Perhaps, the best thing that can be said about the current efforts to strengthen the Naira through the deepening of the nation’s financial system stability and monetary policy transmission mechanisms, is that the objective will remain an idle fancy unless the monetary authorities install effective monitoring windows to check the operation of e-payment schemes in the country.
A recent investigation, which involved a painstaking study of the e-payment system operations in the country, revealed that millions of Naira are freighted out of the country every day through the debit cards (Master and Visa cards ) issued by local banks despite the fact that Naira is not a convertible currency.
Holders of any of these cards ( MasterCard and VisaCard issued by the local banks) can load as much as N220,000,000 ($1,000,000) or more in his/her bank account each time he/she chooses to travel out of the country without any restriction, thus, creating a vacuum ,which may be exploited by unpatriotic Nigerians (to dupe the country) or the militant groups like Boko Haram to procure military wares.
Usually, in many countries, debit cards like Master Card and Visa Card as well as Verve are tied to the domiciliary account ( which are usually in currencies like the dollars, pounds, Euro or yen) of their holders. But in Nigeria, debit cards denominated in Naira, which is not a convertible currency, are used for cross-border transactions in other currencies of the world outside the country.
The MasterCard card issued in Nigeria is a Nairadenominated- debit-card issued in partnership with MasterCard Worldwide. Although , it is denominated in Naira, it can also be used to settle purchases in other major currencies. It is accepted worldwide as a means of payment for goods and services at 32.7million MasterCard locations and over 1.9million ATMs in more than 210 countries.
The same applies to the Visa Debit Card which enables holders to conduct trans-border transactions from Naira-denominated-accounts to any other currency without going through the protocols of foreign exchange acquisition.
Today, on account of this loophole, the best and most expensive properties in choice places in Dubai, Europe and North America may have been bought up by ‘smart’ Nigerians through this unrestricted debit cards controlled by foreign integrated payment and transaction processing companies, sidetracking the monetary authorities in the country. Some Nigerians (and even foreigners) are surprised that the authorities and institutions like the National Assembly and the Presidency (knowingly and unknowingly), are looking the other way as unscrupulous Nigerians and their foreign counterparts cash in on the nation’s ineptitude to destroy the country.
E-payment is a financial exchange that takes place online between buyers and sellers. The content of this exchange is usually in some form of digital financial instrument (such as encrypted credit card numbers, electronic cheques or digital cash) that is backed by a bank or an intermediary, or by a legal tender. The various factors that have lead the financial institutions to make use of electronic payments include decreasing technology cost, reduced operational and processing and increasing online commerce. But the resulting benefits of e-payment should not blind us to its ugly side which has the potential to destroy our economy if not effectively controlled by the relevant authorities.
In Nigeria, the need for a safe and sound payment infrastructure that will facilitate economic activities and receiving payments with minimal risks to all parties was initiated in the 1990s. Progress was made in 2003 when the Central Bank first published its Guidelines on Electronic Banking in Nigeria an effort, which addressed mainly individual e-payment issues.
Unfortunately, a critical examination of the system revealed the existence of a vacuum of a much national dimension ,which turned out to be a recipe for money laundering and round tripping of the Naira currency because the CBN does not have enough monitoring windows to checkmate the operations of the debit cards issued by the local banks.
We need a National EMV (Euro, MasterCard and Visa) compatible chip with national payment scheme. This will provide a standard EMV local chip for the nation’s local currency; create an interoperable uniformity standard chip for all Nigerian financial institutions; create fit-for-purpose standards for all Nigerian financial institutions and support the cashless policy adoption.
The standard chip , as I gathered, will assist CBN to put a cap on forex usage transactions, provide it (the apex bank) with a monitoring window for both local and forex usage, track spending and revenue as well as increase tax revenue.
(I learnt the apex bank is already or about doing this. That will be good). It will also help in collection of better national economic data, ensure quick evaluation of general economic situation and growth as well as conserve foreign reserve, promote faster cashless economy and checkmate money laundering and round tripping of foreign currencies by banks. It will also reduce capital flight.
Presently, the currency policy of BTA in the country is that no person can take more than $4,000 per quarter when travelling out of the country, but with Master/Visa debit card , anybody can load N220,000,000 ($1,000,000) or more in his/her bank account each time he/she choses to travel out of the country without any restriction.
The same person can obtain same Visa/Master- Card from other banks provided he/she operates an account in that bank, a legitimate gateway to fleecing the nations economy and stagnating its macroeconomic objectives. Many countries especially those in Asia have adopted the local scheme based on each country’s monetary policies and objectives.
For example, Malaysia’s migration to EMV domestic chip based cards was designed to establish links with other four neighbouring countries (Indonesia , Thailand ,Singapore and China) to facilitate cross-border ATM cash withdrawal transactions. These other countries have also adopted their individual migration through the creation of their national EMV standard chips. As a leader in the West African sub-region, adoption of local chip will fast-track the West African Monetary Union (WAMU) as well as a model for