CBN bans dollar charges on domestic transactions, launches Nigerian Domestic Card, AfriGo

The Central Bank of Nigeria (CBN), on Thursday, launched a Nigerian national domestic card scheme, AfriGo, as part of its efforts to drive financial inclusion in the country.— an initiative to boost the country’s payments landscape.

Speaking at the virtual launch of the initiative, Godwin Emefiele, CBN governor, said the domestic card scheme would provide opportunities to integrate the informal segment of the economy, reduce shadow banking, and bring more Nigerians into the formal financial services system.

He said while the penetration of card payments in Nigeria had grown tremendously over the years, many Nigerians were still excluded.

According to Emefiele, the challenges financial inclusion in the country are the high cost of card services as a result of foreign exchange requirements of international card schemes, as well as the inability of existing card products to address local peculiarities of the Nigerian market.

At some point in the next few weeks, I am sure that the CBN will come up with the cut-off. All domestic transactions that are going to be conducted in Nigeria will have to be through the Nigerian domestic cards.”

Emefiele also said Nigerians could continue to use the existing payment cards in the country for transactions.

“Your existing cards are fine. You can continue using them but given that charges by foreign cards are in dollars, we will no longer pay dollars for the charges on those cards,” Emefiele explained.

“We will only pay dollars for charges on transactions that are done outside Nigeria. NIBSS, the CBN, and Nigerian banks will work together to see how to segregate those transactions to ensure that we pay fees or charges for international transactions that are conducted on both domestic cards, Visa or Master Cards, as they are known today.

“I thought it important for me to say so not because there’s any preference for the domestic card but what is most important is that we do not have foreign exchange and we will bar payment of charges for domestic transactions from the Nigerian foreign exchange market at some point in the very near future.”

Also speaking at the event, Premier Oiwoh, managing director of NIBSS, said the scheme was developed to promote a robust in-country domestic card payment scheme tailored to address the specific requirements of Nigeria’s payment industry.

Importance of AfriGo to the Nigerian economy

According to the CBN governor, AfriGo is a broad opportunity to integrate the informal segment of our economy, reduce shadow banking, and bring more Nigerians into the formal financial service system with attendant diversification of deposit portfolio, which will further strengthen the stability of our banking industry.

The cashless policy, which commenced in 2012, has created value, engendered competition, and attracted investment into the Nigerian banking and payment ecosystem. We have witnessed the proliferation of products, channels and participants with significantly increased direct foreign investments into the Nigerian payment space.

While the penetration of card payments in Nigeria has grown over the years, many Nigerians are still excluded. The challenges that have limited the inclusion of Nigerians include; 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 the local peculiarity of the Nigerian market

Given the noted usage of cards by Nigerians and to deepen penetration, the CBN actively promoted the national domestic card scheme, AfriGo, which would be available to all Nigerians and address the local peculiarities of the Nigerian market. This scheme is an essential plug in the gap which has remained with us since the cashless policy was introduced in 2012.

Nigeria, by the initiative, will be joining countries that have established a domestic card scheme the same and harnessed the transformative benefits for their payments and financial system, particularly for the underbanked.

What this means for other card service providers

The CBN governor further stressed that AfriGo is not meant to discourage international service providers from continuing to provide services in Nigeria. However, it aims to provide more options for domestic consumers while promoting the delivery of services in a more innovative, cost-effective, and competitive manner.

The Nigerian market is vast, and the current participants have done much in the last 12 years to transform the ecosystem. Yet, there is much ground to be covered as millions of Nigerians are without payment cards to complete transactions. The CBN hopes that the launch of AfriGo will help eradicate this issue as soon as possible.

It remains to be seen how these other card service providers would react to the CBN’s decision to stop paying the charges on domestic transactions in dollars.