The value of cheque transactions dipped by N119.57 billion (32.5 per cent) Yearon- Year (YoY) to N248.20 billion in January 2021 from N367.77 billion in the corresponding period of 2020, latest data released by the Nigeria Interbank Settlement System Plc (NIBSS) shows. The NIBSS’ report also indicates that the volume of cheque transactions declined by 42.4 per cent to 362,127 in January 2021 from 628,628 in the corresponding period of last year.
New Telegraph’s analysis of the data further shows that the value of transactions at the end of January this year was 23.7 per cent less than the N325.31 billion recorded for the end of December 2020. Similarly, the volume of transactions at the end of January 2021 was 28.3 per cent below the 504,728 recorded for December last year. However, further review of the NIBSS’ numbers reveals that after plunging to N103 billion in April 2020, occasioned by the COVID- 19-induced shutdown of the economy during the period, the value of cheque transactions maintained an upward trend to hit N283.55 billion in September last year. Although it fell to N222.56 billion in October, the value of cheque transactions resumed its upward trajectory in November and December last year.
Still, New Telegraph’s analysis of cheque transactions data obtained from NIBSS indicates that the financial instrument has been on a downward trend in the last three years. For instance, the figures for the first quarter of 2020 shows that the volume of cheque transactions, which stood at 628,628 in January 2020, dropped to 594,093 and 577,644 in February and March respectively.
The data also indicates that the total volume and total value of cheques processed by NIBSS, which stood at 10.81 million and N5.38 trillion respectively in 2017, dropped to 9.0 million and N5.0 trillion and 7.8 million and N4.5 trillion in 2018 and 2019 respectively. This means that the total volume and value of cheques processed by NIBSS between 2017 and 2019 fell by 3.01 million and N880 billion respectively.
Analysts attribute the decline in cheque usage not only in Nigeria, but globally, to the widespread adoption of electronic payment channels. Indeed, analysts trace the decline of cheques in Nigeria to 2014, when the Central Bank of Nigeria (CBN), in line with its cashless policy released a fresh policy on cheque transaction.
The policy placed a ban on payment of value above N10 million through cheques and directed that such payment should be made through electronic payment channels. Following the sharp decline in cheque usage triggered by the cashless policy, NIBSS predicted in a report in 2016 that “we might witness the end of the cheque book by the year 2050.” The company (NIBSS) also noted in a more recent report that the decline in cheque transactions has become a global phenomenon.
“Globally, as the market share of cheques decline in the wake of increased adoption of contactless and real-time payments, a duopoly may likely develop in the non-cash market with cards and credit transfer (instant payments) dominating across most geographies. “For instance, in the Asian-Pacific (APAC), China, South Korea and Australia recorded a 20 percent drop in cheque usage although India recorded a 10.1 per cent increase in usage due majorly to her government’s demonetisation policy,” it said.
NIBSS added that in the United States, cheque usage remained a governmentbacked phenomenon as it contributed a whopping 73.5 per cent of global cheque volume. “In Nigeria, cheque transactions have continued on a downward spiral from its peak volume of 15.3 million in 2014 to 9 million in 2018. This is a -10 per cent CAGR over the five-year period; with a growth rate of -17 per cent when compared to 2017. Although, the volume of cheque transaction is decreasing, it is fair to say that its use is still relevant, especially amongst larger value transactions, bill payments, and payroll transactions,” NIBSS said in the report. Significantly, in South Africa, which has the continent’s biggest lenders, major banks, including Nedbank, FNB and Absa, last year ,announced plans to discontinue the use of cheque payments beginning from January this year.
The Payments Association of South Africa (PASA), which said that it anticipates that even more banks will take a similar action, said the decline in cheque usage is being exacerbated by the coronavirus outbreak. It said: “Following the COVID- 19 pandemic, the physical contact required to issue, collect, and process cheques, makes it a less desirable method of payment for consumers and businesses alike. Since the start of the pandemic in South Africa, there has been a massive decline in cheque usage.”
However, the consensus among analysts in Nigeria seems to be that the country’s banks will continue to accept cheques for some time to come. In fact, CBN recently announced that the implementation of the Nigeria Cheque Standard (NCS) and Nigeria Cheque Printers Accreditation Scheme (NICPAS) Version 2, will fully commence from April 1, 2021. The new standard introduces a new digit on the Magnetic Ink Character Recognition code line on cheque leaflets as well as expiry dates for new cheque books.
A financial consultant, Mr. Jude Nwankwo, told New Telegraph that “many corporate bodies in this country still use cheques because they believe that they (cheques) are generally safer than cards and digital platforms, which are vulnerable to cyber-attacks.”