NIP, NEFT, Mobile transactions record lower growth
Analysts project divergent outlook for 2018

By Adaeze Okechukwu

NIGERIA’s electronic payment industry struggled to grow in 2017, constrained by the impact of  economic recession and inflation on the purchasing power of Nigerians and decline in awareness campaign  to discourage cash based transactions.

Financial Vanguard analysis of data from the Nigeria Interbank Settlement System (NIBSS) for four major electronic payment channels showed that while the total value of transactions rose by 35 percent to N69.7 trillion in 2017, from N51.6 trillion in 2016, three of the channels recorded lower growth rate during the year.

The channels are NIBSS Instant Payment (NIP), NIBSS Electronic Funds Transfer (NEFT), Point of Sale (PoS) and Mobile (Interscheme) transactions.

Growth rate of Epayment channels

NIBSS data showed that while growth in value of PoS transactions rose in 2017, growth in value of NIP, NEFT and mobile transactions dropped during the year.

In 2017, growth in value PoS transactions rose to 86 percent, up from 69 percent in 2016. But growth in value of Mobile transactions dropped sharply to 35 percent, down from 251 percent in 2016. Also growth in value of NIP dropped to 47 percent in 2017 from 50 percent in 2016. NEFT, however, suffered further contraction in 2017, as value of its transactions, which contracted by 4.0 per cent in 2016, contracted by 5.0 percent in 2017.

Details of E-Payment Performance in 2017

Data from NIBSS showed that the volume and value of PoS transactions grew by 130 percent and 86 percent respectively to 146 million and N141 billion in 2017, from 63.7 million and 759 billion in 2016. For NEFT, the volume and value of transactions dropped by 7 percent and 4 percent respectively to 23.6 billion from N11.9 trillion in 2017 from 25.3 billion and N12.4 trillion in 2016.

The volume and value of NIP transactions, however, rose by 140 percent and 47 percent respectively to 370.9 billion and N56.2 trillion in 2017 from 154.5 billion and N38.2 trillion in 2016. Similarly, the volume and value of Mobile transactions (Interscheme) rose by 40 percent and  35 percent  respectively to 5.1 billion and N196.3  billion  in 2017 from 3.7 billion and 145.9 billion in 2016.

Declining year-on-year trend

Financial Vanguard analysis of quarterly epayment data for  2016 and 2017 also revealed declining trend in the growth of value of epayment transactions. The value of epayment transactions grew by 59 percent to N16.5 trillion in first quarter of 2017 (Q1 2017) from N10.4 trillion in Q1 2016. In Q2 2017, the growth dropped to 43 percent as value of epayment transactions grew to N16.6 trillion in Q2 2017 from N11.6 trillion in Q2 2016.

The growth dropped further to 29 per cent in Q3 2017 as value of epayment transactions rose to N17.5 trillion in Q3 2017 from N13.5 trillion in Q3 2016. This trend persisted in Q4 2017, with growth declining again to 20 percent, as value of epayment transactions rose to N19 trillion in Q4 2017 from N15.9 trillion in Q4 2016.

Analysts comment

While banking and epayment professionals attributed the downward trend to impact of the economic recession and drop in awareness campaign on cashless policy, bank customers however stressed the ingrained preference for cash among Nigerians.  Executive Secretary/CEO, E-Payment Providers Association of Nigeria, E-PPAN, Mrs. Onajite Regha, attributed this slowed growth to economic woes faced by the country.

She said: “The slowed growth can be attributed to the economic downturn experienced in the country between 2015 and 2017. “People are more concerned about survival than aesthetics, and until the general populace understands that an improved payment system equals improved economy you will have this kind of indices. Generally, however, there was a slowdown in many facets of the economy not just e-payment so it is understandable.”

Regha, however, noted that the decline in growth can undermine efforts to achieve financial inclusion. “The slowed down impacts negatively on financial inclusion and access to finance, as well as less business for the banking sector and payment providers also,” she said.

Purchasing power

Also speaking to Financial Vanguard, Dr. Uju Ogubunka, President, Bank Customers Association of Nigeria, BCAN, said: “Last year was tight financially for businesses and most Nigerians. People need to have the purchasing power to enable them use these e-channels. In the absence of the purchasing power, they would not need to engage these e-payment channels. Hence, the income of the populace is a main determinant of e-payment utilisation.

“From the unemployment statistics from NBS, unemployment and underemployment has increased. Today, a number of people in paid-employment are still owed salaries. You cannot spend what you don’t have.”

