In several developing economies, cash is usually the king that underpins most transactions. This is as economic experts have also argued that national development seems faster when there is increased financial penetration. It was in a bid to give teeth to this argument that the Central Bank of Nigeria (CBN), in 2012, adopted the National Financial Inclusion Strategy (NFIS), which focuses among others things on enhancing the adoption of cashless payment channels, ensuring that over 80 per cent of the bankable adults in the country have access to financial services and reduction of the exclusion rate to 20 per cent by 2020.
Since the adoption of the policy, Nigeria’s financial regulators have gone ahead to include the Microfinance banking, agent banking, and Mobile Money Operation (MMO) or Mobile Banking, in the basket of choices to achieve the objective of increased financial inclusion, albeit with very unsatisfactory outcomes.
For instance, the 2018 data by Enhancing Financial Innovation and Access (EFInA) put the nation’s financial inclusion rate at 63.2percent, meaning that as much 36.8 percent or about 40 million adults still lack access to financial services. The expectation of closing the 16.8 per cent shortfall may have even been mired by another elephant in the room: social engineering or electronic frauds, also known as e-fraud for short, which in most cases involve bank staff.
Already, the development is fast eroding the trust customers have in banks and their staff.
According to experts, social engineering is the use of tricks and psychological manipulations by a fraudster to collect sensitive security information from unsuspecting users.
Recent data generated by the Nigeria Deposit Insurance Company (NDIC) in a report, revealed that the amount involved in fraudulent activities in the banking industry increased from the N8.68 billion in 2016 to N12.01 billion in 2017,representing about 38 per cent surge. This was as the CBN also reported a staggering rise in reported cases of such incidences from 16,762 in the first half of the financial year of 2017 to 20,768 in the corresponding period of 2018. In its 2018 Financial Stability Report (FSR), the apex bank disclosed that the payment channels hard-hit include Automated Teller Machines (ATM), Point of Sales (POS) and Mobile Banking.
For instance, a Criminology, Victimology, Electronic Fraud and Cybercrime, researcher at the University of Ibadan, Oludayo Tade, stated in a report, Electronic Banking Fraud in Nigeria: How it’s Done, and What Can be Done to Stop It: “Our research investigated dimensions of electronic fraud in Nigeria. We found three including : internal fraud carried out by banks staff; external fraud carried out by ordinary Nigerians; and collaboration between fraudsters and banking staff. We found that inefficient supervision, non-performance of oversight by regional heads of banks, and poor follow-up on customers’ addresses (Know Your Customer) accounted for the fraud that took place.”
The FSR explains that ATM recorded the highest incidences of fraud in Nigeria with 34.87 per cent fraud interest index. Also, the mobile payment channel ranks the second with 28.21 per cent, while POS recorded 19.55 per cent in 2018.
Fraud incidences recorded across other payment channels include across-the-counter, 8.52 per cent; Cheques, 1.87 per cent; e-commerce, 0.14 per cent and Internet Banking 0.43 per cent.
Cases of fraud and forgeries recorded by the commercial banks rose to 25,029 at the end of December 2018, from 20,774 cases at the end of June 2018. In terms of the amount involved, the sum of N18.94 billion was recorded as cases of fraud and forgeries in 2018 full year, with actual losses estimated at N2.21 billion.
Similarly, the Nigerian Electronic Fraud Forum (NeFF) report for 2018 stated that electronic bank fraud cases rose to N5.571 billion from 2016 to 2018, while the value of fraud perpetrated across-the-counter has been on the decline over the same period, the ones done via ATM and mobile devises have been on the increase.
“In the first half of 2015, the actual loss incurred by banks was N1.9 billion, compared with N4.8 billion and N1.72 billion recorded at the end of the preceding-December and the corresponding period of 2014, respectively. The significant decrease in the actual loss reflected stronger internal control measures adopted by the banks and improved use of technology.”
According to the NeFF Chairman then, Mr Dipo Fatokun, “this goes to show that, increasingly, cyber attacks are becoming common-place and the tactics used are more damaging to individuals and institutions alike.”
Churning out the NeFF statistics at the 3rd NeFF general meeting in Lagos, former Group Managing Director/CEO of Zenith Bank Plc, Mr. Peter Amangbo, stated that “actual loss arising from banks’ fraud fell by 63 per cent, from N6.2 billion recorded in 2014 to about N2.3 billion in 2015, while attempted frauds dropped by 43 percent year-on-year, from N7.8 billion in 2014 to N4.4 billion in 2015.”
In those two years, 12, 204 cases of fraud were attempted with actual loss standing at N8.5billion, while the value of attempted frauds amounted to N12.2 billion.
