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Thursday, July 14, 2005

Lawal makes case for e-payment

MANAGING Director of the Nigeria Inter-Bank Settlement System (NIBSS) Plc, Mr. Paul O. Lawal, has said that the adoption of electronic payment system would reduce the huge amount of money outside the financial sector otherwise known as Currency Outside Banks (COB).

Speaking at the fifth edition of West Africa’s Card Technology Conference and exhibition held in Lagos at the weekend, Mr. Lawal, said in his keynote address that over N500 billion in circulation in the country are outside the banking system.

According to him, equals more than 20 per cent of the total monetary liabilities of the Central Bank of Nigeria (CBN) that are in currency outside the banking system.

“Electronic payment is the order of the day in all industrialized economies. Nigeria, and indeed all emerging economies, must deploy all appropriate resources to develop their respective payment systems,” he asserted.

In his paper entitled “Discover the Changing World of Payment” Mr. Lawal examined the state of the nation’s payment system, and said that the N500b represents about 90 per cent of the money supplied into the system as at the first quarter of this year.

Champion Infotel recalls that in the country’s COB has hovered between N300 billion and N400 billion.

He, however, pointed out that this figure amounts to 20 per cent the total monetary liabilities of the CBN, against 4 per cent in the United Kingdom and 9 per cent in the United States.

He stressed that the nation’s payment system is generally characterized by high cash payments volume and high resistance to new initiatives, resulting therefore, “in adequate data for planning”.

This in effect causes the missing of economic development opportunities, even as low depth of financial intermediation also pervades the banking industry and the nation as well.

He said that this amounted to critical reduction in the efficiency of monetary policy, coupled with rife in corruption, which have contributed to the decay of the nation’s payment system.

Emphasising that cost of banking business is high, “so much investment in cash handling machines, insurance, cash storage among others,” stand as obstacle to the growth of the system too.

According to him, duplication of payment structures and lack of infrastructure were not helpful at all and add to high underutilization of installed capacity.

But then, there are potentials of an efficient payment system in the country, that is, until customers embrace electronic payment solution fully.

This, he said, would bring about drastic reduction in the amount of currency outside the banking system as more funds would be available for banks to support credit demands.

He further said that the nation has potentials to earn foreign exchange due to export of new payment process, personnel and technology. He also lauded the recent payment solution initiatives in the country, including the implementation of the Nigeria Automated Clearing System (NACS), which he said, reduces the clearing days for local cheques, just as the introduction of Electronic Funds Transfer by NIBSS has been very helpful.

Pointing out that the establishment of Electronic Payment schemes such as Valucard, Smartpay, eTranzact, Interswitch, Mastercard, GloMobile among others into the system, as well as the Automated Teller Machine (ATM) network have been on the increase and is very encouraging for the system growth.

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