It was really nothing more than a routine afternoon stroll in a Lagos shopping mall. Equity analyst Abiola Rasaq took some friends to lunch at KFC and bought a few shirts.
What made the outing unusual was how he paid. In a country where all but 2 percent of transactions are carried out in cash, Rasaq pulled out a debit card, dispensing with the wads of notes that Nigerians have grown used to stuffing in pockets after a decade of inflation averaging 11.9 percent.
“You didn’t have such experiences in the past,” said Rasaq, the head of research at Lagos-based UBA Capital. “I have issued fewer cheques in the last 12 months and have paid for most of my shopping at formal stores with cards.”
Two years into a push by policymakers to wean Nigeria off its cash dependency, Nigerians are starting to change their habits. Shaking off scepticism about a payment method associated with theft and fraud and plagued by faulty communications networks, some see it as a way to cut costs, counter corruption and bring more Nigerians into a financial fold that the central bank estimates has left out 46 percent of the 170 million strong population.
As electronic payments gain ground, the number of connected card readers has risen to about 158 000 from 5 000 before 2012, according to the Central Bank of Nigeria. The value of transactions rose 26 percent to 1.4 trillion naira (R91.4 billion) in the first half of last year from the year-earlier period.
The central bank aimed at 375 000 readers by the end of next year, said deputy governor Kingsley Moghalu, who heads financial system stability.
“It will help the central bank to also make monetary policy more efficient because you can monitor more the movement of money,” Moghalu said.
The rise of online-shopping websites, such as Jumia and Konga.com, the local equivalents of Amazon.com, has also spurred Nigerians to consider electronic payments. The value of online retail transactions, estimated at 62bn naira in 2011, may rise to 150bn naira this year, according to Euromonitor International.
Turning Nigerians away from their reliance on cash goes hand in hand with efforts to diversify the economy beyond oil by boosting other industries such as agriculture.
The economy might have grown 6.4 percent last year and accelerate further this year, the International Monetary Fund said earlier this month.
“Urbanisation, an expanding labor force, and the rise of the middle class, are all fuelling demand for safe, secure and convenient payment products,” said Marc Carolus, the Johannesburg division lead at MasterCard Advisors. Nigerian authorities were realising “the benefits of a cashless society, namely increased transparency, cost effectiveness, financial inclusion, foreign investment and economic growth”, he said.
ATM withdrawals accounted for 93 percent of electronic payments by volume in the first half of the year, according to central bank data. Cash makes up about 98 percent of consumer payments in Nigeria, compared with 85 percent in emerging markets and 80 percent in South Africa, according to MasterCard Advisors.
Mobile money also has not taken off in Nigeria, with phone payments accounting for 3.7 percent of all electronic transactions in the first half of the year, according to the central bank. While mobile payments rose more than threefold compared with a year earlier, only 6 million naira was transacted, compared with 57.2bn naira on card readers.
The central bank wanted banks to drive growth rather than phone operators because they regulate the banks and not the telecoms companies, Moghalu said. The number of cellphone subscribers, at 159 million, dwarfs the 20 million bank accounts in Nigeria.
To encourage electronic payments, a pilot project in Lagos state penalised individuals for withdrawing more than 500 000 naira a day in cash and 3m naira for companies.
In the commercial hub of Lagos, Rasaq said he had little cause for complaint, with his pockets lighter and less need to wait in queues to draw cash.
“It’s been a good experience,” he said. “The challenge that I face now is I tend to spend more.” – Bloomberg