March 15, 2023/CSL Research
Based on new data from the Nigeria Inter-Bank Settlement System (NIBBS), online transactions grew 41.29% as cashless gateways were used 901.46 million times in February compared with 638 million times in January. Despite an increase in usage, the total value of cashless transactions fell in February, indicating an increase in the number of failed transactions. As cost of living escalates with the scarcity of Naira across the country, many Nigerians are left with no choice but to use online banking services to effect transactions, but there have been reports of many failed.
The Central Bank of Nigeria (CBN) on December 15, 2022, rolled out the redesigned Naira and planned to phase out the old Naira notes by 31 January 2023, but following strong pressure from the national assembly and the populace, the deadline for the old notes to cease to be legal tender has been extended to 31 December 2023. Also, the CBN revised weekly maximum over-the-counter cash withdrawal limit by individuals and corporate organisations
to N100,000 and N500,000 respectively, adding that withdrawals above these limits would attract processing fees of 5% and 10% respectively. The CBN further stated that the maximum cash withdrawal per week via Automated Teller Machines would be N100,000 subject to a maximum of N20,000 cash withdrawal per day.
This policy has contributed to the surge in mobile transactions, with PoS transactions growing from N807.16bn in January to N883.45bn in February. Also, Usage of mobile transfers, which serve as the primary payment gateway for many Nigerians, soared by 69.87% from 108.14 million times in January to 183.69 million times in February. While usage grew drastically, transaction value only grew marginally by 7.88% from N2.37tn in January to N2.56tn in February. This figure represents the realities of many Nigerians who have had to survive many failed mobile transactions amidst the current naira cash crunch.
Nigerians have been experiencing an increase in failed online transactions. This could be attributed to the inability of banks’ E-payment infrastructure to cater for the sudden rise in usage due to the current Naira scarcity. Telecom operators (Telcos), whose infrastructure the banks ride on to provide financial services to customers, have distant themselves from failed transactions and have advised the banks to increase the capacity of their payment infrastructure to be able to absorb the sudden pressure from bank customers who have switched to online channels due to cash scarcity.
That said, the CBN yesterday announced that the old Naira notes will remain legal tender till December in compliance with the Supreme court order and some banks have begun to dispense the old Naira notes. We believe the redistribution of the old notes will ease the pressure on the E-payment channels but the problem of failed transactions in the past weeks is an indication that there is need for an expansion of the E-payment capacity if a cashless society is the way to go.
