To move from a linear to a parabolic (or exponential) economic growth, one thing MUST happen in every nation. Today, Nigeria is not even making any effort on that – and that means, you cannot expect a huge economic growth in the nation. That thing is catalytic and until it is done, nothing will change. Check the marks (see plot) and read the national histories of the nations; the marked inflection points in the USA and China happened because the “one thing” came to pass.

Prof Robbins defines economics as a social science which studies human behaviour as a relationship between ends and scarce means which has alternative uses [check every chapter 1 of WAEC recommended economics textbook, that is the safe definition to memorize!]. He is right but when you move into development, you will notice that economics has one core element of “certainty” that no country can ramp up development without doing that “one thing”. So, it goes beyond social science because that “one thing” brings the certainty of natural philosophy in economic development.

I have studied many countries on how developments come (I won a Book of the Year award chronicling it: “IGI Global Announces Winner of 2010 Excellence in Technology Research ‘Book of the Year’ Award”) and I can write that Nigeria’s development paradigm has not started. Yes, we are way off because that “one thing” is inexistent.

I am also using this to announce a new work coming out in Harvard Business Review which looks at industrialization, development and urbanization in sub-Saharan Africa. You are going to like it; expect it in August.

If the cost of living in Lagos continues with no policy to hit the brakes to pause the drive of inflation, I predict that in the next five years, Lagos will lose a significant number of its population. The nation’s commercial capital has become increasingly expensive.

Yes, as Nigeria battles inflation, Lagos is seeing a new dimension of it: “Regarding food inflation, Lagos had the highest year-on-year rate at 30.37 percent in June, followed by Kwara at 30.8 percent, and Kogi at 29.71 percent. In contrast, Zamfara had the slowest rise in food inflation at 21.38 percent, followed by Sokoto at 21.60 percent, and Borno at 21.75 percent.” Those numbers are high across board.

Why has Nigeria struggled to combat inflation despite years of trying? Answer: we have not invented a policy tool that can work for Nigeria; the typical tools which are postulated in Western Economics textbooks cannot work for us.

Our policy of raising interest rates has worked to reduce supply which we actually need to increase, to re-adjust the price in the demand-supply curve. In other words, since Nigeria’s consumer credit system is largely non-existent, any interest hike affects corporate credit more. And when you do that, companies cannot borrow cheaply (at high rates, most do not take loans), resulting in lower production output. If output is low, it does imply that supply has reduced when demand has not been affected. Magically, price attains a higher new equilibrium point on the demand-supply curve.

(In Europe and US, they can use rates to reduce inflation because they can influence DEMAND via rates on credit cards and broad consumer credit. Nigeria  is not a consumer-credit economy, and you cannot influence demand directly with rates).

The unexpectedly brisk growth of the U.S. economy is buoyed, in part, by continued consumer spending made possible by debt that’s already locked in “ultralow interest rates,” The Wall Street Journal notes. That means many American borrowers who took out mortgages and car loans before 2022 are largely immune to the Federal Reserve’s rate-hike campaign, which has pushed rates to a 22-year high. Coming off of the first quarter, Moody’s Analytics data showed just 11% of outstanding household debt had variable rates that hinged on the Fed’s benchmark figures. (LinkedIn News)

What can work then? Nigeria’s main chance is to find ways to reduce interest rates for producers and SMEs.  And that means, we have to abandon the typical postulations in Western economics textbooks.  If we do reduce rates (not an easy task, I will explain below), we can boost SUPPLY, and if we do that, prices will drop based on the fundamental economics of higher Supply will reduce  price, assuming that demand remains at the same level. More so, there is a need to boost VC investment in Nigeria as that investment will also help to deepen supply.

Reducing rates may not be easy for the Central Bank of Nigeria. Why? Managing inflation and strengthening the currency could be defined as the core roles of any central bank. Yes, central banks work mainly to stabilize or strengthen their currencies (to reduce inflation) and create employment by managing interest rates. While they can make lending rates low, they also need to consider that easy money can ravage their currencies. 

And with that, it comes down to having a balance.  That balance would be offering only working capital financing at low rates to ensure only actual producers and makers have access to cheaper capital.

This is key as Nigeria’s central bank is not doing well on two key tenets of central banks: improving employment and stabilizing the currency. Which means, they have to go bold and bring new tools.

