Business

Value of cheque transactions declines by N73.49bn in April

Total value of transactions through cheques across the country amounted to N243.70billion in April 2021, down 23.2 per cent (N73.49 billion), compared to the N317.19 billion recorded for the previous month, latest data released by the Nigeria Interbank Settlement System Plc (NIBSS) shows.

The NIBSS’ numbers also indicate that the total volume of transactions through cheques dropped by 149,024 to 318.77 in April 2021 from 467.79 in the previous month. New Telegraph’s analysis of the NIBSS’ data also shows that the total value of transactions fell to its lowest level in April since the beginning of the year. Further analysis of the NIBSS’ data indicates that until the decline last month, the value of cheque transactions maintained an upward trajectory in the first three months of this year. For instance, from N248.21 billion in January, the value to N277.45 billion and N317.18 billion in February and March respectively.

The data also 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. Indeed, aside from when it declined sharply to N103 billion in April 2020 in the wake of the COVID- 19-induced shutdown of the economy, the value of transactions maintained an upward trend to hit N283.55 billion in September last year.

However, while available data between April 2020 and April this year presents a mixed picture with regard to whether the value of transactions across the country is de-clining or rising, further review of NIBSS’ figures shows that without considering April 2020 data, which was affected by the COVID-19 crisis, the value has steadily dropped in the last four years. For instance, it fell from N435 billion in April 2018 to N379.82 billion in April 2019, declining further to N243.70billion in April this year. According to analysts, the decline in cheque usage is not peculiar to Nigeria, but a global phenomenon, which is being driven by the widespread adoption of electronic payment channels. For instance, in South Africa, which has the continent’s biggest lenders, major banks, such as 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 anticipated that even more banks would take a similar ac-tion, noted that the decline in cheque usage was being exacerbated by the coronavirus outbreak. It said: “Following COVID- 19, 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.”

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 transactions. The policy placed a ban on payment of value above N10 million through cheques and directed that such payment should be made through electronic channels. In fact, 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 stated: “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. “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.” In a chat with New Telegraph, a top banker, who did not want to be named, also said that although cheque usage was declining in the country, the industry is not expecting cheques to become extinct in the foreseeable future.

He said: “Despite the rapid growth of e-payments, many corporate bodies in this country still prefer to use cheques because they believe that the process of clearing cheques deters cybercriminals.” New Telegraph reports that banks in the country commenced implementation of the Nigeria Cheque Standard (NCS) and Nigeria Cheque Printers Accreditation Scheme (NICPAS) Version 2, on April 1, 2021.

 

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