient’s account or bounce back to you. The co-founder offered a straightforward reason for this situation: The banks are still using outdated technology.
Adeleke said that, in contrast to the conventional banks, fintech businesses like as VPD were able to help during this trying time, noting that “when you utilize fintech companies like VPD, etc. to transmit money, it moves quickly. Since our platforms are dependable and transmission is free at this time, our client base significantly rose. The recipient has gotten his money in the blink of an eye. The current banks will charge you, but they won’t provide a good service.
The co-founder said that the Central Bank of Nigeria (CBN) would not be able to implement its cashless policy if it just works with the current banks, and he urged the top bank to be flexible.
It’s a good idea to have a backup plan in case anything goes wrong.
Also, he advised existing banks to work with fintech firms, pointing out that although most banks in Nigeria would decline in the next ten years, fintech firms would expand.
Fintech businesses are expanding quickly and offering financial services to rural regions as well. For instance, the value of Flutterwave is equivalent to the combined value of seven (smaller) Nigerian banks. The banks who engage with fintech firms today will be the ones that endure, he said.
The failures of the e-transactions that followed the CBN’s implementation of its cashless policy, which caused so much suffering and losses to innocent Nigerians, have angered experts in the telecoms sector.
Ajibola Olude, executive secretary of the Association of Telecommunications Companies of Nigeria (ATCON), told our reporters that the hurry with which the apex bank attempted to execute the policy was to blame for the turmoil it generated.
What occurred, he said, was that the CBN rushed the implementation of the cashless policy, which led to many transactional failures on the side of different channels. And the reason for this, in my opinion, is that the banks were not included when the CBN wished to put this into effect. Because we didn’t previously encounter the same level of failure while doing transactions utilizing apps and other technologies.
“But, since the banks were not adequately guided, they must hire data center personnel to extend their storage. You cannot utilize the storage for 20,000 transactions for 80,000 transactions; instead, a data center is needed to increase the storage’s capacity. This is what caused the disaster you are referring to, he said, adding that the data centers’ scope of their rack was not improved.
He stated, “It’s like you’re trying to cram more info into a little area.
Many individuals wish to utilize USSD and applications, he said, but “you have not expanded the scope of their storage, and as a consequence, their transactions could not go through.”
Olude regretted that so many people had lost their employment, with the SMEs being the most impacted by this crisis, and said that the banks were unprepared for the havoc the policy had brought about.
In order to remedy the current difficult situation, he asked the banks to make new levels of investment by expanding the breadth of their data storage.
“The CBN should have done this implementation in stages and not this abrupt approach. Nigeria is mostly a cash economy, as we should all be aware, but I’m not sure why the CBN is pressuring Nigerians to embrace this policy as soon as possible. As a consequence of this policy, many individuals have lost their employment, particularly SMEs that value cash more than other forms of payment. Moreover, purchasers have been unable to purchase goods since SMEs are hesitant to accept transfers because the majority of them lack literacy. They are not used to moving.
The policy, in his opinion, is ill-timed, and CBN should start again and execute it gradually, he added.
Ade Atobatele, a fintech specialist, called the program a failure that caused tremendous pain for Nigerians and said the CBN lacked vision in putting it into practice.
“We were progressively increasing our capacity; we did not have the capability for what the system was required to perform overnight. We were operating at an ever-increasing capacity each year until the CBN unjustly seized our money.
“The system was serving us faithfully for the purposes for which we needed it, and we were increasing the number of people managing the system and providing resources to allow it to expand, when all of a sudden, the CBN requested to transform overnight from a kid to an adult. Overnight, we increased from 15% to 85% of our capacity. Nothing the CBN accomplished could not have been spread out over a longer time frame. We now have dead individuals and a large number of people are turning beggars because of CBN’s lack of vision and foresight, he said.
The expert said, “We did not profit from this program,” when asked whether the country had gained anything from it, adding that as the system began to collapse, people lost trust in it.
By requesting the system to do tasks for which it was not intended, the CBN distorted it, he said.
With regards to the future, Atobatele said, “We have to undertake a post-mortem, learn from our errors, and return to organic growth.”
According to Mr. Yemi Okeremi, CEO of Precise Financial System, Nigeria’s financial technology is pretty advanced given the degree of development of the nation.
