MONEY MARKET: Cutting Dollar Spending With Afrigo, Nigeria’s Domestic Card

Last week, the Central Bank of Nigeria(CBN), in collaboration with the Nigeria Inter Bank Settlement System (NIBSS) unveiled Afrigo Pay, Nigeria’s own domestic card, putting a definitive end to the payment of dollars as charges on payment cards in the country.

With the domestic card which is meant to serve as both a credit card and debit card, among other functions, Nigeria follows the example of countries such as China, Turkey and Brazil which have harnessed the transformative benefits for their respective payments and financial systems, particularly, for the unbanked.

A card scheme is a central payment network that uses credit and debit cards to process payments. Its primary role is to manage payment transactions, including operations and clearing.

Visa and MasterCard, two of the largest global brands, offer credit and debit cards that have become synonymous with a payment type that is accepted around the world; these two huge brands are known as card schemes. Both Visa and Mastercard alongside Verve are the current card schemes that are used in Nigeria.

Card schemes have four players, the cardholder, the card issuer, the merchant and the acquirer, all of which together make up an open-loop system that allows consumers to seamlessly purchase items or services from merchants by letting the banks do all the work on their behalf.

Asides these four primary players in the card scheme, there are also intermediaries that facilitate the transaction, including the payment gateway and the payment processor.

Speaking at the virtual unveiling of Afrigo, the governor of the Central Bank of Nigeria(CBN), Godwin Emefiele had noted that the National domestic card scheme, which will be accessible to all Nigerians, will help address the financial inclusion gap in the country and also address the country’s local peculiarities.

While the foreign cards remain convenient, especially, for international transactions, he explained that the domestic cards are expected to better serve the unbanked market and increase competition within the payment landscape.

Emefiele stated that, although the penetration of card payments in Nigeria has grown tremendously over the years, “many Nigerians are still excluded. The challenges that have limited the inclusion of Nigerians include the high cost of card services as a result of foreign exchange requirements of international card schemes and the fact that existing card products do not address local peculiarities of the Nigerian market.

“This effort is not a quest to prevent international service providers from continuing to provide services in Nigeria. Rather, it is aimed at providing more options for domestic consumers whilst also promoting the delivery of services in a more innovative, cost effective and competitive manner.”

According to CBN, the domestic card is expected to have the capacity to reduce Nigeria’s reliance on foreign-owned financial services companies.

The CBN governor, noted that “at this time of of foreign exchange challenges that persists globally it is important that that we have this card to to ensure that all card transactions, online transactions where you’re using cards will now effectively immediately begin to go on the Nigerian National Domestic system.

“At some point in the next few weeks, I’m sure that the CBN will come up with the cut off which will mean that all domestic transaction all domestic transactions that are going to be conducted in Nigeria will have to be through the Nigerian domestic cards.

“The charges on the foreign cards are in dollars, we will no longer pay dollars for those cards for the charges on those cards. We would only pay dollars for charges for transactions that are done with our domestic card or foreign cards outside Nigeria. NIBBS and the Central Bank of Nigeria and the Nigerian banks will work together to see to how to segregate those transactions to ensure that we would only make charges or fees for international transactions that are conducted on both these cards or the Visa or MasterCard as they are today.”

To the CBN deputy governor, Financial System Stability(FSS), Aisha Ahmad, who also serves as the Chair of the board of NIBSS, noted that, with the launch of Afrigopay, “a lot of opportunities are being created within the ecosystem, and there is more opportunities that will be brought back by this Afrigo card.

“So leveraging its industry position, NIBBS and with a strong regulatory backing of the Central Bank of Nigeria, Afrigo card has been has been brought up. I think it is important to also explain what the corporate structure for delivering this card looks like.

“The company -Afrigopay Financial Services- is a domestic Card Scheme. Duly licenced by the Central Bank of Nigeria is an affiliate of NIBBS but it is constructed as a distinct legal entity, with its world class management team to deploy and operate the domestic scheme for the benefit of the industry.”

The CBN governor had noted that the apex bank remains “committed to a robust, efficient and safe national payments system and welcomes innovation from both domestic firms and foreign investors. The Nigerian market is vast, and the current participants have done so much in the last twelve years to transform the ecosystem. Yet there is much ground to be covered as millions of Nigerians are yet without payments cards to consummate transactions.

“I am convinced that the National Domestic Card Scheme will make this a reality in the coming months. We can no longer neglect the vast majority of the Nigerians whose daily payments needs are micropayments. We need to capture them in national statistics to further understand their transaction dynamics and properly target interventions in that sector of the economy.”