Ogubunka also blamed the decline in growth on slowdown in e-payment awareness campaign, as well as banks’ unwillingness to lend to businesses and households.

He said: “The e-payment channel promotions slowed down in 2017. Prior to 2017, banks and regulatory authorities laid heavy emphasis on the need to engage these e-channels. Seeing that there were not as much enlightenment campaigns in 2017 as there were in 2016, a slowdown in the growth rate of the e-payment transactions should not come as surprise. A typical example will be the financial inclusion goal of the government. Examining the financial inclusion report, the growth rate of financial inclusion has been declining over time as a result of slowdown in promotional activities.

“Banks were constrained from lending to customers to avoid increasing provisions for their non-performing loans. You would notice that in 2017, banks did not give out as much loan as they did in 2016, as a result of default in loan repayment by many businesses. So, if banks are not providing as much credit to customers as they ought to, and people were not making as much money as they used to, where will they get the funds to do as much e-payments?

“We pride ourselves on the fact we have exited recession, however, the manifestations of the weakness of the economy are still very prominent.”

On her part, Lilian Okoye,  a bank customer and business woman, said that the slowdown in epayment growth is caused by  Nigerians’ preference for cash as well as poor awareness on benefits epayment.

She said: “The reason for this slowdown in the growth of  e-payment transactions  in Nigeria is because cash remains the preferred medium for payment in the country. Poor awareness of e-payment solutions, ignorance, poor banking culture, lack of trust, illiteracy and the love for the status quo have been fingered as responsible for the high volume of cash transactions in Nigeria.

“Also, the economic recession contributed to the slowdown witnessed in 2017 because of great  reduction in people’s disposable income.

“Moreover, to get people to use credit or debit cards you must get local merchants to accept it. POS terminals are now available at super markets, shops, restaurants, fast food joints, filling stations, hotels and other such places. However, a large proportion of retailers and service provided are yet to upgrade to POS.”

Stressing the need for increased awareness, Okoye  stated:  “There is the need to educate the citizens (merchants and card holders) on the benefits of electronic payment. There is also a need to educate them on how to use ATM, debit and credit cards to reduce the phobia for such technologies. Electronic transaction security education should be intensified to protect card holders.”

Similarly, David Shaibu, a financial analyst said:  “Consumers generally prefer cash transactions for some reasons including certainty and trust.

“Generally, when the prices of goods increase, less quantity of those goods can be afforded given same level of income. The inflation digits were still high last year, so there should have been a decline in not only electronic means of payment but also in cash payments for this reason.

“Rising prices also have a subtle impact which can easily go unnoticed. We are generally more comfortable making electronic payments for goods that are relatively less costly. As prices rose, people became more skeptical making online payments just because of how relatively high they deem the value of such transactions. This argument may not necessarily hold for payment for services (such as school fees) but it has a net impact.

Outlook for epayment in 2018

Stakeholders, however, expressed divergent opinions on the expected performance of the epayment industry this year.

On one hand, Ogubunka of BCAN posited: “The performance of the industry may not change drastically from what was witnessed last year. However, in the event of oil price hike, Nigeria is likely to earn  revenue exceeding that which was estimated in the budget. This can likely create more jobs and increase the disposable income of people. We can then expect to see massive growth in the value of transactions done via these e-payment channels.

“Conversely, with an upward trend in unemployment rate, double digit inflation rate and high Monetary Policy Rate (MPR), the economy may still be harsh and largely unfavourable. It is only when we can liberalise these factors that there can be growth. Otherwise, my expectations for the e-payment industry this year may not be different from the industry’s performance last year.”

Reliability and pervasiveness

Regha of E-PPAN however maintained an optimistic view stating that there is still hope for increased growth in the industry even as awareness creation for  e-payments channel is boosted.

She averred: “The country is slowly creeping out of recession and people are taking out lessons from the period. We will capitalize on this and intensify awareness on the benefits of an improved payment system. As usual we will team up with the CBN and sensitize users.

“Mobile payment still holds the light of hope at this period but a lot of work still needs to be done with the challenges we are facing with poor network, affordability, reliability and pervasiveness. Though we have over 150 million lines registered and in the hands of the people, in our work in the field we find some areas are not quite covered.

“So there is a lot of work to be done. This year E-PPAN hopes to improve on our leverage on partnerships and ensure that we are able to realize the PSV 2020 vision to a great extent by the year 2020. Of course our conferences and our programmatic activities for 2018 will address some of the challenges that can hamper growth, such as fraud, financial illiteracy, limited use of intelligent data.”