Nigeria’s Ambitious Payment System Roadmap, PSV 2025

Central and federal reserve banks around the world are piloting schemes to incorporate the very latest technology into their financial systems, including in the issuance and control of fiat. The quest for a faster, cheaper, more secure payment solution is at the top of the agenda on a global scale. Digital assets, tokenization, and digital identity powered by a form of distributed ledger technology (DLT) have become global trends.

Nigeria’s Central Bank Reveals its Digital Payments System Goals

The central bank of Nigeria (CBN) has released a paper that highlights its strategy and roadmap for an improved payment system. The CBN calls these strategies and roadmaps the Payment System Vision (PSV). In 2006 the CBN released the Payment System Vision 2020 (PSV 2020) – its strategy and roadmap for what the Nigerian digital payment system should be by the year 2020. PSV 2020 facilitated the emergence of a robust payments infrastructure in Nigeria and a vast digital reform in the Nigerian banking sector. By 2021, Nigerian real-time payment transactions ranked 6th in the world and were rated the most developed real-time payment scheme in Africa. Nigeria recorded 3.7 billion real-time transactions in 2021. Nigeria’s robust real-time payment system NIBSS Instant Payments (NIP), launched in 2011, is supported by all commercial and neo banks in the country. The payment system can be accessed via a wide range of channels including internet and mobile banking, ATMs, POS terminals, and USSD.

In a bid to expand its payment channels, the CBN launched its central bank digital currency (CBDC) called the eNaira in October 2021. The CBN’s updated payment systems roadmap PSV 2025 focuses on the development of a payment system to be driven by contactless payments, big data, and distributed ledger technology (DLT), among others.

With success recorded at home with its digital payments system, the CBN in its PSV 2025 roadmap aims to extend its payments system for real-time cross-border use to simplify and reduce the cost of international transactions and open a direct channel for fast transfer and processing of remittances.

Drastic Reduction in Cash-Based Transactions

The CBN has tried to implement a cashless policy with all possible expedition. In December, the CBN announced it would implement a cash withdrawal limit within the territory. The initial limit announced was 100,000 naira ($225) weekly for individuals and 500,000 ($1,100) for corporate entities. However, following a public outcry and a hearing by the Senate, the CBN reviewed and raised its cash withdrawal limit, setting new limits at 500,000 naira ($1,100) for individuals and 5,000,000 naira ($11,000) for corporate entities.

The CBN says the purpose of the cash withdrawal limit is to propel the adoption of digital payments and the use of its CDBC the eNaira.

eNaira Adoption Metrics

It’s been over a year since the CBN and the Nigerian federal government launched its retail CBDC the eNaira. The government chose the slogan “same naira, more possibilities” for the eNaira. The eNaira has been plagued with slow adoption and poor utility.

According to surveys, only 1 in 200 Nigerians makes use of the eNaira. At the 2022 eNaira Hackathon, the CBN governor Godwin Emeifile expressed optimism about the eNaira project. He revealed that the eNaira official wallet had reached 840,000 downloads, and the total transaction volume had reached approximately $9 million.

This stat, however, has been viewed as unimpressive by many as Nigeria is known as one of the largest peer-to-peer (p2p) traders of cryptocurrencies in the world. In the first half of 2022, Nigeria’s total BTC p2p volume reached nearly $400 million; while its p2p lending volume reaches approximately $8 million weekly. An online survey by a data analysis platform found that in 2020 32% of Nigerians owned cryptocurrency; while in 2022, the crypto ownership rate in Nigeria increased to 45%. In comparison to the stats revealed by the CBN governor, the eNaira is far from seeing any reasonable adoption in the country. This brings up the question: will CBDC ever gain users’ trust and overtake decentralized systems like Bitcoin?

Elsewhere on the continent, several central and reserve banks have been exploring CDBCs. The Bank of Ghana has also kicked off the pilot phase of its retail CBDC. In South Africa, Zambia, and Ghana, there have been some CBDC developments, too.

As these governments and their central banks continue to build the frameworks and building blocks of DLT-powered systems, the true paradigm shift in how money is sent, received, retrieved, and stored is just around the corner.