Bridging Financial Inclusion Gap With CBN National Domestic Card Scheme

In January this year (2023), the Central Bank of Nigeria (CBN) in collaboration with the Nigeria Inter-Bank Settlement System Plc (NIBSS), and Bankers Committee launched Africa’s first National Domestic Card Scheme to ensure stability and growth in the financial and payments system in the country.

The goal was to also improve financial inclusion and support the development of a robust digital economy within the Nigerian domestic market and across the African continent.

With the launch, Nigeria has joined a growing list of countries like India, Turkey, China and Brazil as leading examples – which have launched domestic card schemes and harnessed the transformative benefits for their respective payments and financial systems, particularly for the underbanked.

In Nigeria, the scheme is expected to bring multiple transformative benefits for the residents, including enhanced financial inclusion for the over 38 million unbanked Nigerians and increased affordability of payment services.

The scheme, as a true game-changer for the Nigerian payments ecosystem and beyond would enable the Banks to offer a variety of solution including debit, credit, virtual, loyalty and tokenised cards amongst others.

The “AfriGo” card is a national domestic card scheme initiated by the CBN to perform domestic transactions within Nigeria like other existing debit cards.

Some of the benefits of the card, according to CBN, are that the card scheme would strengthen the national payments system, deepen the usage of electronic platforms in the country, reduce the cost of cashless society, save the country foreign transaction fees and improve the country’s data Sovereignty and security.

The AfriGo cards are also expected to address challenges within the local banking system such as the high charges for issuance and maintenance of bank cards.

Although CBN is yet to reveal the actual price of the cards, report has it the cards would cost less than N1,000 (one thousand Naira), which is the general rate for card issuance by most commercial banks in Nigeria.

Currently, Nigerian financial institutions feature three card payment providers, namely: Visa, Mastercard and Verve by Interswitch.

Report has it that “in 2021 alone, the value of card transactions facilitated by these market players equaled $18.2 billion. This figure is expected to keep increasing at a compound annual growth rate (CAGR) of over 18% until 2025”.

Nigeria’s domestic card payment scheme is a joint project of a number of parties, including: The CBN, NIBSS, The Bankers Committee and Several other financial ecosystem stakeholders.

Why The National Domestic Card?

CBN explained that based on the global card ownership statistics report, the Nigerian adult population owns about 32% and 3% Debit and Credit cards.

This ranks Nigeria as the 75th in the world in debit card to population ratio and 114th in the world in credit card to population ratio.

Nigeria has a low card to population ratio, when it is benchmarked globally, and this has a major impact in the government’s drive to aggressively boost financial inclusion.

In addition, the CBN said, Nigeria is Africa’s largest and most vibrant economy and the pace of digitisation and innovation, alongside the expansion of mobile penetration and the proactive policy initiatives of the bank have driven the accelerated adoption of digital financial services.

It said, considering the strength and breadth of its banking sector and the rapid growth and transformation of its payments system over the last decade, Nigeria was ideally positioned to successfully launch the national card scheme.

The bank said, building on this platform to accelerate financial inclusion requires infrastructure that could deliver lower cost payments services that are more accessible and affordable for Nigerians.

“Domesticating our card scheme also enhances data sovereignty, enabling the development of locally relevant products and services and reduces demands on foreign exchange.

“The scheme can also be leveraged as a platform for the seamless dissemination of government-to-person payments and other social impact initiatives, enhancing financial access and supporting the growth of a robust and inclusive digital economy.

.“The CBN recognizes the significant benefits from delivering Africa’s first central bank-driven, domestic card scheme, which, when delivered at scale, has the potential to become the largest in Africa, and one of the largest in the world”, it said.

CBN Governor, Mr Godwin Emefiele while performing the virtual launch of the scheme said, the scheme would provide more options for domestic consumers while also promoting the delivery of services in a more innovative, cost-effective and competitive manner.,

He said, “the scheme is important to plug in the gap that has remained in the economy since the introduction of the cashless policy, and will integrate the informal segment of our economy, reduce shadow banking, bring more Nigerians into the formal financial services with an attendant diversification of deposit portfolio which will further strengthen the stability of the banking industry”.

He noted that, though the penetration of card payments in Nigeria had grown tremendously over the years, many Nigerians were still excluded, adding that the challenges of financial inclusion in the country were 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.

While assuring that the National Domestic card would be accessible to all Nigerians and address most of the country’s local peculiarities, he further stated that it was not a quest to prevent international service providers from continuing to provide services in Nigeria. Instead, he said it aimed at domestic consumers whilst also promoting the delivery of services in a more innovative, cost-effective and competitive manner.

In her welcome remarks, the Deputy Governor (Financial System Stability) at the Central Bank of Nigeria, Mrs. Aishah Ahmad, said that the Nigerian National domestic card Scheme would lead to the sovereignty of data, saves cost on card transactions, reduce foreign exchange pressure and would present new opportunities for the Nigerian economy.

Mrs. Ahmad, who doubles as Chairman of the Nigerian Interbank Settlement System (NIBSS), further said the card scheme “heralds a new vista of opportunities for the card business, that several countries continue to recognise and leverage as they create their domestic card schemes to augment existing foreign payment card rails.”

According to her, the card scheme also provides an essential platform for further innovation to solve some of the most pressing issues around financial inclusion, SME payments and trade facilitation primarily, supporting the drive for a robust digital economy for the Nigerian market, the African continent and the world.

Giving an overview of the card, she said the name for the national domestic card scheme, AfriGO, was birthed in Nigeria with continental aspirations, as ‘AFRI’ means culture, ethnic diversity, bravery, innovation, and growth while “GO” symbolises progress, empowerment, inclusivity, and future-forward amongst others.

The Afrigopay Financial Services Limited (AFSL), a local card scheme duly licensed by the CBN, was an affiliate of the NIBSS and responsible for deploying and managing the scheme for Nigeria.

Also speaking, the Managing Director of NIBSS, Premier Owoh, Scheme was developed by the stakeholders to bridge the card penetration gap in the country.

Oiwoh said, with the current pace of card population ratio, financial inclusion and cashless society drive would be difficult to grow and sustained.

He noted that existing ATM Cards and POS would still function without interruption, adding that it would co-exist with other card schemes in the country as it is in other global economies.

Some Reactions On The Scheme

Omolola Coker et al said, “this initiative is certainly commendable, with the CBN entering the card issuance market as the first government backed scheme in Africa. However, it must be said that the reality of the “unbanked” remains unchanged as they still do not have access to banking facilities, automatically excluding them from becoming beneficiaries of the scheme. Therefore, the practical steps for implementation of the domestic card scheme are eagerly anticipated alongside greater assurance of the infrastructural improvements that must be made for true financial inclusion”.

Martha Dali Mghendi-Fisher said, “this is actually a good thing. Cost of card transactions in many African countries is ridiculously high. Lowering the cost can encourage card adoption and discourage card usage. The big question to ask is who bears the cost? Someone has to. Is it the consumer or the Banks or the local card scheme. If they make it very transparent in terms of actual costs of having and using the Card, I think it’s a positive development”.