Nigeria’s foreign exchange (FX) market witnessed a downturn as the Naira depreciated against the dollar on Thursday, compounding its downward spiral that has put the nation’s economy on the edge.

The decline followed a reduction in FX sales by banks, with the volume of dollars exchanged between banks and willing buyers and sellers dropping by 6.13 percent to $321.23 million compared to the previous day’s $342.22 million.

Data from the Financial Markets Dealers Quotations (FMDQ) revealed that the Naira fell by 4.10 percent, with the dollar quoted at N1,479.47 on Thursday, weaker than the N1,418.78 recorded on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).

The intraday high closed at N1,504 per dollar, slightly stronger than Wednesday’s N1,510, while the intraday low weakened to N946.82 per dollar, down from N896.28/$1 on Wednesday.

In the money market, the Nigerian Treasury Bills (NT-Bills) secondary market experienced a negative trend, marked by an increase in average yields across the curve. FSDH Research reported a significant surge in the average yield by 261 basis points (bps) to reach 14.99 percent, compared to the previous day’s 12.38 percent.

Short-term and medium-term maturities saw notable expansions of 572 bps and 509 bps, respectively, while long-term maturities witnessed a slight decline of 11 bps. The NTB for March 7, 2024 maturity bill experienced heavy selling pressure (+634 bps), whereas buying interest was observed on the NTB for August 8, 2024 (-53 bps).

Simultaneously, the Central Bank of Nigeria (CBN) conducted its scheduled Primary Market Auction on February 7, issuing NT-Bills valued at N1,000.00 billion across varying tenors. Despite higher stop rates, the auction saw robust demand, with bid-to-cover ratios settling at 0.20x (91-day), 0.38x (182-day), and 3.11x (364-day), indicating strong investor appetite.

In the Open Market Operations (OMO) bills market, there was a slight positive sentiment as the average yield across the curve dipped by 1 basis point to close at 10.07 percent. Long-term maturities also saw a marginal decline of 1 basis point, with mild buying interest noted on the OMO 10-December 2024 maturity bill.

These developments underpin the continuous volatility of Nigeria’s debt market, creating doubts for investors as the fluctuations dampen economic growth. However, the high demand observed at the Primary Market Auction despite higher stop rates suggests that investors remain interested in Nigerian debt instruments, albeit amidst the challenges posed by the FX market and other economic factors.

The fluctuations in the Naira exchange rate and the surge in average yields on NT-Bills, which reflect the ongoing volatility and uncertainties in Nigeria’s financial sector, highlight the ineffectiveness of the government’s approach in addressing the concerns.

The CBN has rolled of out a series of new policies geared toward boosting the performance of the naira in the FX market recently. The policies, accompanied by an assurance from the central bank governor Yemi Cardoso that inflation, currently sitting at over 28%, will drop to 21% in 2024, have failed to show any signs of mitigating the FX challenges.

The CBN announced that it has cleared about $3 billion in FX forwards backlog, which has been fingered as the major instigator of the naira’s weakness in the foreign exchange market. With no positive impact from these efforts, Nigerians have expressed concern that clearing all the backlogs in FX forward obligations may not be the answer to the urgently needed succor to the naira’s depreciation.

Have you tried transferring money to someone and you mistakenly mixed up the account digits and you ended up sending money to someone else whom you do not even know?

Well, I found myself in that situation yesterday when I wanted to transfer money to my staff and I mixed up the digits and I ended up transferring money to a total stranger. That got me thinking about what laws/ regulations have been put in place to cater for situations such as this. 

The Central Bank of Nigeria definitely knows that human beings are prone to error, so the chances of making mistakes during electronic transfers are high. They therefore introduced a Regulation for Instant Electronic Transfer Funds (EFT) Services in Nigeria in September 2018. This regulation of the CBN captured every error or mistake that could occur during electronic money transfer and they issued guidelines/ procedures on how affected persons; ie persons who made some mistake during electronic money transfer like sending the above figure and want a refund or sending money in error to other persons and want a refund or a failed transfer and want a reversal etc. 

According to this CBN guidelines, when a person mistakenly sends money to another person, the apex bank suggests that if the sender knows the receiver or can find out who the receiver of that erroneous transfer is, the sender should reach out to that recipient and negotiate for the refund but if the beneficiary is unknown to the sender, the sender should quickly contact his bank (which is the sending entity) and make a complaint of the erroneous transfer and the Sending Entity having received the complaint from the Customer will notify the receiver’s bank which is the Receiving Entity. Upon the notification, the Regulation provides that the Receiving Entity i.e. the receiver’s bank should immediately place a lien on the said amount in the account of the beneficiary and thereafter obtain the consent of the beneficiary to execute a refund back to the sender.

