Agriculture Vertical – an example of the catalyst role for CBN
The Agriculture Sector is key to the Nigerian economy and has a value chain that is ideally suited to integration and automation. The rational for promoting adoptionin the sector is compelling: ·Agriculture represents 43% of GDP and engages 70% of labour force ·The sector has a very high potential for employment generation, food security, poverty reduction and industrialisation ·There is already Strong Federal and State Government focus, and a huge Local Government potential for the sector ·The sector is the largest constituency for financial inclusion, with service opportunity for KYC Identity enrolment, basic transaction (“no frills”) account, mobile wallet, pre-paid cards and mobile commerce. ·The payment systems offerings fit in to the agenda for Nigeria Incentive-based Risk Sharing System for Agricultural Lending (NIRSAL) to de-risk agricultural financing and facilitate low-interest credit ·This will facilitate efficient and transparent distribution of government grants and subsidies (e.g. Growth Enhancement Support Scheme of FMARD) So far, stakeholder meetings have been attended by representatives from government, deposit money banks, consumers, mobile money operators, identity management service providers, development partners, agriculture finance specialists and regulators. The current plan covers the following initial steps: ·Integrate the relevant activity plans for multiple stakeholder communities, including FMARD, BOA and Cellulant, National Identity Management System, Bankers Committee Identity Management project, Cashless Economy, Financial Inclusion initiative, appropriate State Government initiatives and the Government e-payments initiative. ·Plan to use the over 10 million farmer data to simultaneously provide Unique Identification, a “No frills” Savings Account, a Mobile Money Account and Prepaid Card ·Empower development institutions and agent networks to ease and broaden access to payment services by Agriculture communities ·Work with communication expertsto clearly define key stakeholder roles and profile stakeholders for proper coordination and effective communication. A consolidated masterplan, agreed with the Forum for Agriculture Finance Officers of commercial banks, CBN and the Bankers Committee will drive implementation.
Objectives of the review In March 2007, the Central Bank of Nigeria formally launched the Payment Systems Vision 2020 – a strategy that reflected four months of collaborative work with the leading banks in the country.
The objective was to drive the shift from a cash-based economy to one where electronic payment are at the centre of commercial activity the implementation of the strategy created an industry structure that has successfully instigated, promoted and implemented numerous successful initiatives. As a result of these impressive achievements, the Nigeria payments landscape looks very different from August 2007. Our starting point is now very different due to the successful implementation of much of the · original document and changes to international benchmarks: · The national payments infrastructure has substantially improved in both variety and efficiency since 2007 Consumers and Businesses are embracing innovative new technologies available today such as the use of · mobile technology, and the level of expectation is significantly higher New Core Principles for Financial Market Infrastructure have been defined by a joint working group drawn from the Bank for International Settlements Committee for Payment and Settlement Systems (BIS CPSS) · and the International Organisation of Securities Commissions (IOSCO) working group We have witnessed greater engagement in governance and direction of the payment systems from · Commercial Banks Other national initiatives such as Identity Management and Credit Bureaux are in the process of · implementation and wider adoption Payments infrastructure outside of Nigeria has progressed significantly Hence CBN has determined that a review of the PSV2020 strategy is appropriate. This document reflects a further six months of discussion, debate and analysis. Our overall objective remains consistent with the original PSV2020 document: However, the expectations are even higher in 2013 than when the first version of this document was released in 2007.
As a result, the PSV2020 Release 2.0 is much more than an update to the original vision. It is a complete re-write
based on new and aggressive objectives.
3.2 Progress since PSV2020 Release in 2007
The Nigeria Payments landscape is fundamentally different due to numerous initiatives, a summary of
which is given in the following sections.
3.2.1 Changes to the legal environment
A sound legal basis underpins the payments infrastructure, and several key changes to national statutes
· have been made, with further changes currently being progressed through the legislature
The CBN Act 2007was passed into law to further clarify the mandate of CBN in providing oversight of
the payment system.
The Evidence Act of 2011 ensured the legal admissibility of electronic records, essential for electronic
· payment systems
The Payment Systems Management Bill is currently being finalized, a bill that clarifies the structure and
· responsibilities within the payment systems industry
The Electronic Transaction Bill for an Act to facilitate the use of information in electronic form when
conducting transactions in Nigeria and for connected purposes.
New Payments Methods · NIBSS Instant Payments – Anew payment scheme, NIBSS Instant Payments (NIP), was launched in 2011.
NIP enables real-time inter-bank account-to-account electronic fund transfers. All major banks in Nigeria
· support this scheme, resulting in an impressive uptake by consumers
Mobile Money – Following the development and release of a Mobile Payments Rules and Regulation
framework, 26 mobile payments schemes have been licenced by CBN. The volume of mobile payments has
grown rapidly since 2011 reflecting the natural appeal of mobile as a payment method. Nigeria has adopted a
‘bank-led’ model for mobile payments, thereby ensuring the financial resilience of all schemes and creating
an open market to encourage innovation and competition
3.2.3 Infrastructure enhancements · CSD for Government Securities – In August 2013, CBN successfully completed an ambitious project to
deploy a new Real-Time Gross Settlement (RTGS) payments system plus a new Central Securities
Depository (CSD) for Government debt instruments. A robust RTGS payment system underpins a sound
Financial Markets Industry, and the inclusion of the CSD functionality supports greater flexibility in
· Collateral Management for the payment systems
EMV Cards – The Nigeria cards infrastructure successfully migrated to EMV Cards (Chip and PIN) to
· significantly improve the security of plastic cards
NUBAN – Astandardised bank account structure – Nigeria Uniform Bank Account Number (NUBAN) – has
been implemented to improve the quality of payment validation and automation. Arrangements to extend the
· NUBAN to non-bank financial institutions are nearly concluded
Clearing Cycle Reduction – The Cheque Clearing Cycles were harmonized across the country, and clearing
· cycles for ACH payments and cheques has been reduced from 3 days(T+2) to next day (T+1)
Centralised Clearing – The Clearing centre infrastructure has been rationalized, reducing seven automated
and thirty manual clearing centres to one national automated clearing centre that handles all ACH and cheque
Nigeria Central Switch – NCS has become operational enabling interconnectivity and interoperability
among deposit-taking institutions and licensed payment service providers. The NCS also facilitates inter-
· scheme card and mobile payments.
Payments Terminal Service Aggregation – this model has been put in place to facilitate seamless and
interoperable card payments, clear regulatory visibility for the retail payment infrastructure, and reliable
· industry retail payment system statistics for analysis and planning purses.
Cheque Truncation – Cheque truncation has been introduced to dematerialise the physical cheque and hence
· processing purely on the basis of secure electronic images
Cheque amount cap – Acheque cap of N10 million was introduced to encourage higher value payments to be
· made electronically.
Mandate Processing for Direct Debits – A centralised Direct Debit Mandate Processing infrastructure has
been created to streamline the administration of the mandate process, and banks have been required to
· improve the validation of payment requests against the lodged mandates.
Credit Bureaux – Three separate but interlinked credit bureaux have been launched, providing the first steps
in creating a database of credit history which is essential as the financial community offer new banking
ATM and POS Deployment – Under direction from CBN, banks and other financial service providers have
been required or encouraged to increase the deployment of ATM and POS devices.