Online Payment – The Central Bank of Nigeria (CBN)the Bank in exercise of its powers under the CBN Act, 2007, hereby issues the Regulation on Electronic Payments and Collections for Public and Private Sectors in Nigeria (the Regulation).The Regulation is a revision of the Guidelines on Electronic Payment of Salaries, Pensions, Suppliers and Taxes in Nigeria (2014), and is intended to guide the end to-end electronic payment of salaries, pensions and other remittances, suppliers and revenue collections in Nigeria.
OBJECTIVE
The objective of the Regulation is to fully align with the core objectives of the National Payments System Vision 2020 (PSV2020) to ensure the availability of safe, effective and efficient mechanisms for conveniently making and receiving all types of payments from any location and at any time, through multiple electronic channels. This will reduce the time and costs of transactions, minimize leakages in revenue receipts and at the same time provide reliable audit trails, thereby ensuring that the Nigerian Payments System aligns with international best practices. This Regulation is therefore set out to provide all stakeholders with the operational procedures that guide end-to-end electronic payment for the Public and Private Sector.
SCOPE
This Regulation applies to all CBN regulated entities operating in Nigeria and mandates adoption, implementation and compliance with the directives on end-to-end electronic payments of all forms of salaries, pensions & other remittances, suppliers, revenue collections including but not limited to taxes, levies, penalties, recoveries, assessments, and the disbursement of funds for social programs payments bills, honorarium, scholarships, allowances, etc. herein referred to collectively as ‘payments and collections.
THE REGULATORY CHALLENGES
At the national level, the Nigerian government and the relevant regulatory agencies have strived to match the rapidly changing electronic banking environment with necessary regulations and institutional frameworks. Earlier efforts made to this effect included the enactment of the Failed Banks (Recovery of Debts) and Malpractices in Banks Decree No.18 of 1994, and the Money Laundering Decree of 1995.
However, as noted above, poor enforcement procedure rendered these instruments very inactive in checking the menace of financial crimes. By the late 1990s, following record growth in Internet and computer usage in the country, almost all the regulations guiding the banking industry, including the Banks and Other Institutions Act of 1991, were lacking adequate provisions to accommodate the emerging trend.
Not even a mention of electronic banking or any manner of its application was mentioned in any of those prevailing regulatory documents. The situation created a lot of gaps between the levels of CBN regulatory tools and the advances in information technology. This at the same time made the banks vulnerable to all kinds of risks, including transaction, strategic, reputation and foreign exchange risks.
This deficiency notwithstanding, it was not until 2003 when the maiden guidelines on electronic banking came into force. The electronic banking guidelines emerged from the findings of a Technical Committee on Electronic Banking set up by the Central Bank of Nigeria in 2003 to find appropriate modalities for the operation of electronic banking in the country.
It was indeed the findings and recommendations of the committee that led to the adoption of a set of guidelines on Electronic Banking in August 2003. Of the key provisions of the Guidelines, only a section deals with issues relating to Internet Banking. Section1.3 paragraph 4 of the guidelines, exceptionally stresses that banks should put in place procedures for maintaining the bank’s Web site, including the various security features needed for internet banking services.
Despite its numerous technical specifications, the Guidelines have been widely criticized as not being enough to check the growing popularity of Internet banking against the backdrop of growing sophistication in technology related crimes and frauds. Closer examination of the contents of the Guidelines equally shows that the document fails to meet up with the four key areas where Internet banking may have regulatory impact – changing the traditional lines upon which existing regulatory structures are laid; handling concerns about existing public policy issues; changing the nature and scope of existing risks; and rebalancing regulatory rules and industry discretion.
Again, some important recommendations of the Technical Committee that gave rise to the adoption of the guidelines were completely omitted. This is especially so with paragraph 6.1 of the Committee’s report, which among others recommended that all banks intending to offer transactional services on the Internet/other e-banking products should obtain an approval-in-principle from CBN prior to commencing these services.
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Part of the criticisms is that the recent guidelines that are capable of constraining the practice and development of Internet banking Nigeria. One of such areas, for instance, is the requirement on electronic banking product development. While acknowledging that the existing regulations would apply wholly on electronic banking, section 4.2 of the Guidelines emphasizes that only banks, which are licensed, supervised and with physical presence in Nigeria, are permitted to offer electronic banking services in Nigeria, and that virtual banks are not to be allowed.
The Guidelines also gives indications that the products/services can only be offered to residents of Nigeria with a verifiable address within the geographic boundary of Nigeria; any person residing physically in Nigeria as a citizen, under a resident permit or other legal residency designation under the Nigerian Immigration Act; any person known herein as a “classified person” who neither is temporarily in Nigeria. The Guidelines go further to indicate that the e-banking service should be offered in Naira only; and that where such a service is to be provided in foreign currency, it should be to only the holders of ordinary domiciliary accounts, and conform with all other foreign exchange regulations. On some other aspects, the Guidelines have also been criticized for not addressing adequately the critical issues concerning Internet security.
It failed to explicitly recommend a standard that allows banks to examine potential threats that may already be in existence in each individual financial institution’s current network. In addition to this array of criticisms, the workability of proper Internet framework is also queried amidst the poor state of basic information technological infrastructure in the country. This is essentially necessary since e-banking generally relies on the existence of adequate operational infrastructure like telecommunications and power to function effective.
Though little success has been recorded, the supply of these requisite facilities is very erratic in the Nigerian case. Where they exist, high cost of acquisition and maintenance tend to deny a greater percentage of the population access to them. The case of Internet access is a glaring one – where majority of the citizens rely solely on the services of commercial cyber cafés to meet their Internet needs. It is expected of the E-Banking Guidelines to provide procedures not only for banks’ investment in Internet facilities, but also in promoting customers’ access to such. Unfortunately, none of such is contained in the document.
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CONCLUSION
As it stands, Internet banking might take a reasonably long time to fully become of economic relevance in the country’s banking practice. Even amidst the regulatory deficiencies identified above, the rising cases of Internet related frauds originating from Nigeria have made the Internet banking environment very complex.
The banking industry in the country does not also at present enjoy that level of global integration that may allow for full benefits of Internet banking system. Even at home, the level of public confidence in the banks is not such that can guarantee effective customer patronage of Internet Banking services.
Hence in addition to the cases of poor access to the requisite facilities, very few customers actually transact businesses through the Internet. This explains why the development of banks’ web sites has not gone beyond information purposes. A situation where banks would have to invest much on acquiring information technology software without attracting enough customer patronage necessary to justify the huge expenditure does not make for a progressive chance for rapid growth in Internet banking in Nigeria.
With the deficiencies in the existing electronic banking guidelines and the seemingly lack of proactive measures in other banking regulations in the country, the right environment for Internet banking remains presently not in existence.
