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Payment Systems

Introduction | Roles | Modes | Clearing & Settlement | Framework | Achievements | RTGS

Institutional framework for payment systems development

National Payments System Committee (NPSC):
Given the strong relationship between a well functioning payments system and effective monetary policy, financial sector stability and overall economic efficiency, the National payments system committee was reconstituted, with the Governor of CBN as Chairman and the Deputy Governor, Operations as Alternate Chairman.

  1. Membership were drawn from:
    • Deposit Money banks
    • Payment/Technology companies
    • NSE
    • Core government agencies, including revenue agencies, attorney general and Minister of Justice, Accountant-general of the Federation.
  2. The core mandate of the committee is to determine the payments system strategy and act as a sounding board for the national payments system strategy.
  3. National Payments System Technical Committees: established to assist the work of the NPSC with membership made up of :
    • banks
    • CBN
    • NIBSS
    • SEC
    • NSE/CSCS
    • Card, Switching services companies and other technology companies.
    • Revenue Agencies etc.
  4. Terms of reference of the Technical sub-committees were principally:
    • Advise the National Payments System Committee on short term, medium term and long term strategies on payments system reforms and developments.
    • Identify strategies for enhancing the long-term efficiency of the existing payment systems, in particular, through migration to more electronic forms of payment.
    • Proffer actionable plans for the development of various payments system components, such as :
  1. Large -value payments
  2. Retail Payments
  3. Securities clearing and settlement
  4. Regulation and supervision, legal and institutional framework
  5. Payments system standards and information Technology.

National Payment Systems (NPS) Reform/Initiatives

The new payment systems
As at 31st December, 2005 the three major components of the Nigerian payment systems, retail payments system, large value payments system and securities clearing and settlement system have been substantially developed, largely in accordance with the core principles for Systemically Important Payment System and the Lumfallussy Standards.

Large-value payments system (RTGS)
Given the high risk exposure associated with net settlement system, the CBN has established an RTGS System, such that processing and settlement of transactions are:

  • On a payment-by-payment basis
  • In real time (Continuously)
  • With immediate (intraday) finality
  • The key advantages include:
  • No credit risk.
  • Immediate final settlement
  • Efficient use of liquidity (queue management, e.g. priority setting, is an important feature)

Retail payments system
The current ACH was designed and implemented in 2002 to provide the following benefits to participants:

  • Simplified reconciliation procedures.
  • Enhancement of Straight -Through Processing due to use of industry standard and agreed business practices.
  • A direct connection to a wide banking community
  • Allowing direct participating banks to focus their individual efforts on offering new value-added services.

Securities clearing and settlement system
With the completion of the process re-engineering by the CBN, transactions in Government securities would achieve maximum automation away from the current semi automated environment. Essentially, trading would be internet based via the online trading desk of the CBN.

The Nigerian Stock Exchange having accomplished advanced level of its automation program was able to reduce trading cycle to T+3 and achieved a Delivery Vs Payment (DVP) on net basis for the payment leg. The next thing would be to consolidate on this achievement and work towards reducing the trading cycle to possibly, T+1.

Also as a result of increased application of technology to the market processes, there is today a shift from trading floors to screen -based systems and electronic trading platforms are increasingly emerging. Accordingly, the Exchange had since commissioned the Automated Trading Floor in more areas such as Kano, which now enables stockbrokers resident in Kano to trade online and real-time with their counterparts in Abuja and Lagos, taking advantage of the remote trading capability of the Exchange's Automated Trading System (ATS).

These developments have been targeted towards enhancing the profile of the Nigerian stock market, engendered liquidity and enhanced its competitiveness for international investment capital.

These achievements recorded in the areas large-value payments, retail payments and securities clearing and settlement point towards payment systems convergence and integration, for a robust national payments system.

Challenges

  • Economic constraints and dependence on Cash for transactions - Developing a savings culture, which aids payment system development has been hampered by the low income level of the populace while the predominance of cash based transactions reflects the preference of economic agents and the weak legal system.
  • Public Acceptance - Making the general public to accept payment system innovations has remained a big challenge given their preference for cash payments as a result of the low literacy and awareness levels.
  • Infrastructure - The poor state of some infrastructural facilities such as electricity and transportation network to provide the enabling environment for the use of modern technology has continued to hinder the use of more sophisticated electronic payments. Since 2001, significant progress has been made with regards to Information and Communication Technology (ICT). However, when ICT infrastructure becomes more affordable and secured, payment system will become more efficient and effective.
  • Legal Framework - Providing adequate legal basis to payment system related issues is an absolute pre-requisite in the development the nation's payment system. For instance, laws exist to encourage the use of cheques but violations have not been adequately discouraged.

Other challenges include:

  • Integration of the various components into a robust payments system
  • Reduction of payment barrier with forces of change-technology
  • Building the bridge of cooperation and integration with the WAMZ countries, BCEAO and global market

    While recognizing the dynamics of globalization, it is obvious that no country's domestic payment system will be able to function in isolation. It is therefore, a major challenge to position the nation's payments system on a strong footing for integration with the systems of the WAMZ countries, BCEAO as well as the global market.
  • Meet customers challenges
  • To ensure that both corporate as well as individual customer payments needs are met, adequate information regarding product and pricing policies must be transparent. This would be encouraged through the existence of adequate structures such as consumer protection bureau, competition commission and alliance between service providers to ensure guaranteed service delivery.

Current Payment System Initiatives

Wholesale DAS

Date Total Sold
5/21 Auction No. 38 held with 21 Banks biding for a total of $0.00 (the lowest bid was $156.69). Total amount sold was $150,000,000.00. Click on date to see the detailed breakdown of the auction. ($150,000)
5/16 Auction No. 37 held with 19 Banks biding for a total of $0.00 (the lowest bid was $155.69). Total amount sold was $200,000,000.00. Click on date to see the detailed breakdown of the auction. ($200,000)
5/14 Auction No. 36 held with 18 Banks biding for a total of $0.00 (the lowest bid was $155.69). Total amount sold was $150,000,000.00. Click on date to see the detailed breakdown of the auction. ($150,000)
Note.: the above figures are in thousands of U$D.
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Exchange Rates (NGN)
¥JPY1.9489
WAUA237.1828
$USD155.7
CHF165.4095
SDR237.6449
SAR41.5156
£GBP246.115
As at May 22, 2012
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