CBN Stops Dollar Charges on Domestic Card Transactions

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The Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele on Thursday declared that going forward, dollar charges on all domestic cards and online transactions would not be permitted.

Emefiele said all transactions on existing local bank cards must, therefore, be routed through the Nigerian National Domestic Card scheme which he officially unveiled on Thursday.

Speaking at the virtual launch of the card scheme, the CBN governor pointed out that at a time when foreign exchange challenges have persisted globally.

The central bank came up with the domestic card scheme to, “ensure that all card transactions, online transactions where you’re using cards will now effective immediately, begin to go on the Nigerian National Domestic Card system.”

Emefiele, however, clarified that though there was nothing wrong with existing local bank cards, customers are at liberty to continue using them.

He said, “But given that charges by foreign cards are in dollars, we will no longer pay dollars for charges on those cards.”

He said: “All domestic card transactions that are going to be conducted in Nigeria will have to be through the Nigerian domestic card.

“We would only pay dollars for charges on transactions that are done with this domestic card or foreign cards outside Nigeria.”

He, however, clarified that the CBN’s effort was not to prevent international service providers from continuing to provide services in Nigeria.

He said, “Rather, it is aimed at providing more options for domestic consumers while also promoting the delivery of services in a more innovative, cost-effective, and competitive manner.”

Emefiele also disclosed that the CBN would collaborate with the Nigeria Inter-Bank Settlement System (NIBSS), Nigerian banks, and other electronic payment operators to see, “how to segregate those transactions to ensure that we would only make charges or fees for international transactions that are conducted on these cards or the Visa or MasterCard as they are used today.”

The CBN governor insisted that while there was no preference for any particular domestic card,

“we don’t need to have our domestic cards but most importantly is that we do not have foreign exchange, and we would bar payment of charges for domestic transactions from the Nigerian Foreign Exchange Market at some point in the very near future.”

He said given the limited usage of cards by Nigerians and in a bid to deepen penetration, the central bank actively promoted the national domestic card scheme which would be accessible to all Nigerians and also address local peculiarities.

He said the scheme represented an important plug in the gap that has remained with the system since the cashless policy was introduced.

Yet, the CBN governor said the unveiling signaled another major step in the country’s drive toward achieving a thriving and competitive payments landscape in the country.

Emefiele said the cashless policy has created value, engendered competition, and attracted investment into the Nigerian banking and payments ecosystem, adding that

“We have witnessed the proliferation of products, channels, and participants with significantly increased foreign direct investments into the Nigerian payments space.”

He said the CBN had over time focused attention on the robust development of financial service touchpoints including the ATMs, POS terminals, and agent networks, explaining that the success of the Shared Agent Network Expansion Facility has led to growth in the number of agents to about 1.5 million across the federation with the capacity to accept card payments from Nigerians.

Emefiele said while the penetration of card payments in Nigeria has grown tremendously over the years, many Nigerians are still excluded.

He said that the challenges that have limited the inclusion of Nigerians included the high cost of card services as a result of foreign exchange requirements of international card schemes and the fact that existing card products do not address local peculiarities of the Nigerian market.

According to him, the cashless policy which commenced in 2012, signposts the CBN’s common drive to strengthen the national payment system and deepen the usage of electronic platforms in the country.

He said in line with the National Payments System Strategy, the CBN had been deliberate in collaborating with relevant stakeholders to enhance the national payments infrastructure through initiatives such as the Bank Verification Number (BVN), Real Time Gross Settlement System (RTGS), Shared Agent Network Facility (SANEF), Regulatory Sandbox, Open Banking, and the eNaira.

Emefiele said, “It is important to note that the establishment of National Domestic Card Schemes is in line with global trends.

“Nigeria, by this initiative, will therefore be joining countries like China, Russia, Turkey, and India which have launched domestic card schemes and harnessed the transformative benefits for their respective payments and financial systems, particularly for the underbanked.

“The CBN is committed to a robust, efficient, and safe national payments system and welcomes innovation from both domestic firms and foreign investors.

The Nigerian market is vast, and the current participants have done so much in the last twelve years to transform the ecosystem.”

He said, “Yet there is much ground to be covered as millions of Nigerians are yet without payments cards to consummate transactions.”

“I am convinced that the National Domestic Card Scheme will make this a reality in the coming months. We can no longer neglect the vast majority of Nigerians whose daily payments needs are micropayments.

“We need to capture them in national statistics to further understand their transaction dynamics and properly target interventions in that sector of the economy.”

The CBN governor said the card scheme presented opportunities for the economy to integrate the informal segment of the economy, reduce shadow banking, and bring more Nigerians into the formal financial services with attendant diversification of deposit portfolio which will further strengthen the stability of the banking industry.

In her remarks, CBN Deputy Governor, Financial System Stability (FSS) Directorate, Mrs. Aishah Ahmad, said the innovation would revolutionise Africa’s payment landscape.

She said a major value proposition of the card scheme was the ability to lower operating costs and reduced charges, stressing

“We’re not in business to make a profit but rather to reduce costs. This is to deepen financial inclusion.”

According to her, the initiative would deepen financial payment, disclosing that it was the first central bank-led domestic card innovation in Africa.

“It also gives us sovereignty of our data and presents a new vista for the card business,” he added.

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