Greetings. The academic festival begins tomorrow at Tekedia Mini-MBA. If you want to join, now is the time to get the ticket. I will open it tomorrow with the Mission of Firms and Building Category-King Companies.

What is your vision? What is your playbook? How is that leadership ascension coming? Etc. At Tekedia Mini-MBA, we will co-learn to advance professionally and accelerate progress in firms, communities.

Pick a seat here.

How your bank configures its ATM systems can help you model the trust factor in the land. In Nigeria, the bank debits you before the ATM dispenses money. If the seconds between debiting you and dispensing money, a technical glitch happens, you will go home with no cash even though you have been “paid” according to the bank’s general ledger.  So, you need to return to the bank hall to clear it up. That happens in POS terminals: the payment fails with the merchant only to notice later that you were actually debited. In Nigeria, it is Debit and then Pay.

In the US, they actually “lock” your money, then pay before they debit you, making sure under no circumstances would you be debited with no dispensing of cash. But they have something working for them: they have access to your credit file, and that means even if they have paid and you do not have cash, you cannot run away; they will mess up your credit. 

Bank transfers via ATMs, POS, etc are failing in Nigeria. In this piece, I explain how we can fix this paralysis. Simply, move from our current system of debiting before releasing cash or value, to one that follows “lock” value, release value to the recipient and then debit the originating account. 

The implication is clear: you will never visit a restaurant where the owner tells you that your debit card payment failed only to receive a debit alert from your bank in 4 hours. Why? Before the bank can debit you, it has to have established that the recipient has received the value. 

Yet, technically, there is no way they can pay you when you have no cash because the systems that check balances and release cash are entwined. And 99.99% of the time, the tech does not fail due to many layers of warehousing and redundancies built in. Everyone is happy and technical glitches do not cause bad customer experiences.

So as Nigeria struggles with the current mess where banks debit and do not deliver value to recipients, a simple solution could be to reconfigure ATMs, POS and evolve how we do business: “lock” value in originating account, release value to destination and debit the originating account. If you cannot lock value, then, do not follow the subsequent phases. And if you lock value, irrespective of anything, including technology glitch, go ahead and release value. Later, you can debit the account.

The failures we are experiencing are not just about tech. The Service Level Agreements with the customers are not well designed and that requires another stack layer.

They have to move higher to technology stacks if they want to prevent that nightmare experience where after customers have eaten in a restaurant, and try to pay via POS, and are informed that the payments have failed, only later to receive successful debit alerts after they have left the restaurant (after substituting with cash payment), on the same failed POS payments.

In the US, they lock the value, and give credit to the restaurant (the merchant), and then debit the bank customer. In other words, there is no way you can have a failed payment for a transaction that was successfully debited. Once they have paid the merchant, they will debit the locked value later. What this means is that a technology glitch will not affect the sequence of events and at the end of the whole process, superior service is delivered.

Nigeria needs a Lock, Release and Debit sequence to avoid this mess!

Addition: in US banking, there is a PENDING state (you see that in your online account) before any debit as the bank “warehouses” the fund, making sure the payer cannot re-use it. Notice that it has already sent value to the recipient. Once it establishes the recipient has the value, it moves from PENDING to DEBIT. Where it is unable to deliver value, it aborts that process and returns money to the payer. By doing this, it cannot debit you without serving your purpose; a great system design which works irrespective of network speed. This whole thing takes a short time.

Comment on Feed

Comment 1: Dear Prof. Ndubuisi Ekekwe quite a number of Fintechs that offer Agency Banking services have similar functionality in place already. The transaction amount is placed on hold in the customer’s account while the Banks are left to pass manual debit later on. One of the problems of this method is its impact on customer experience; particularly the spike in customer complaints that occur after the manual debits despite SMS notifications with clear transaction description.

However, the actual problem currently encumbering the channels appear to be capacity related rather than methodology.

To improve e-channel related service offering in Nigeria will require developing a conscious road map to drastically improve infrastructure in the chain of services that support these channels.
Case in point using POS: Telcos provide the connectivity for transmitting this data from the POS devices, there is the data traffic that takes place at the payment gateways, there is the data verification and exchange at the switch, data exchange between switch and host (Banks where the accounts are domiciled). Each of these nodes of information exchange needs to ramp up capacity to be able to handle the volume of transactions.