In his keynote address entitled “Tackling the Risk of Social Engineering Attacks: the Nigerian Perspective” Amangbo, who was represented by Mr Sola Oladipo, said “social engineering is getting more sophisticated, requiring sophisticated actions and response”.
Defining social engineering as “the use of tricks and psychological manipulations by a fraudster to collect sensitive security information from unsuspecting users,” he warned that “the advent of social engineering is an indication that technology alone is not enough to keep” people “and the system secured.”
Sharing his bank’s experience, Amangbo explained that, like other industry players, Zenith Bank also experienced social engineering attacks but that the bank has continued to upgrade its IT infrastructure to curb cybercrimes. If you have very good system and very good people, their (e-fraudsrers’) job will be very difficult. But if your system is lousy and you have very lousy people, of course, it will be very difficult preventing them
“Preventing social engineering attacks and other e- frauds, entails that we should educate our customers and employees regularly on what they (fraudsters) do. Because when they don’t know what they do, that is why, when the unsuspecting people receive their messages, they respond. And when they respond, they lose huge sums of money.
Fatokun, who was then the Director, Banks and Payment Systems Department of the CBN, said since e-fraud has become rife in cybercrime attacks in the country. He explained that, almost on a daily basis, “a plethora of messages are sent by these criminals with the express intent to con the unsuspecting recipient, using techniques that appeal to vanity, greed or authority.” As a result of this, he opined that the Forum should deem it important to look critically at measures that would protect the industry from the menace of the social engineering attacks. The NeFF is an industry platform for collaborating on payments security.
He added: “It is often said that people, processes and technology are the tripod on which cyber-security lies, with discussion ever hovering on which is the weakest link. I must, however, submit that like what is required in building any chain, we must prepare to forge each link with the same degree of heat. In other words, no link must be too important or less significant in the pursuit of payments security.
Fatokun then advocated ”a workshop on the Cybercrime Prohibition and Prevention Act, which will expand understanding of the impact, implications and responsibilities of all stakeholders, particularly those operating within the financial services sector; Consistent publishing of literature that will benefit the entire payments industry and customers alike,
Mr Johnson Chukwu, CEO, Cowry Assets Management Limited, opined that to address electronic payment fraud, one needs to have multiple layers of security built into your electronic financial transactions.
His words: “I think financial inclusion does not have any issue addressing financial crimes because for one to address electronic payment fraud, you need to have multiple layers of security built into your electronic financial transactions. Secondly, the account holders must be discreet with revealing their password. Thirdly, there is also greed on the part of individuals where they are enticed by fraudsters with rewards that are not realistic and they fall for it and these are not things you can legislate against as it can only be moderated by awareness which i know the CBN, Bankers Committee and other financial agencies have been trying to do. The key thing is for financial inclusion to build layers of validation process or securities in the their financial transactions so that before anyone can breach the multiple layers, it will be difficult but in many cases of fraud, individuals allow themselves to be compromised as regards their password and so financial inclusion is not constrained to criminal activity, rather, it is constrained by access from rural dwellers to financial service platforms which is why the CBN licensed payment service providers and then agent banking as well as microfinance banks.
Meanwhile, the Bankers Committee and CBN have flagged off a cyber-security and fraud awareness campaign, called ‘Moni Sense,’ as part of their efforts to enlighten customers on the benefits of protecting their bank and other related transaction details from criminals.
Through the initiative, the CBN and the Bankers’ Committee aim to ensure Nigerians are empowered with critical information and knowledge necessary to make important financial decisions, enhance economic prosperity and continue to drive poverty reduction across the country.
A statement on the campaign indicated that the apex bank and the Bankers’ Committee would work to ensure Nigerians are empowered with critical information and knowledge necessary to make important financial decisions, enhance economic prosperity and continue to drive poverty reduction across the country.
It noted that the incidents of cyber-crime and other financial frauds usually heightens as the year gradually inches to an end, the partners stated that fraud and cyber security awareness was important in ensuring members of the public are informed on their role in protecting their banking information from fraudulent activities.
Chairman, Financial Literacy and Public Enlightenment Sub-Committee (FLPE), Mr. Emeka Emuwa said: “Fraudsters and scammers continually devise new ways to deceive the unsuspecting public, usually with the aim of luring them to inadvertently disclose confidential bank information.
“We encourage Nigerians to always be cautious and ignore any text message, phone call, or Email asking to update your bank information, provide sensitive bank details, disclose online banking details, debit card numbers or PIN to anyone”, the banker added
Financial literacy and public enlightenment are key components of the Bankers’ Committee mandate and the pursuit is considered crucial in the financial inclusion drive of the apex bank and deposit money banks and others in the country.
Nigeria @ 60: Footprints of banking sector in national development
Since the establishment of the Central Bank of Nigeria (CBN) in 1959, the events that shaped the development of the banking sector in the country have been pockmarked by the good, the bad and the ugly.
