25 November 2012

Nigeria: E-Payment Can Drive Efficiency in Corporate and Public Institutions


Mr. John Obaro, 1st Vice President, Institute of Software Practitioners of Nigeria (Ispon) and Managing Director, Systemspecs Limited, Africa's biggest software company, in this interview with Chima Akwaja  looks at the state of e-payment system, what CBN should do to encourage it and government's role in encouraging software innovation.

How is the e-payment ecosystem in Nigeria playing, have we arrived where we should be?

Electronic payment (e-payment) generally covers a lot of things but most people tend to see e-payment only in terms of ATM (automated teller machines) and probably PoS (point of sale) transactions which are just coming up. But one major area that requires more focus is web payments. In terms of the ATM leg of the e-payments, a lot has happened in Nigeria.

In many parts of the country, you can readily get cash from ATM machines. That is an area where all of us will agree there has been some growth.

Things can be better but at least, there has been some developments. In the area of PoS, there has been challenges in terms of deployment and connectivity leading to acceptance in challenges. I also think that there are some regulatory issues that can help to catalyze that line of business, some growth opportunities significantly exist in that area. In the area of web payments, I think that is the area where there has been the least focus.

There are tremendous opportunities there because it is the area where we can easily galvanise corporate and public institutions' efficiency. I mean efficiencies in corporate environments and public institutions. If you can get the payment processes right, the whole economy will become more efficient. This is an area I believe not much has happened and it is the area where we play.

We are looking at being able to work with more organisations to optimise their processes internally which will lead to payments and collection of revenue.

What do you think the CBN should do to improve on the e-payment policy?

In fairness to the CBN, they have different fora by which they welcome suggestions on how to drive the industry. But, of course, you also have the challenge of when several people are talking; you have a new challenge on how to distil the direction to go. At least, the CBN has created various platforms by which people can come up with suggestions. One of the main areas I think they need to look at is that you must allow a framework that encourages creativity. If you are not too careful, if you have too much regulation, then you unwittingly stifle creativity.

While you need to have regulation, you need to watch out so that your good intention does not invariably become obstacle. I would also suggest, for instance, in the area of PoS that instead of using only regulations on the big stick of penalties, there should be incentives. We have had various sums of money being used to print currencies, for instance. We have had figures like N40 billion to print currencies annually.

If we want to grow the e-payment industry in Nigeria, we can use a percentage of that money to grow e-payment money rather than paper money. For example, if the CBN says, instead of spending N40 billion to print cash that is perishable, maybe we should push fifty percent of that (N20 billion) into e-money, it would assist organisations to adopt e-payment for our progress.

For instance, we can have incentives, that use point of sale for transaction. Customers that want to pay with electronic platforms, may be waived charges for some time, may be one year and let the CBN take it upon itself and come up with incentives that can encourage the policy.

If CBN is the one paying all your transaction costs, then it becomes easier for you to try out e-payment practices even if they withdraw after a while but by then, there would have been a culture change and people would have seen the benefits of sticking to the electronic space rather than going back to cash. But for as long as we have so much cash around us and we keep printing more and more while preaching e-payment, it is a salient contradiction. I would like CBN to look at that area. Like I said, I would want CBN to encourage creativity and reward creativity especially from industry players.

Does it mean the policy has not benefitted the ICT sector and software developers?

Certainly, it has benefitted the sector because everywhere in the world for e-payment to take off the ground, the government has to be a major player in it. And that is the role being played by the CBN. A lot has happened in the last seven to eight years in Nigeria's e-payment and that has largely been driven by policy statements from the apex bank. But we must also recognise that the local information technology (IT) industry is not a particularly strong industry.

Therefore, there has to be a conscious effort to help that industry to grow. It is not enough to wait for the local industry to stay and capitalise on the opportunities. Some form of assistance have to be in place otherwise ,we will all keep talking and there may not be much movement.

How will that assistance come about?

I am not looking at a situation in which you dish money around. I am looking in terms of opportunities, policies that directly speak to local industry and business opportunities. Preference should be given, for instance, to local industries. Take the area of software, for instance, I personally don't know anything in e-payment space that cannot be coded in Nigeria. When you want to look at software in e-payment space, you can continue to interact with foreign players because there are ideas are all over the world we can learn from.

But when it gets down to the actual software to drive operations, I believe there are a number of indigenous applications that have come up in the last few years that can speak on any issue that comes up but then, there may be no need to look out.

You don't necessarily need to go to South Africa, Portugal or any other country to go and get a software that you can force it to work in the Nigerian environment or worse still, begin to steer policies in the direction of these foreign applications because that is how those applications expect you to operate. I am saying we probably need to be more open and recognise that there are brilliant solutions locally and then move on from there.

Has the government policy direction created room for innovation in software?

It has definitely because if the CBN had not insisted on e-payment, then even if you have good product thoughts, it cannot get off the ground. By saying everybody go e-payment, that has created a market and markets have a way of forcing out new products.

To that extent, it has helped but we are saying a lot more can happen. I would love a situation, for instance, where some of the policy statements by CBN are enforced to the letter.

If, for example, you said from January 2012, all payments above a certain limit must be done electronically, all salaries of organisations above fifty employees must be paid electronically and then this kind of thing should be enforced, it should go beyond just making the pronouncement. I would love a situation where, for instance, those who are complying gets some reward; those who are not complying, get some sanctions rather than just make the announcement and leave it to the good intention or goodwill of people to do.

About seven or eight years ago, we saw that e-payment would come to stay in Nigeria and we started channeling our efforts to the development of Remita and thank God, the economy is now coming round to accept it not as fast as we would have loved, but clearly things are moving in that direction.

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