30 June 2012

Nigeria: Cashless Policy - U.S. to Set Up U.S.$510 Million Data Recovery Centre

The United States Trade and Development Agency (USTDA) has offered commercial banks in Nigeria a grant of $510 million for the establishment of a Disaster Recovery Centre (DRC) to fortify and protect e-payment transactions.

The move was in demonstration of the agency's support for the Central Bank of Nigeria (CBN) cash-less policy.

Head, Shared Services, Chidi Umeano, who made this known in Lagos at the weekend, said the fund would be used to finance qualified United State firm to provide expert consulting services.

He further said that a vendor had been evaluated and selected by the apex bank, adding that the CBN had also received a "letter of no objection," from USTDA.

Continuing, Umeano pointed out that the legal unit of the CBN was drafting contract agreement that would be reviewed and binding on both parties. According to him, the apex bank was also developing modalities for the implementation of shared tier-three DRC infrastructure and services.

"The apex bank is also working on shared power infrastructure service to the banks, as well as developing the Nigeria Financial services network (NFSN) to effectively achieve these objectives.

"The CBN is also setting up Information Technology (IT) Standards Board and requisite governance framework to oversee the administration of IT standards in the industry and drive its adoption across the players in the industry. We understand that payment is the key driver of cost distribution in the industry and accounts for almost sixty per cent of the industry cost base," he said.

As a result of this, the CBN official explained that the CBN was working with the commercial banks to ensure more efficiency in the payment system, adding that cash management constitutes almost 80 per cent of bank infrastructure and staff, directly drive up the cost of banking service.

He added: "The CBN having monitored the partial implementation of the cash-less policy and following stakeholder engagement on the effective implementation of the project decided to reassess its parameters to allow for smooth transition and adoption. The cashless policy has tremendous benefits for the people and the economy. It would reduce the cost of cash handling and cost of funds; with available statistics showing that the CBN and the banks would have spent over N200 billion on cash management by 2012."

This cost he explained, could be ploughed into infrastructure development. He reiterated that the policy was designed to promote financial intermediation, financial inclusion, minimise revenue leakages in the economy.

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