Nigeria To Launch Africa’s First Domestic Card Network

October 27, 2022
Nigeria will become the first African nation to launch its own domestic card scheme, hoping to follow in the footsteps of India and China by supporting national sovereignty of payments and tapping into the fast growth of electronic payments in Africa’s largest and most populous economy.

Nigeria will become the first African nation to launch its own domestic card scheme, hoping to follow in the footsteps of India and China by supporting national sovereignty of payments and tapping into the fast growth of electronic payments in Africa’s largest and most populous economy.

Last week, the Central Bank of Nigeria (CBN) confirmed that it plans to launch the National Domestic Card Scheme by January 16, 2023.

In a virtual press briefing covered by Nigeria’s TVC News and Tekedia, the CBN said the domestic card scheme is the product of an ongoing collaboration between itself, the Nigerian Inter-Bank Settlement System (NIBSS) and the Bankers’ Committee.

“The CBN recognises the significant benefits from delivering Africa’s first central bank-driven, domestic card scheme, which when delivered at scale has the potential to become the largest in Africa, and one of the largest in the world,” the CBN said in a statement.

The CBN said it expects Nigerian consumers, merchants and payments firms to benefit from the scheme in the form of reduced costs, lower barriers to entry, data sovereignty and lower reliance on foreign exchange.

“Nigeria is in a vantage position to successfully launch a domestic card scheme given the significant transformation in its payments system over the past decade,” said the CBN.

“The transformation within the Nigerian financial industry has been driven by rapid digital and technological innovation, increasing mobile penetration and the proactive policy initiatives of the CBN, which have spurred unprecedented adoption of digital financial services.”

Premier Oiwoh, CEO and managing director of NIBSS, said he expects the domestic card scheme to stimulate further innovation throughout Nigeria’s payments ecosystem, with the rewards from that innovation staying within the country.

“Uniquely, this card will be configured to address the unique ecosystem issues that we have to help improve payments across the nation,” he said, adding that the scheme “will support micropayment and credit, e-government identity management, transportation, health sector and agriculture in terms of payment.”

The CBN also emphasised that the scheme can be used as a platform for banks and other financial institutions to build new debit, credit, virtual, loyalty and tokenised card products, and it can also be used to deliver government-to-person payments.

Finally, the launch of the scheme is expected to benefit Nigeria’s cross-border payments infrastructure, by enabling potential bilateral linkages with neighbouring economies, similar to that of India’s RuPay and China’s UnionPay schemes.

Joining the club

In launching its own domestic scheme, the CBN noted that Nigeria will join a growing list of countries that now offer an alternative network to Visa and Mastercard.

In addition to India and China, Japan and Brazil are among the countries with the largest domestic card schemes in terms of total cards in circulation.

At the end of 2021, China’s UnionPay was comfortably the largest card scheme in the world, with 9.4bn cards in circulation worldwide, according to the Nilson Report. In contrast, Visa had 3.7bn cards in circulation and Mastercard had 2.5bn.

At the end of 2020, India’s RuPay had issued 603m, making it the world’s fourth largest scheme, according to the Reserve Bank of India (RBI).

With a population of 211m, according to the International Monetary Fund, of which 70 percent is under the age of 30, Nigeria’s domestic card scheme has the potential to become one of the biggest in the world.

Building blocks

A challenge for realising this potential, however, is financial inclusion. A recent survey by a Nigerian non-government organisation, Enhancing Financial Innovation & Access, found that 45 percent of Nigerians were banked in 2020, up from 40 percent in 2018.

Nevertheless, growing financial inclusion alongside the country’s payments modernisation efforts is supporting rapid growth of Nigeria’s existing electronic payment methods.

For example, In the absence of widespread use of payment cards, the country’s instant payments system, which launched in 2011, is beginning to gain significant traction.

In 2021, for example, the volume of transactions sent via the NIBSS Instant Payments (NIP) platform hit 3.7bn, an increase of almost 95 percent year-on-year.

These figures put Nigeria in sixth place globally in terms of total instant payments volume, behind India, China, Thailand, Brazil and South Korea respectively, and just ahead of the UK.

In August, the NIP system also hit a record high in terms of value, with N33.2trn ($74bn) transacted on the platform.

Wole Abegunde, chairman at eTranzact, said the Nigerian electronic payment industry is still poised for further growth as electronic payment channels evolve.

“The favourable demographics and regulatory support are major enablers and bases of expectation of accelerated growth in the industry,” said Abegunde.

In March 2021, NIBSS also launched NQR, an interoperable national QR code standard to facilitate instant P2B and P2P payments.

“This will further catapult real-time payments use, helping it to record an 18.6 percent CAGR from 2021- 2026 in terms of volume,” said NIBSS.

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