The total value of transactions carried out using cheques across the country amounted to N283.55 billion in September 2020, down by 19.3 per cent vis-à-vis the same month last year, latest data released by the Nigeria Interbank Settlement System (NIBSS) shows. According to NIBSS, banks cleared cheques worth N351.38 billion in September 2019. The data also shows that the volume of transactions carried out using cheques fell by 35.9 per cent to 408.25 in September this year compared to 637.24 last year. However, the value of transactions recorded in September 2020 increased by 2.6 per cent in comparison to the N276.27 billion recorded last month.
In fact, since it fell sharply to N103 billion in April, occasioned by the coro-navirus (COVID-19) pandemic-induced shutdown of the economy during the period, the value of cheque transactions has been steadily heading north this year. Still, New Telegraph’s analysis of NIBSS data on cheque transactions 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, show 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 value of cheque transactions fell from N403.22 billion in January to N358.48 billion in February this year.
It, however, inched up to N361.72 billion in March. Similarly, while the total volume and total value of cheques processed by NIBSS stood at 10.81million and N5.38trillion respectively in 2017, it, however, dropped to 9.0million and N5.0trillion and 7.8million and N4.5trillion 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. Industry watchers, in fact, trace the decline of cheques in Nigeria to 2014 when the Central Bank of Nigeria (CBN) released its 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. Significantly also, following the sharp decline in cheque usage triggered by the cashless policy, NIBSS had predicted in a report in 2016 that “we might witness the end of the cheque book by the year 2050.” Furthermore, in a recent review of the payment system in the country, NIBSS noted 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 per cent 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 government-backed 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 nine 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 review.
Indeed, in South Africa, which has the continent’s biggest lenders, major banks, including Nedbank, FNB and Absa, have already announced plans to discontinue the use of cheque payments beginning from January next year.
The Payments Association of South Africa (PASA) said, last month, that it anticipated that even more banks would be issuing similar public announcements in the next few months. The association said the decline in cheque usage was being exacerbated by the coronavirus outbreak. It said: “Following the Covid- 19 crisis, 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.”
But the broad consensus among analysts in these parts appears to be that Nigerian banks will continue to accept cheques for some time to come. Interestingly, in recent weeks, lenders have been informing their customers via emails about the new cheque standard approved by the CBN, which will take effect from January 1, 2021.
The new standard will introduce a new digit on the Magnetic Ink Character Recognition code line on cheque leaflets as well as expiry dates for new cheque books. Supporting the view that cheques are not likely to become extinct in the country in the short term at least, a financial consultant, Mr. Evaristus Okechukwu, told New Telegraph that while it is true that many people are embracing electronic payments, a lot of firms still use them as a major means of payment. He said: “Cheques are still widely used by many corporate bodies in this country because they believe that the payment instrument is generally safer than cards and digital platforms, which are vulnerable to cyberattacks.”