For instance, banking failure, which preceded the nation’s independence and trigerred various reforms post independenc, occurred in 1930. And between that year and 1959, 21 out of the 25 indigenous banks and nine foreign banks collapsed.
That incident cut down the number of banks in the country to 12 by 1960. And between 1960 and 1986, the number of commercial banks in the country mushroomed to 29, due to the deregulation of September 16, 1986, and peaked at 66 in 1992. However, owing to the liquidation of 15 banks over the years, the number declined to 51 at the end of 1998 and rose again to 89 by 2003.
In the year 2000, the universal banking system was introduced to bridge the gap between merchant and commercial banks, and proffer solutions to the problems of declining ethics, huge non-performing loans, low capital base, over-dependence on public sector funds and weak corporate governance.
During this period, the minimum capital base stipulated for banks was pegged at N2 billion, as against the initial N500 million capital base. It became operational in January 2001.
As at December 2006, owing to the consolidation of the banking system, the number went down to 25, later to 24 at the end of 2007 following the merger of Stanbic Bank and IBTC-Chartered Bank. It is pertinent to mention that the number of banks which closed shop stood at 48 between 1994 and 2006.
On July 6, 2004, the banking system witnessed what was called the ‘Soludo Solution’, when the then CBN Governor, Professor Charles Soludo, announced a comprehensive reform programme. The minimum capital base for universal banks rose to N25 billion. This was far above the initial capital base of N2billion, with full compliance by December 31, 2005. Many banks that could not meet the requirement were either acquired or merged with other banks.
The Mergers and Acquisitions involved 76 banks, out of the initial 89 banks. This brought down the number of banks to 25. Moreso, all the banks mobilised funds through Initial Public Offering (IPO) and 14 bank licences were revoked. The 76 banks “represents 93.5 per cent of the deposit share of the market, while the 13 banks that failed to meet the recapitalization requirement accounts for 6.5 per cent of the deposit share of the industry. At the end of the 18-month consolidation/recapitalization exercise, the capital market witnessed a boost of N406 billion in its market capitalization and N360 billion was accepted by the CBN in addition to foreign capital inflow of US$654 million and £161,993. Later, IBTC and Stanbic merged. This brought the total numbers of banks operating in the country to 24. Bankers and financial experts all over the world expressed satisfaction at the success of the policy which eliminated an old fashioned banking style for one that would move the economy forward.
In 2009, the apex bank announced that five Nigerian bank CEOs were dismissed and replaced with immediate effect. The affected banks were Intercontinental Bank, Oceanic Bank, Finbank, Spring Bank Union Bank and Afribank. In the same year, the Assets Management Corporation of Nigeria (AMCON) was established. To soak up the non-performing loans (NPLs) in the sector. The financing of AMCON is composed of a N50 billion CBN fund and 0.3 per cent of total assets of participating commercial banks. It also supports the implementation of International Financial Reporting Standards (IFRS) of for global reporting compliance in terms of reporting. This reform reviewed the universal banking model by restricting commercial banks to banking activities only. The reform also addresses excessive banking interest by the creation of a non-interest bank.
The apex bank adopted the National Financial Inclusion Strategy (NFIS) in 2012. The Strategy articulated the demand-side, supply-side and regulatory barriers to financial inclusion, identified areas of focus, set targets, determined key performance indicators (KPIs) and established the implementation structure. The NFIS was built on four strategic areas of agency banking, mobile banking/mobile payments, linkage models and client empowerment. Four priority areas were identified for guideline and framework development namely, Tiered Know-yourCustomer (T-KYC) regulations, Agent Banking regulations, National Financial Literacy Strategy and Consumer Protection. The Central Bank of Nigeria (CBN) and other stakeholders intend to implement a National Financial Inclusion Strategy that will reduce the percentage of adult Nigerians that are excluded from financial services from 46.3 per cent in 2010 to 20 per cent by 2020.
The number of Nigerians included in the formal sector will increase from 36.3 per cent in 2010 to 70 per cent by 2020.
But Enhancing Financial Innovation and Access (EFInA) said the target by CBN to ensure 80 per cent of Nigerian adults have access to financial services by end of 2020 is unlikely to happen.
EFInA) is the organisation that conducts biennial report on Nigeria’s financial inclusion. The organisation explained that, having covered Nigeria’s financial inclusion space in the last 12 years, the 20 per cent exclusion target is unlikely to be achieved as its data show that Nigeria’s exclusion gap was widening.
It said even though its 20218 data showed that more people became financially included the financial inclusion pace was however not matching the country’s population growth rate.