The redesign of the naira, which has reduced the amount of money in circulation and increased the usage of online banking, has, according to Okeremi, done more damage than good since it has further drained the banks’ already precarious infrastructure.
We are not prepared for the cashless policy, in my opinion. Since the banks had expanded depending on conditions on the ground, we had previously enjoyed rather decent online and mobile banking. They are aware of how many Nigerians have enrolled in their online banking services, as well as how many of them are banked and have infrastructure in place to serve them.
The CBN then decided that everyone in Nigeria needed to stop using cash. There is almost two times as many people as were using their internet services. Many Nigerians have bank accounts but don’t use the online banking facilities offered by those institutions. This group of individuals were obliged to start utilizing online banking overnight, which has slowed down servers, consequently delaying transactions or even refusing them,” the CEO averred.
And he said, “Most of these recent graduates do not know the nitty-gritty on how to maintain some of the software and hardware utilized in the banking industry. Many IT professionals have left the nation in search of greener fields, leaving the less experienced staff to manage the infrastructure in the bank.
“Poor internet connection has also hampered the smooth transition to cashless, since the cashless program requires rapid transactions and alerts for it to function. The reality, however, is different since some transactions take up to two days before the opposite party receives notification.
The CEO listed the socioeconomic issues, lack of infrastructure, and brain drain as well as the fact that everyone in Nigeria wants to utilize online banking at once as the causes of this problem.
Yet, he encouraged CBN to rethink its choice.
“We are aware that a cashless system is an excellent way for any economy to develop, but the CBN would have gradually converted Nigeria’s economy to a cashless system. As online banking was not anticipated, the banking industry is doing the best it can. They deserve praise, but I urge them to step up and take on the current challenge.
“The telecommunications industry is trying its best in terms of broadband connection, with plans to increase the level to something like 70% by 2024. People would be able to get transaction alerts on time if that occurred, he said.
The head of operations for the Association of Licensed Telecommunications Operators of Nigeria (ALTON), Gbolahan Awonuga, asked the banking industry to increase its capacity in a similar manner.
“What the government is doing right now is that they want a totally cashless environment,” Awonuga remarked. We are taking about digital economy, but there must be some amount of preparedness. The banks should be able to handle the client traffic flow.
The online systems of the banks should be able to handle the traffic if everyone switches to a cashless system. There is a lot of backend traffic, which is why we are seeing transaction delays or refused transactions. Individuals wish to do online banking simultaneously, however due to capacity, they are unable to do so.
He pushed for increased collaboration with fintech firms.
Awonuga said that “some select fintech businesses are working with banks to guarantee smooth online internet banking” and urged others to join the effort to improve the existing state of affairs.
In the meanwhile, the NIBSS February report revealed a rise in the amount of tiny and micro transactions made using mobile devices, which experienced a huge 70% volume growth and a 7.8% volume increase between January and February of this year.
Nigerians have resorted to utilizing USSD and other bank apps as well as electronic channels to pay for transactions that might cost as low as N100. Because of the country’s cash shortage, many Nigerians are now forced to use electronic channels for purchases like groceries and transportation, which were previously largely made with cash.
Delta Government Requests That People Accept Outdated Notes
The Delta State administration urged citizens to abide by the Central Bank of Nigeria’s (CBN) order that the old N1,000, N500, and N200 notes continue to be valid until December 31, 2023.
In light of the Supreme Court’s ruling from March 3 and the Central Bank circular directing the continued recognition of the old bills as legal tender, the state commissioner for information, Mr. Charles Aniagwu, made the call in a statement in Asaba. He urged all residents in the state to continue to accept the bills as legal tender.
He especially requested that the CBN’s instruction be followed by government tax collectors, gas stations, dealers, marketplaces, and other stakeholders.
The old N1,000 and N500 notes are already being given out by commercial banks in Kwara State to their clients, and they are also accepting the old bills as deposits.
The banks have complied with the Supreme Court’s ruling on the legitimacy of the old naira notes till the end of this year, according to a visit to Access bank, Unity Road, and FCMB, Murtala Mohammed Way, Ilorin.
However, despite the CBN’s directive designating old Notes as legal tender, Niger state continues to struggle with a cash shortage.
Except for a few banks that are paying a maximum of N5000 over the counter, MINIECHAT’s findings in the majority of banks showed that both old and new naira notes are still hard to come by.