Payment Modes in Nigeria
As of June 30, 2024, the payment landscape in Nigeria has undergone significant changes. While cash remains relevant, the adoption of non-cash payment channels has surged. Electronic transactions, facilitated by platforms like the NIBSS Instant Payment (NIP), have become increasingly popular. Nigerians now prefer digital methods for making payments, reflecting a shift away from traditional cash-based transactions.
Available data on non-cash retail payment channels at the end of June 2024 indicated that Internet (Web) Transfer remained the most patronized channel accounting for 51.91 per cent of the total e-payment transactions while NEFT was the least with 0.20 per cent. A detailed breakdown of some of the e-payment channels is shown below:
Volume termsWeb (Internet) | 51.91 per cent |
POS | 28.53 per cent |
Mobile | 15.58 per cent |
ATM | 2.21 per cent |
NEFT | 0.20 per cent |
DIRECT DEBIT | 0.44 per cent |
Web (Internet) | 52.95 per cent |
NEFT | 23.48 per cent |
Mobile | 10.23 per cent |
POS | 5.51 per cent |
Direct Debit | 0.80 per cent |
ATM | 0.78 per cent |
USSD | 0.14 per cent |
3.1 Cash payments
Cash has historically been the most prevalent form of payment in Nigeria. However, the landscape has evolved. In 2011, the CBN introduced the cashless policy. The goal was not to eliminate cash but to reduce its circulation in the economy. The policy encourages more electronic-based transactions, including payments for goods, services, and electronic transfers. A portion of the total monetary liabilities of the CBN exist in the form of Currency Outside the Banks (COB). This refers to cash held by individuals, businesses, and other economic units that are not within the formal banking system. COB cannot be subjected to the usual regulatory and operational procedures that apply to funds within the banking system.
The presence of a significant amount of COB poses challenges for monetary policy. Since these funds are outside the formal channels, the ability to implement effective monetary policy is somewhat restricted. In addition, COB does not respond to interest rate adjustments or other policy tools in the same way as bank deposits do. Despite the limitations, the CBN is actively working to promote the use of formal payment systems. These systems include electronic funds transfers, mobile payments, and card-based transactions. By encouraging the adoption of these systems, the CBN aims to enhance its ability to execute and manage monetary policy effectively.
3.2 Non-cash payments.
3.2.1 ChequesThe volume of cheques cleared decreased by 13 per cent from 7,920,181 in the second half of 2023 to 6,877,644 in the first half of 2024. In Contrast, the value of cheques cleared increased by 2 per cent, rising from N8.553 trillion in the second half of 2023 to N8.741 trillion in the first half of 2024. The decrease in volume was attributed to customer preference for electronic and other payment channels.
3.2.2 NIBSS Instant Payment (NIP)The volume and value of NIP rose to 5,626,762,540.00 and N476.89 trillion in the first half of 2024, up from 4,848,535,512 and N343.94 trillion in the second half of 2023, indicating increases of 16 per cent and 39 per cent, respectively. This significant growth in the use of the channel was attributed to the cash scarcity experienced in March 2023, which compelled many Nigerians to switch to electronic channels for their transactions. Additionally, the Central Bank of Nigeria’s revised cashless policy, which further limited the amount of cash that could be withdrawn from banks, played a crucial role in promoting the growth of e-payments.
3.2.3 NIBSS Electronic Fund Transfer (NEFT) TransactionsThe volume of NEFT transactions decreased by 3 per cent from 46,281,736 in the second half of 2023 to 44,828,568.00 in the first half of 2024. The value, on the other hand, increased by 5 per cent to N366.070 trillion in the first half of 2024 from N348.200 trillion in the second half of 2023.
3.3 Electronic Card Payments
3.3.1 ATMs TransactionsThe number of active ATMs deployed stood at 16,714 in the first half of 2024, representing a 3.82 per cent decrease from 17,377 in the second half of 2023. However, ATM transactions increased in volume by about 1 per cent, rising from 492,757,656 in the second half of 2023 to 496,436,959 in the first half of 2024. In contrast, the transaction value decreased by 10 per cent, falling to N12.21 trillion in the first half of 2024 from N13.58 trillion in the second half of 2023. The decrease in the number of active ATMs and the value of ATM transactions can be attributed to the ongoing digital transformation in the banking and financial services industry, which has led to a shift towards online and mobile banking, reducing the need for physical ATM transactions. Other contributing factors include changing consumer behaviour, with more consumers adopting digital payment methods and becoming increasingly comfortable with cashless transactions. Additionally, banks and financial institutions are optimizing their online banking services to reduce operational costs, resulting in fewer active ATMs. The slight increase in ATM transaction volume may be due to customers' growing trust in banking services and the availability of clean notes at ATMs, making bank ATMs a preferred choice in the first half of 2024.