My Response: Sure, but I do not understand why a bank should be posting “manual debits” . If that is the case, that should be stopped. Nigeria has the capacity to build end-to-end closed look system which ensures you ONLY DEBIT after the recipient has value. Note – that happens in seconds. It seems the Nigerian stacks do not have a closed feedback. That has to be fixed.

Comment 1R: Ndubuisi Ekekwe – Prof. I agree that debiting after value has been given can be achieved.

What you are proposing would work in a manner similar to how automated charges are taken from accounts- a service that debit accounts without manual intervention. However, I can confirm to you that such services also fail intermittently. When it does, then the fall back would involve manual debits using uploads.

I still insist that the fundamental challenge has more to do with capacity rather than methodology.

Comment 2:

Ndubuisi Ekekwe What you just explained has been in existence for years in other countries but only applies to international transactions initiated by cardholders in Nigeria.

There is a single and dual message system of processing transactions which 99% of the banks in Nigeria don’t use the dual message for processing local transactions. It involves placing a hold of the fund in the customer’s account and then taking the fund after certain criteria has been met to move funds to the merchant(Pos agent/Bank).

The reason why banks run away from this method is because it is not cost friendly and also it requires a lot of system configuration.

At one point in 2019 the CBN mandated banks/merchant acquirers to apply the dual message system to POS transaction processing but the full compliance was never adopted.

It is something that can be done if we want to. https://www.cbn.gov.ng/Out/2019/PSMD/Circular%20on%20Pre-Authorisation%20of%20Cards%20in%20Nigeria.pdf

Nigeria’s next leader has one major assignment: restructure the country, financially and fiscally. President Buhari promised that but he did not deliver there. This redesign is fundamental, and is the only path to get people to believe again, on the promises of the nation. Yes, today’s Nigeria is not working for many people. And the major reason is clear: Nigeria does not offer any incentive for excellence, and because of that, productivity continues to drop, and regional comparative advantages in agriculture, mining, etc are muted.

In America, you can have your Silicon Valley and California and thrive. You can also have Florida and the nice beaches and do well. You can have your shale gas in Oklahoma and do well. You can have your big banks in New York and boom. You can have your farmlands in Alabama and party. Indeed, across America, by being decoupled from the center, states have found how to innovate and thrive. The end game: America is better because everyone is firing all the necessary cylinders.

 In Nigeria, that is not the case: travel from Kano to Jigawa (I did that in 2019 on the invitation of the governor) and you will see a massive landmass. But a nation with that resource still needs a war-ravaged Ukraine to send it cheap food. That is unfortunate.

Two kids wrote to study in our unity school system or the Federal Government Colleges. They’re in the same school and class. One has to score 173 to be admitted while another needs just 3, primarily because of “state of origin” quota system. How do you explain to the one who needs to score 173 that he belongs to the same country?

As Buhari winds down his second coming, he is aware that many in the Southeast will not miss him due to choices he made. If Atiku becomes the next President, many in the southern part of Nigeria will not play along since another northern president will replace another after 8 years.  If Tinubu makes it, expect disconnections from the Southeast.  That is natural: the government introduces quotas to reduce comparative advantages in areas of their strengths, but in areas they have limited strength (population), the government opens it up for competition.  And if Obi wins, do not expect many in Sokoto to play along.

You can pretend that no one should care. But wait until you become a recipient of these demonic attacks. Like I have written here many times, if FUTO, my undergraduate school, had denied my automatic academic offer as my class’s best graduating student, preferring another person due to my state or tribe, I would never forgive the school.

Today, you can be #1 and not get it because your tribe is not the chosen, and #5 gets it. How would you feel that the prize of that hardwork was stolen from you and handed to another person? Nigeria does this many times daily in various forms, and people still think we can rise as a people.

People, irrespective of how you see this, the more we can get Nigeria to forget the center and become regionally focused, the better is the hope of ascension. For Obi, Atiku and Tinubu, fiscal federalism would be the most important mission if they hope to get Nigerians to dream and work for the rise of the nation. 

Yet, people will still be bitter about who the president is but when they understand that at least their hardwork will help fix their roads and hospitals, they will feel better. Yes, if your roads, hospitals, etc are working, you may even forget who holds the title of President. With fiscal federalism, the corruption at the center will go because the center will not call the shorts at scale.