“What we saw between the 2016 and 2018 data was that more people were becoming financially included but not at the same pace as the population growth rate which is why the 80 percent target of financial inclusion for this year or conversely the 20 percent exclusion target is unlikely to be met if we are all particularly realistic,” Dayo Odulate-Ademola, Head of innovation at EFInA said recently.
Financial System Strategy (FSS) 2020
The CBN launched the FSS2020 in August 2006 to fast track the achievement of the country’s vision 2020. The FSS2020 is based on the recognition of the linkage between financial deepening/growth and economic developments.
The Financial System Strategy (FSS) 2020 is a national reform program aimed at developing and transforming Nigeria’s financial sector into a growth catalyst to fast track the achievement of the Vision 20:2020 and engineer Nigeria’s evolution into an International Financial Centre. The strategic objectives of FSS2020 are to strengthen and deepen the domestic financial markets, enhance the integration of domestic financial markets with the external financial markets and supporting the real sector.
To attain these objectives, the key regulators of the Nigerian financial system came together under the leadership of the Central Bank of Nigeria and crafted the vision to make Nigeria the safest and most diversified growing economy among emerging markets. The key institutions are: CBN, SEC, NAICOM, PENCOM, DMO, FMBN, SMEDAN, NSE, NDIC, FIRS and FRC.
FSS2020 aims to transform Nigeria’s financial system into a catalyst for growth, develop Nigeria into an international financial centre, and transform the economy into one of the twenty largest economies in the world by the year 2020.
The overall goals of FSS 2020 Financial Markets Sector are derived from the Money and Foreign exchange markets and the capital market. Money Market refers to the segment of the Nigerian financial system comprising both the money market and the foreign exchange markets activities. The Central Bank of Nigeria is the regulator of the money market. The capital market is the segment of the financial system where medium to long term funds are mobilised. The Securities and Exchange Commission is the apex regulatory authority of the Nigerian capital market charged with the dual responsibilities of regulating and developing the market.
Naira steady amid #EndSARS mayhem
The naira last week traded at the parallel market for N463 against the dollar, a slightly weaker ratio from the N462 exchange rate the previous week. Naira’s exchange rate remains at N379 to the dollar at the official market.
The local currency, however, sustained its stability despite the impact of the #EndSARS protests across major cities in the country and reduced business activities triggered by the protests. The deadly clashes between protestors and security forces escalated and led to number of deaths. Analysts said that negative sentiment against the naira slowed as rioting, blazes and round-the-clock curfews slowed economic activity and shuttered many businesses.
Investors in the equities market also earned N19.7 billion profit as market capitalisation rose to N15 trillion, putting the year-to-date returns at 6.9 per cent.
Speaking on the development, Murega Mungai, Trading Desk Manager, AZA, global currency dealing leader, said the Naira remains in a risk-averse state, with Amnesty International (AI) saying at least 56 people have been killed since the #EndSARS protests began earlier this month.
The Central Bank of Nigeria (CBN) projected that lower oil export revenue and the economic impact from the pandemic would cause external reserves to sink to between $29.9 billion and $34.3 billion by year-end, with the development expected to further add to naira’s pressure.
Even though speculative buying has been lower than normal, anticipation of naira depreciation has driven hoarding of dollars, while demand for forex from manufacturers persists.
CBN to promote zero balance account opening
The Central Bank of Nigeria (CBN) says it will promote the opening of new accounts with zero balance.
This was contained in its report, Monetary, Credit, Foreign Trade and Exchange Policy Guidelines for Fiscal Years 2020/2021.
According to the report, the apex bank gave this directive to deposit money banks (DMBs) to ensure greater financial inclusion in the country.
The banks are expected to simplify their account opening processes, while adhering to Know-Your-Customer (KYC) requirements.
CBN further urged the banks to develop new products that would provide greater access to credit.
“As part of its effort towards promoting greater financial inclusion in the country, the bank shall continue to encourage banks to intensify deposit mobilisation during the 2020/2021 fiscal years,” the report read.
“Accordingly, banks shall allow zero balances for opening new bank accounts and simplify their account opening processes, while adhering to Know-Your-Customer requirements.
“Banks are also encouraged to develop new products that would provide greater access to credit.”
The report added that the shared agency network expansion facility (SANEF), established to enhance the provision of financial services access points in under-served and unserved locations will continue in the 2020/2021 fiscal years.
Banks, mobile money operators, and super-agents shall continue to render returns in the prescribed formats and frequency to the CBN.
The apex bank said the national financial inclusion strategy (NFIS) was devised to enable adults in Nigeria have access to a broad range of formal financial services that are affordable, meet their needs, and provided at an affordable cost.
The strategy was revised in 2018 with focus on five targets: females; youth within the age bracket of 18-25 years; rural dwellers; North-West and North-East regions; and micro, small and medium enterprises (MSMEs).
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