The reason why it is not working is because the inflation we are battling is cost-push. The cost of production is high and the economics states that battling it is hard and raising interest rate is not one of the solution to it. The solution is to bring down production cost.

— Adekoya Temidayo ???? (@AdekoyaTemiday3) July 23, 2023

Comment:  Yours truly studied banking and finance to doctoral level (funded amazingly by the world’s finest bank ever established – Diamond Bank Lagos ) and my specialty is global trade and currency. You can read my lead paper in the African Union Congress. I have written briefs in this domain because right now as a container importer, I like to understand what happens in the high seas and the trading floors of banks

The Central Bank of Nigeria (CBN), pursuant to its powers guaranteed by the Central Bank of Nigeria Act  and in furtherance of its mandate to ensure the safety and stability of the Nigerian financial system as well as the promotion of a resilient and stable payments system, launches on the 27th of June,2023, a new set of guidelines for contactless payments in Nigeria.

Contactless payment technology provides an efficient payment option and consists of using payment instruments without physical contact with devices, thereby constituting an efficient and convenient cashless payment method for users whether it is in the form of prepaid debit and credit cards, stickers, fobs, tokens or mobile electronic devices operating in interaction with contactless payment devices.

This article will thus be looking at the guidelines governing the operation of contactless payment services in Nigeria.

What is the scope of the contactless payment guidelines?

The guidelines specifically cover the operations of contactless payments in Nigeria.

What are the objectives of these guidelines?

The guidelines were introduced to provide minimum standards and requirements for the operations of contactless payments in Nigeria as well as to specify the roles and responsibilities of stakeholders involved in contactless payments in Nigeria.

Who are the relevant stakeholders/participants in the contactless payment service chain/framework as identified by the guidelines?

The contactless payment system consists of :-

– Acquirers

– Issuers

– Payment schemes

– Card schemes

– Switching companies

– Payment Terminal Service Providers (PTSPs)

– Payment Terminal Service Aggregators (PTSAs)

– Merchants

– Terminal owners

– Customers

– Any other stakeholder as designated by the CBN.

What are the minimum standards for contactless payments set by the CBN guidelines?

The following are the minimum standards for contactless payments set by the CBN Guidelines :-

1. PA DSS – Payment Application Data Security Standards

2. PCI PED – Payment Card Industry PIN Entry Device

3. PCI DSS – Payment Card Data Security Standard

4. Triple DES – Data Encryption Standards shall be the benchmark for all data transmitted and authenticated between each party

5. AES – Advanced Encryption Standards

6. Minimum EMV requirements for contactless acceptance

7. All required scheme certifications for contactless cards and terminals

8. ISO 27001- Information Security Management System

9. ISO 1443 – Identification cards, contactless integrated circuit cards and proximity card specifications

-Regarding these minimum standards, all terminals, applications and processing systems shall comply with the standards specified by the various payment schemes. 

-Also, each operator shall maintain valid certification compliance with these standards and shall regularly review the state of its systems, applications, networks and devices,to ensure they remain compliant at all times.

– Contactless devices shall be configured to work within a maximum of 2 cm from the terminal to manage the risk of data interception.

What are the prescribed roles and responsibilities of identified contactless payment stakeholders and participants under the CBN Guidelines?

Acquirers

– Only CBN Licensed institutions shall serve as acquirers for contactless payments in Nigeria.

– Acquirers who engage in contactless payments shall ensure their applications, tokens & devices meet current standards and specifications for contactless payments.

– Acquirers who engage in contactless payments shall be able to accept all cards or payment instruments used in Nigeria.

– Acquirers and processing entities shall switch all domestic contactless payments through a Nigerian switch for the purpose of seeking authorisation from the relevant issuer and shall not under any circumstance route transactions outside Nigeria.

– All acquirers’ contactless devices shall be connected to an account or wallet with a Bank Verification Number (BVN).

Issuers

– Only CBN Licensed institutions shall serve as issuers for contactless payments in Nigeria.

– Issuers shall ensure that activation of contactless payment is at the customer’s instance and with his full consent with evidence of this consent obtained before activation.

– Issuers shall provide opt-out options for customers who may no longer desire contactless payment products.

