The Central Bank of Nigeria (CBN) has commenced the implementation of a new Real-Time Gross Settlement (RTGS) system which would bring it at par with best global payment standards and particularly help push its Payment System Vision 2020 (PVS 2020).
An RTGS is an inter-bank payment structure which facilitates the real-time (continuous) settlement of electronic funds transfer on gross (individual), final and irrevocable basis.
Tunde Lemo, retiring CBN deputy governor, operations, said on Thursday that the new RTGS which had actually been put into live operations since December 16, 2013 is integrated with a Scripless Securities Settlement System (SSSS).
He explained that the SSSS is a new initiative to issue, manage and settle government and other money-market securities processed as electronic records in a Central Securities Depository (CSD) system.
The RTGS is basically for large volume payments and replaces the old one implemented some seven years ago as part of the then CBN transformation programme code-named Project Eagles.
Speaking at a press briefing in Abuja, Lemo noted that the new RTGS is built on the SWIFT messaging standards to allow for safer, easier and faster interconnectivity with other payment system infrastructure (both locally and internationally).
According to him, it serves as the nucleus of the national payment system, as all payments finally settle in central bank money, through settlement accounts maintained for designated financial institutions.
“I think customers should be very happy about the RTGS because it is going to reduce cost of banking transactions”, he stressed.
Lemo noted that the RTGS would also facilitate in the activities of the Debt Management Office which had actually intended to set up its own payment engine particularly in the OTC transactions.
The SSSS on the other hand, according to Lemo, facilitates the electronic management of the entire life cycle of securities’ transactions for both primary and secondary markets.
He further noted that the integration of the RTGS and SSSS was a major strategic move which would assist in radically reducing systemic risks associated with payments system.
Other benefits of the new payment systems include provision of a collateral management platform to mitigate settlement risks and improvement in liquidity management, facilitating more efficient monetary policy implementation.
The new payment system will also among other things, provide a more efficient, secure and appropriate payments landscape to encourage foreign investment, improve financial intermediation efficiency, and enhance financial inclusion.
“With the implementation of the RTGS and SSSS, the Nigerian payment system is positioned to progressively improve all retail payments schemes with a view to achieving the PVS 2020 and meeting world class standards, as spelt out in the BIS/IOSCO principles for financial markets infrastructure”, Lemo assured.
“This will also trigger rapid transformational developments in the financial markets- allowing real-time settlements of transactions in the capital, commodity and foreign exchange markets”, he added.