3.3.2 PoS TransactionsThe number of PoS terminals deployed stood at 2,935,765 in the first half of 2024, representing a 20 per cent increase from 2,448,805 in the second half of 2023. Additionally, the volume and value of payments via PoS terminals rose to 6,395,670,571 and N85.914 trillion by the end of the first half of 2024, up from 4,974,979,119 and N61.902 trillion in the second half of 2023, representing increases of 29 per cent and 39 per cent in volume and value, respectively. This growth can be attributed to the shift towards cashless transactions, as the Nigerian populace increasingly embraces digital payment methods over traditional cash transactions. The convenience and speed offered by PoS terminals have made them a preferred choice for everyday purchases, including groceries, utilities, and services.
3.3.3 Mobile PaymentsThe volume and value of mobile payments increased by 19 per cent and 30 per cent respectively to 3,493,116,888 and N159.419 trillion in the first half of 2024, up from 2,928,536,803 and N122.744 trillion in the second half of 2023. This significant growth can be attributed to increased consumer awareness and the concerted efforts to promote mobile payments as a viable and more convenient payment method.
3.3.4 Internet (Web) TransactionsThe volume and value of Internet (Web) transactions increased to 11,638,142,074 and N825.50 trillion in the first half of 2024, up from 10,432,480,162 and N634.959 trillion in the second half of 2023, representing approximately 12 per cent and 30 per cent increases, respectively. The rise in transaction volume, combined with the growth in transaction value, indicates a shift toward more financially significant transactions, including online banking, e-commerce, and large local money transfers. These factors have had a significant impact on the overall value of transactions.
3.4 Payment Cards:
As of December 31, 2023, the status of payment card usage in Nigeria evolved significantly in terms of acceptance, infrastructure, and operational efficiency. The initial challenges faced, such as low acceptability due to factors like lack of shared networks, unreliable services, limited ATM and Point of Sale (POS) terminals, and high operational costs, have likely been addressed largely over the years.
The Central Bank of Nigeria's efforts to promote secure card payments through various guidelines and frameworks have contributed to the growth and development of the e-payment ecosystem in the country. Initiatives such as the establishment of switching companies for interconnectivity, shared ATM networks, Independent Service Operators (ISOs) for widespread deployment of ATMs and POS terminals, and regulatory frameworks for mobile payments have played a significant role in driving the adoption and usage of payment cards in Nigeria.
Types of Payment CardsPayment Cards - are cards issued by a CBN licensed issuer to cardholders (individuals or corporates) and accepted at terminals (ATMs, POS, Web, Mobile, Kiosks etc.) to make payments, purchases or withdrawals. Types of payment cards used in Nigeria include:
a) Stored-value cards - Payment cards where money is on deposit with the issuer, but the card account is not linked to a current or savings account. Funds and data on a stored value card are metaphorically physically stored on the card. Stored value cards are usually anonymous in nature and issued outside of banking halls.
b) Prepaid cards - Payment cards where money is on deposit with the issuer, but the card account is not linked to a current or savings account. Funds and data are maintained on computer systems affiliated with the issuer.
c) Credit card - Refers to a payment card assigned to a cardholder, usually with a credit limit, that can be used to purchase goods and services on credit or obtain cash advances. Credit cards allow cardholders to pay for purchases made over a period of time, and to carry a balance from one billing cycle to the next. It is the least used of all the available payment cards in Nigeria, due to the stringent conditions and collaterals attached to it, unlike other payment cards.
d) Charge Card - A charge card is a credit card that requires all outstanding to be settled on due date without the feature to revolve balances (i.e., carry a balance to the next billing cycle).
Card Schemes operating in Nigeria include; Freedom, UnionPay, PayAttitude, MasterCard, Visa, Verve, AfriGo and Amex cards.
3.5 Electronic Funds Transfer
Electronic Fund Transfers are used in transferring value between banks on behalf of customers. There are various forms of electronic fund transfers including the NIBSS Fast Fund, NIBSS Electronic Funds Transfer (NEFT) which operates General Interbank Recurring Order (GIRO) payments for retail transfers of bank customers, NIBSS Instant Payments (NIP) and many others.
3.6 Mobile and Internet Banking Services
Mobile phones and Internet are increasingly being used for financial services in Nigeria. Deposit Money Banks and Non-Banks are enabling their customers to conduct some financial transactions using these channels.
3.7 International Payments (SWIFT)
In Nigeria, international money transfers are largely through telegraphic means. All the twenty five licensed banks are members of SWIFT and are therefore
on the SWIFT network.