Ben Uzor Jr
Government’s desire to move the nation into a cashless mode is being threatened by the absence of requisite infrastructure for the efficient deployment and adoption of electronic payment and commerce in Nigeria, analysts have said. Industry analysts told Business Day that Nigeria’s low point of sale terminal (PoS) density and poor last mile connectivity constitute significant drawbacks to the success of the Central Bank of Nigeria’s (CBN) ‘Cashless Nigeria’ project which is scheduled to go live by June 2012. Besides, Business Day investigations reveal that there are only about 3,000 functioning PoS terminals in the country out of the existing 13,000.
Spain, for instance has 1.6 million active PoS terminals with a population of 14 million people, while India which has deployed about 500, 000 PoS terminals, conducts 360 million transactions per annum. With electronic commerce increasingly driving economic growth in developing economies, government’s priority should be the infrastructure that citizens need to make online payments, analysts have argued. The financial regulator and banks are upbeat about the prospects and benefits of moving the economy into cashless mode. Only recently, the CBN licensed five independent Payment Terminal Service (PTS) providers with the singular mandate to deploy and manage PoS terminals in Nigeria.
The five successful companies are Paymaster, Etop, Citiserve, ValuCard and ITEX. CBN licensed only these companies, to enable the PTSPs build scale and maximise efficiency. Industry analysts say that the five firms are tested and trusted e-payment companies that provide e-business infrastructure with the objective of establishing and running a secure, reliable and scalable network. Some of the licensed firms, analyst say, have shown strong pedigree in the e-business sector in the deployment and maintenance of independent multiplication and functional Point-of-Service terminals network, which accepts cards from all payment schemes in Nigeria, by connecting directly to relevant electronic transaction switching and processing companies.
In addition, the apex bank also recently reversed its directive on off-site ATMs and mandated banks to deploy 75,000 ATMs before 2015. This, according to analysts is an attempt to encourage the adoption of electronic channels. “The CBN’s cashless economy drive cannot be ready now. It is very easy for the CBN to make an announcement, but it really depends on the political will to make this a reality. At the moment, we are not ready for this transition, infrastructure-wise. Government needs to take pro-active measures and actions to ensure that the requisite infrastructure needed for the ‘Cashless Nigeria project to thrive is on-ground. As you know, there is this haphazard motion of government in taking decisions that border on the socio-economic development of the country.
“I hope the new minster is taking stock of these issues and I hope her voice will be heard”, Emmanuel Amos, managing director/ chief executive officer of Programmos, an indigenous software company told Business in an interview at the weekend. Usen Udoh, senior director, high technology, Accenture told Business Day in an interview that the dearth of infrastructure is hindering the growth of e-commerce in the country. “For instance, we do not have the last mile connection to take advantage of the internet to grow e-commerce and e-payments in Nigeria . “Yes, we have the submarine cables (MainOne, Glo-1 and SAT-3 cables) providing huge bandwidth capacity but the last connection is still a very pertinent issue in the country. Telecommunications companies like MTN, Globacom, and Multilinks are investing in last mile connection but they are doing it at a very slow pace and they are not sharing.”
Lanre Ajayi, past president, Nigerian Internet Group (NIG) said “Infrastructure- wise, we are not there yet but it is a work in progress. The objective of CBN’s cashless Nigeria project is to promote the use of electronic channels as opposed to cash. This project is feasible in my opinion. I do not think infrastructure is the most important problem. I think awareness is something the government needs to address, to drive the adoption of electronic channels. Take for instance; PoS terminals use GPRS for transactions to take place. Almost all parts of the country are covered by GPRS. Yes, we still have a very low PoS density but it something that is surmountable, considering the resolve of financial institutions to deploy 40, 000 PoS terminals in Lagos by December.”
“The vision of the CBN over the next two to three years is that Nigeria has 500, 000 PoS terminals. Are banks ready for the move? Yes, they are. Do banks have the expertise to deploy PoS terminals? That is subjective. Another challenge is the prohibitive cost of deploying PoS. It is very expensive because people buy, based on silos. “The industry is looking at it from a shared service perspective, which would ensure that the cost goes down”, Luqman Balogun, divisional head, e-Banking, UBA told BusinessDay. Juliet Anammah, director, real sector, Accenture Nigeria, confirmed that 3, 000 PoS were operational, adding that connectivity issues resulting in frequent downtime in communications, merchant apathy, and lack of awareness, were some of the factors responsible for Nigeria’s low PoS density.
She said that the CBN was working with telecoms firms to ensure 95 percent bandwidth availability to boost user confidence in the systems. “As you know, the PoS transaction doesn’t actually carry much capacity. Maximum is 4 kilobytes, so it is just a question of ensuring that there is bandwidth for that and CBN has said that they are working with telecoms providers to ensure 95 per cent availability and to develop that further, until they have 100 per cent availability”, Anammah posited. Balogun believes that another challenge is the prohibitive cost of deploying PoS. “It is very expensive because people buy based on silos. The industry is looking at it from a shared service perspective, which would ensure that the cost goes down. “We are partnering with the telcos to ensure connectivity is addressed.
As an industry, we are working to improve customer education and awareness. From a CBN perspective, we are looking at making the cost of processing ATM more than using the PoS. When you combine all these factors together, what we would see is an aggressive growth of PoS usage.”
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