People & Money

Nigeria’s E-Payments Hit N38.7 Trillion In January 2023

According to the Nigeria Inter-Bank Settlement Systems (NIBSS), the amount spent through electronic channels in Nigeria amounted to N38.7 trillion in January 2023. This figure is coming amidst a shortage of physical cash in circulation causing many Nigerians to resort to electronic payment methods. The figure represents a year-over-year increase of 45% compared to the N26.6 trillion reported in January 2022.

Also Read: Nigeria’s E-Payment Transactions Reaches an All-Time High of N387 Trillion in 2022

Electronic payment in Nigeria has been a growing trend in Nigeria, but as the deadline for the phase-out of the old N200, N500, and N1,000 notes approached, more and more Nigerians were compelled to adopt cashless payment methods towards the end of January 2023.

The Nigeria Inter-Bank Settlement Systems (NIBSS) processed a total of 541 million National Instant Payment (NIP) transactions in January 2023, marking a 55% year-over-year increase from the 348 million processed in January 2022. The trend is expected to continue in February as the cash scarcity continues to bite harder.

Even after the scarcity of physical cash ends, the updated cashless policy, which restricts the amount of cash that individuals and corporations can withdraw, will continue to drive the growth of electronic transactions throughout Nigeria. The new policy, which followed the redesigning of N1,000, N500, and N200 notes, effective from January 9, 2023, provides that cash withdrawal by an individual is now limited to N500,000 a week. Corporate organizations have an N5 million withdrawal limit in a week.

Bank Apps are Crashing

The recent surge in electronic transactions is putting a strain on the existing payment infrastructure, resulting in a rise in the number of failed transactions on various platforms. Amidst the surge, several banks are facing difficulties with their mobile applications, and the rate of point-of-sale transaction failures has also risen. Numerous bank customers have voiced their frustration over the difficulties they are facing while using the bank apps and the USSD platform.

Also Read: Electronic Transmission of Elections Results: One next step

Software engineer, Israel Adetunji spoke on the source of the breakdown affecting mobile apps.

“The most evident issue is the absence of updated infrastructure. While setting up a backend system, there are various hosting options available for providing user access.

“In the past, you would specify the server resources like 2G RAM and disk space based on the expected number of user requests. As your user base expands and the need to scale arises, more resources would be obtained to accommodate the growing number of users (scalability).

“Manually scaling resources is difficult, as a sudden surge in interest in your service could result in a crash if you are not proactive in obtaining additional resources in time. Consider the scenario where you have your data center and need to order new hardware components like hard drives and network adapters from Amazon. The time it takes for these resources to arrive can result in user inconvenience and frustration.

Also Read: CBN, NIBSS Launch AfriGo, Africa’s First National Payment Card Scheme

“Due to the high volume of transactions per minute on their platforms as a result of the scarcity, their infrastructure was not designed to handle this level of activity. Imagine their initial resources were designed to handle only 100 requests per minute, but now they face x100 more, 10,000 requests per minute. Inevitably, their system will either crash or experience slowdowns.”

David Olujinmi

David Olujinmi studies Engineering but his true passion is research and analysis. He writes about finance, particularly the capital market, investment banking, and asset management. More »

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