Is Nigeria’s payment system ready for a coronavirus lockdown?
While the possibility of a lockdown is becoming a closer reality as the number of coronavirus cases rise in Nigeria for many Nigerians who may have to depend on the electronic payment channels to get basic necessities, there are no guarantees the infrastructure is going to run as efficiently when more people are forced to use it instead of cash.
On Thursday the country had confirmed 51 cases of the pandemic coronavirus and many more are still expected as contact tracing continues. With the rise in the number of cases, states like Lagos which accounts for the most cases with 32 confirmed have gone as far as shutting down non-essential markets, public gatherings, and sending its workers home. Many believe the next step is a lockdown.
Lockdown is an emergency protocol that requires citizens of a country to stay at home except for essential purposes. The lockdown order by the South African government, the first of any African country, on Monday gave a glimpse of what to expect.
According to the 21 days order, only grocery stores, pharmacies, banks, and other essential industries will be allowed to remain open.
“Banks cannot shut down, it will be total chaos for families,” said Temi Osunderin, a Telecom expert.
Although banks are not expected to be part of a lockdown, the restriction of movement would also mean that the various modes of transport become scarce, unlike a normal day. Hence, banks are likely to run skeletal services pushing more customers to use their digital banking services.
Chuba Ezekwesili, co-founder and partner at Future Africa, said what will determine efficiency is the ability for the banks or financial institutions like NIBSS or Interswitch to operate and respond to issues while they run a skeletal system during this period of remote work. It might mean slower responses as these institutions adjust their system towards a different way of working.
“However, even in the absence of the pandemic, the payment system is rather notorious for experiencing issues, so these issues will still be experienced by those who decide to make payments online in the coming months,” Ezekwesili said.
In Lagos, queues are starting to grow longer than usual at ATMs. There are less than 18,000 (precisely 17,518) ATMs across the country servicing over 70 million people with active bank accounts according to NIBSS. In the coming days, these machines will be put to a severe test by more people hoping to withdraw money for necessities.
Early pressure is already causing some machines to shut down. Dennice Emejiaka, a legal practitioner, told BusinessDay she had to forgo using ATMs on Tuesday because queues on several terminals she visited stretched to the roads. There is also the danger of contracting the virus from touching ATM surfaces or being in crowded places.
Cash remains the king of payment and transactions in Nigeria as more than 70 percent of people still depend on it to get around.
But digital payment adoption has been on the increase in recent times fuelled by increased mobile phone penetration. In January, electronic transactions reached N10.89 trillion nationwide representing a rise of 29 percent compared to N8.41 trillion recorded in January 2019, according to data from Nigeria Interbank Settlement System (NIBSS).
The figure covers transactions carried out on Point of Sale terminals, mobile inter-bank transfers, NIBSS’ Instant Payments (NIP), e-bill payments and central pay across the country.
Adedeji Olowe, CEO of Trium Networks, said the coronavirus presents an opportunity for Nigeria to deepen electronic payment. Some science reports identify cash as one of the vectors of the virus. Coronavirus may be able to survive on notes or improperly cleaned ATM and POS surfaces.
While Olowe believes that the payment systems are prepared for the lockdown, he says a long time lockdown could be a problem.
“Where we could get into trouble if this continues for a long time that the national diesel supplies get disrupted, Cell sites could go down and we won’t have access to phones or the internet; Bank networks would go down and ATMs won’t work,” he said.
Despite its promise, Nigeria’s payment system is yet to get the complete buy-in of merchants. The many failures in transactions, delay in reconciling transactions and the various levels of fees it attracts.
Olowe says this is when the CBN needs lead and also be communicating daily to assure everyone that the payments infrastructure would work irrespective of what happens.
“We need that assurance,” he said.
At the moment the assurance has come from telecom operators who own the internet that the payment systems are going to rely on. MTN and 9Mobile had in a statement BusinessDay received pledged that they would ensure that services are not interrupted throughout the period of the coronavirus crisis.
Ezekwesili said there is a silver lining for payment companies during the period.
“While it’s clear that people who are home will have to pay with cards and mobile payments, which might increase pressure, this might be offset by a number of businesses who will have to either close or who have experienced a reduced number of customers, example airlines, restaurants, cinemas, bars, clubs, etc. this will reduce pressure on the system,”