Deposit money banks (DMBs) in the country cleared cheques valued at N281.83 billion in November, 2021, compared with N257.48 billion in the previous month, latest data released by the Nigeria Interbank Settlement System Plc (NIBSS) shows. Volume of cheque transactions also increased to 377.54 in November from 357.55 in October, according to the data. New Telegraph’s analysis of the NIBSS’ numbers for the first 11 months of the year indicates that apart from the months of April, July and October, higher value of cheques was cleared in a new month compared with the previous month’s. Thus, the value of cheque transactions, which stood at N248.20 billion in January, rose to N277.45 billion and N317.19 billion in February and March respectively.
Similarly, after declining to N243.70 billion in April, it increased to N246.62 billion and N263.66 billion in May and June respectively, before falling to N248.57 billion in July. Also, the value of cheque transactions, which stood at N265.44 billion in August, rose to N269.37 billion in September before dropping to N257.48 billion in October.
This means that NIBSS recorded an increase in the value of cheque transactions in eight out of the last eleven months. However, a detailed analysis of the NIBSS data shows that the value of cheque transactions has been heading south in the last five years. For instance, NIBSS’ data indicates that the value of cheque transactions fell from N431.57 billion in November 2017 to N415.49 billion in November 2018, dropping further to N344.10 billion in November 2019 and then down to N301.68 billion and N281.83 billion in November 2020 and November 2021, respectively. Analysts note that 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.
In fact, 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 from January 2021. The Payments Association of South Africa (PASA), which said that it anticipates that even more banks will take a similar action, noted that the decline in cheque usage is being exacerbated by the coronavirus outbreak.
In a statement, the association noted that: “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.” For Nigeria, analysts trace the decline of cheques in the country to 2014 when the Central Bank of Nigeria (CBN), in line with its cashless policy, released a new 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 payment channels. Commenting on the sharp decline in cheque usage triggered by the cashless policy, NIBSS, in a report released in 2016, predicted 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.” Still, while the data may show that cheque usage is on the decline in Nigeria, financial experts in the country do not expect lenders to discontinue the use of the financial instrument anytime soon. A top official of a Tier 2 bank, told New Telegraph on condition of anonymity that “although e-payments are growing rapidly, many corporate bodies in this country still prefer to use cheques for Business-to-Business (B2B) transactions and also because they believe that this gives them some sort of protection from cybercriminals.”