Comment on Feed

Comment: “Nigeria does not offer any core incentive for excellence, and because of that, productivity continues to drop, and regional comparative advantages in agriculture, mining, etc are muted.” And yet the country is packed with brilliant people. Imagine if those incentives existed where Nigeria would be already. Now extrapolate that to the tomorrow of your dreams. Indeed, financial and fiscal reforms, coupled with excellence incentives, will bring a dawn of prosperity. But they must not forget about security – a situation that needs immediate attention as well.

My Response: When Nigeria was regionally configured, the Belgian parliament  described it as a “virtuoso” economy as it argued that all aids, incentives, etc from Europe be removed for Nigeria. Nigeria was #1 on palm oil export, top on groundnut, etc. But that system was changed removing incentives for regions to explore comparative advantages since everything is combined and shared together. 

If I make $1,000 and you make $2,000 and we send to an account (federal) which returns $1,500 to each of us, you will agree that you will not bother working to make $2,000 next time. But if you have a system where I pay tax on that $1,000 and you pay on your $2,000 (say 30% tax rate for each), nothing will stop your incentives.

That fundamental redesign from the old constitution to the current is the reason that brilliance has not shown because there is no incentive for any person to think big.

Comment 1R: Agreed that tax reform is one major element of the financial and fiscal retooling that need to be happen. So much more needs to happen also, basic planning and provisioning is scant as well – look at the rollout of the new Naira notes. How can a country introduce new notes yet not produce nowhere near enough to distribute properly? Also, with regard to the upcoming election I read yesterday that some people are having problems getting their voter registration/cards becasue there are none – ergo the planning and provisioning problem.

I am also aware of the Palm oil production issue. I wonder how many people actually know that Nigeria was the original, and largest, grower and producer of Palm oil? I have advocated for the return of the Palm industry to Nigeria and have faced opposition – in the form of negative remarks and sentiments regarding productive capabilities in and of Nigerians. Yet I scoff at that narrative: I am confident that given the right circumstances and (re)training Palm oil production could match that of Indonesia, Malaysia, or Thailand. Nigerians are as industrious and hard working as anyone else – the circumstances and incentives need to there, as you also stated, for progress to be realized. I believe.

Comment 2: I don’t think he has to “restructure.”
That word has been thrown around a lot for a few decades now.
The president has to competent enough to do a good job.
The results of Biden and Trump are clearer now.
Nigerians has to decide who can do a better job.
Elections have consequences.

My Response: “The results of Biden and Trump are clearer now.” – Biden has outperformed Trump in metrics that matter to most independents in America. Biden has created the most jobs at this time in his Presidency in decades than any other person. Biden has put China-tech in ways that it never anticipated (in more lethal ways than whatever Trump shows did), Biden has figured out how to “fight” Russia without declaring a war.  For decades, he outperformed other presidents in midterms. Unless you are using Fox talking points, Biden has good results. (This is not to say I support his policies but for Independents, he seems to be doing the thing. For example, I would have preferred a peace agreement in Ukraine over killing sons and fathers)

Comment 2R: He has created the most jobs when every day people are talking about layoffs.
MSNBC, NBC, CNN all those garbage outlets and the claim that this is most jobs created is incredulous.
Biden would allow a Chinese spy balloon to monitor the US and that’s just last week.
Is that a story from FOX News?
The independent broke from him during the midterms but it wasn’t historic by any metric. The still lost the house.
The Ukraine War was a policy his and Obama’s administration pursed since ’08.
So, yes. The results have become much clearer.

My Response: “He has created the most jobs when every day people are talking about layoffs.” – “Half a million jobs in January ” – Fox News https://www.foxnews.com/politics/white-house-economic-advisor-cites-job-report-proof-not-recessionary

“The independent broke from him during the midterms but it wasn’t historic by any metric” – typically you lose many seats in the Senate and House. He gained in the Senate and lost a few in the House. Possibly Independents broke from him but more Republicans voted for him since he would have achieved the Senate gain and small losses if Independent broke from him (I assume Democrats are with him).

Comment 2 – Another: [ ] in philosophy ( in all practicality) the structure of any human system- and the inherent incentives it embodies- does shapes the energy direction of the most talented members of such system/society. I respect and agree with this opinion of Professor Ndubuisi Ekekwe. United States( see it in the resulting developments that make up it federating units) is a beacon example of that. Dysfunctional fiscal structure is a serious adversary to the Nigeria development and prosperity; if we do not address that fundamental problem, sustainable progress would elude the country. Good and competent President is not enough.