I have also heard of scenarios where a receiver of an erroneous transfer, with criminal intent, quickly withdraws all the money from his account and empties his account so that a reversal cannot be executed by his bank. The CBN in its wisdom also covered this ground in their regulatory guideline. The guideline also provides that when the funds are no longer available in the receiver’s account, the receiver’s bank should immediately notify its Customer about the transaction. The Receiving Entity is also legally obligated to charge the customer to fund the account so that the reversal can be executed and they are to also notify the Customer about the consequences of not funding the account within 24 hours, which is the attraction of sanctions and reporting the customer to the law enforcement agencies.

So according to the 2018 CBN regulatory guidelines on Electronic money transfer, if you erroneously transfer money to the wrong person, you are to reach out to the person (if that is possible) and negotiate your refund with the person but if it won’t be possible for you to reach out to the receiver, quickly contact your bank and lay the complaints with the prove of the transaction, your bank will then contact the receiver’s bank (when the receiver uses a different bank from the sender), the receiver’s bank will then execute a refund back to the sender with the consent of the receiver. 

No doubt that it is not as easy as written here, it takes days, time and a lot of back and forth for all these to be executed but these are the statutory steps to be taken when you find yourself in such a situation and you want your money back. 

Electronic payment transactions in Nigeria surged to an unprecedented high, reaching the N600 trillion mark in 2023, representing a remarkable 55 percent increase from the previous year’s figure of N387 trillion.

This significant rise was disclosed in recent data released by the Nigeria Inter-Bank Settlement System (NIBSS), underscoring the nation’s accelerating transition towards a cashless economy.

The data further revealed a substantial increase in the total value of point of sale (PoS) transactions, which amounted to N10.73 trillion in 2023 compared to N8.39 trillion recorded in 2022, indicating a notable growth rate of 27.85 percent.

March 2023 emerged as a standout period, witnessing an unprecedented peak in e-payment transactions, with a staggering volume of 1.17 billion transactions, closely followed by December, which recorded 968 million transactions. This surge speaks of the growing reliance on electronic payment systems by Nigerians.

A detailed breakdown of the monthly analysis of electronic transaction values in 2023 sheds light on the evolving trends throughout the year. January commenced with transactions amounting to N38.8 trillion, setting a robust pace for the months ahead. Subsequent months saw fluctuations in transaction values, with March witnessing a substantial surge to N48.3 trillion, attributed largely to the prevailing scarcity of cash during that period.

The momentum continued in the following months, with April recording N41.3 trillion in transactions and May witnessing a further increase to N45.9 trillion. Notably, June saw a marginal decline to N45.3 trillion, followed by a significant leap in July to N47.4 trillion. August marked another milestone with transactions reaching N50.9 trillion, maintaining an upward trajectory through September (N51 trillion), October (N59 trillion), and November (N63.6 trillion), and culminating in the highest recorded value of N71.9 trillion in December.

Similarly, a breakdown of the monthly volume of transactions for 2023 revealed fluctuating patterns, with peaks in March (1.17 billion) and December (968.59 million). Despite some fluctuations, the overall trend indicates a consistent increase in electronic transactions throughout the year, reflecting the growing adoption of digital payment methods across the country.

Impact on Nigeria’s Cashless Policy

The surge in electronic payment transactions carries significant implications for Nigeria’s cashless policy. As the country continues to embrace digital payment solutions, there is a gradual shift away from traditional cash-based transactions, offering numerous benefits such as improved transparency, efficiency, and financial inclusion.

Although it was significantly buoyed by cash scarcity, the robust growth in PoS transactions underlines the increasing acceptance and utilization of card payments among consumers and merchants alike. The substantial fluctuations in PoS transaction values throughout the year reflect changing consumer spending patterns and economic dynamics.

However, amidst the remarkable progress, challenges remain in ensuring the security and integrity of electronic payment systems. The central bank has implemented measures to mitigate related risks, including setting limits for contactless payment transactions and enhancing cybersecurity protocols. Also, initiatives such as the eNaira demonstrate the regulatory efforts to mitigate related risks and ensure the security of electronic transactions.

However, experts’ voices have advocated the need for continuous innovation, regulatory oversight, and infrastructure development to sustain this momentum and address emerging challenges in the digital payment industry. While the impact on financial inclusion and economic growth is undeniable, they said concerted efforts are necessary to address emerging challenges and ensure the continued integrity and resilience of digital payment systems.