– Issuers shall ensure that all contactless payment instruments used in Nigeria shall be neutral and agnostic as to contactless payment devices to ensure interoperability.

Payment Schemes

– Payment schemes operating in Nigeria shall comply with these guidelines & other relevant CBN guidelines/circulars.

– Payment schemes shall ensure that all contactless transactions are processed online and/or submitted via current processing specifications.

– All payment schemes that engage in contactless payments shall ensure that the systems and schemes shall be interoperable.

– Payment schemes shall implement a documented risk management process to identify and treat risks associated with contactless payments.

Card Schemes

– Card schemes shall ensure that all contactless transactions are processed online and submitted via current processing specifications.

– Card schemes shall implement a documented risk management process to identify and treat risks associated with contactless payments.

Switching Companies

– Switching companies shall ensure that contactless transactions consummated by all payment instruments issued in Nigerian are successfully switched between acquirers and issuers.

– Switching companies shall carry out periodic risk assessment of their processes and have necessary measures to mitigate ML/TF /PF(Money-laundering/Terrorism Financing/Proliferation Financing) risks associated with contactless payments.

– Switching companies shall ensure that where they process contactless payments, these are executed with stakeholders meeting minimum requirements set by the CBN.

PTSPs

– PTSPs shall establish appropriate mechanisms to remotely detect device failures which shall be rectified or replaced within 48 hours.

– PTSPs shall have adequate support infrastructure that ensures support coverage for merchants and users 24/7.

– PTSPs shall ensure that all deployed devices and terminals for contactless payment have support service contact information.

– PTSPs shall prevent instrument clashes even when multiple contactless payment devices are present.

PTSAs

– PTSAs shall annually or more frequently, as may be required, certify POS terminals for contactless payments to ensure that the POS terminals meet standards approved for the industry.

– PTSAs shall implement a documented risk management process to identify and treat risks associated with contactless payments.

Merchants

– Merchants who engage in contactless payments shall ensure that deployed devices and applications are available for contactless payments of goods and services.

– The contactless payment device used by a merchant shall request the customer’s authorisation such as a Personal Identification Number (PIN), tokens or biometrics where the transaction amount is greater than stipulated limits per transaction/day.

– Merchants shall be held liable for fraudulent contactless payments arising from their negligence/connivance.

– Contactless payment transaction value and associated charges shall be clearly communicated to the customer prior to consummation of the transaction.

Terminal Owners

– Issuers,acquirers, merchants and PTSPs can be terminal/device owners.

– Terminal & device owners shall implement a documented risk management process to identify and treat risks associated with contactless payments. 

– Terminal owners shall ensure all terminals and devices procured by then are compliant with the appropriate minimum specifications for contactless payment terminals and devices. 

Value Added Services

– Stakeholders shall obtain the bank’s approval for contactless payment products.

– Stakeholders shall obtain the CBN’s approval for innovative use cases and value added services to deepen financial inclusion and promote efficient payment systems.

Customers

– Customers shall have the option to opt-in to contactless payments by applying and consenting to terms and conditions of contactless payment products and services.

– Customers shall have the option to withdraw from contactless payment agreements.

– Customers shall authenticate contactless payment transactions as may be required.

What do the guidelines say on contactless payment services display?

The guidelines provide that contactless payment service images, symbols, graphics and/or the words “contactless payment” (in Braille) shall be displayed on contactless payment instruments, devices and locations where contactless payments are accepted.

What are the transaction limits for contactless payment services in Nigeria?

Consult your lawyer on this.

What are the acceptable dispute resolution mechanisms under the guidelines?

– Disputes shall be resolved utilizing the existing payments industry dispute resolution system.

– Stakeholders or parties involved in dispute resolution may escalate any complaint to the CBN if the dispute remains unresolved in line with extant CBN dispute resolution guidelines.

What are the provisions of the guidelines on reporting and sanctions? 

Participants under the guidelines are required to render periodic returns on contactless payment transactions (including volume, value, fraud data, failed transactions,etc.) to the CBN in a format prescribed by it from time to time. 

Participants are also required to immediately report incidences of fraud, breaches and other security events.

Non-adherence to the guidelines shall attract appropriate sanctions and penalties as may be prescribed by the bank.