By Alex C
With Nigeria adjudged as Africa’s biggest economy, eclipsing South Africa following the Gross Domestic Product (GDP) rebasing, electronic payment system is driving Nigeria’s growth.
From a cash-based society, where volume of cash or travellers’ cheque were a necessity for visitors, the birth of the modern payments industry is more noticeable than in the retail banking sector with Automated Teller Machines (ATMs), credit cards and Point-of-Sale (PoS)devices now ubiquitous.
A decade ago, there were nearly no electronic payment systems with few ATMs ‘through-the-wall’ types at bank branches in existence. At the same period, telecommunications were pretty poor as a walk along the street reveals telephone wires festooned on poles, or attached in a haphazard fashion to buildings.
From a herd of nearly a hundred banks, each operating within a limited fiefdom, the Central Bank of Nigeria (CBN) promulgated policy in 2005 that witnessed bank consolidation, resulting to 22 banks.
In the case of ATMs, the absence of an interlinking switch which would allow customers from a bank in one area to withdraw cash from a bank in another was hampered by a cumbersome pool of possible member banks. Together with the consolidation of the organisations, such a facility – considered indispensable for modern banking – was introduced. Credit card machines did not exist en masse, relying on a connection from the merchant to the card issuer (the bank) and the payment system provider.
These connections depend on telecommunications infrastructure. A sense of perspective is required where Nigerian telecommunications is concerned. The country has a population of nearly 170 million people, with over 3 million landlines, thanks to the revolution of mobile telephony that the foundations for better payments systems. Today, there are 164 million GSM lines and nearly 15 million CDMA (3G) connections.
With these event happening in the banking and telecommunications sectors, something began to occur which has played a pivotal role in assisting Nigeria earn the enviable position as Africa’s biggest economy.
More people are gaining access to banking services. Transaction volumes have been increasing exponentially – and when people are banked and transactions begin to flow easily, the economy benefits due to increased consumer participation in both the retail and retail-banking sectors.
The positive effect of a well-managed payments system manifests in various ways. For example, those who have been to Lagos a decade or more ago will remember chaotic roads mostly in a state of disrepair; traffic jams on a colossal scale; and an almost complete absence of traffic lights.
Today, new tarmac can be seen everywhere with traffic management vastly improved (although getting off ‘The Island’ traffic can still be a challenge). While people seek to spend their holidays in Lagos, the airport terminal is undergoing a wide-scale upgrade.
The Nigerian retail economy no longer depends on cash alone, but has the payments systems to support modern means of transacting, delivering improved security and convenience and easing the process of doing business, both locally and foreign investment based.
The situation is geared for continued strong growth in the foreseeable future – and that means Nigeria is an economic power to be reckoned with.
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