In a circular titled ‘Interoperability and Interconnectivity of the Payment System Infrastructure in Nigeria' to all banks, switching companies, and other parties in the Nigerian payment system, the Central Bank has directed that all automated teller machines (ATM) and point of sale (POS) terminals should be configured to accept and process all payment card schemes and other electronic payment instruments that are acceptable in Nigeria.
"The deadline for compliance is December 1, 2010," the circular added. The aim, according to the CBN, is to achieve an effective and robust payment system in line with best practice.
The CBN maintains that the Nigerian Central Switch (NCS) system exists to address the issue of interconnectivity and is insisting that private switches shall not connect directly to one another.
All banks have been instructed to adjust "their switching systems connect to the Nigerian central switch and only one other private switch of their choice as determined by the type of business they are involved in. All participants with multiple connections to private switches have been given until December 1, 2010 to terminate multiple connections.
Many seen this directive as a policy somersault. A number of operators who spoke off the record said the directive was contrary to expectations in a free market economy.
"Nothing I am going to say about this matter is going to be complimentary about the CBN," said a staff member of one of the new switching companies.
"A few years after licensing more switching companies and collecting huge sums from them, you now create another company that all other switching companies must connect to."
Another industry operator said the NCS does not have the technology to play the role that the Central Bank is thrusting upon it.
"Right now, even the central switch is not yet in full operation. They do not have the capacity and they are yet to fully take off. Now, how can the Central Bank lump every payment system operator into a central switch, when our operations are different. Each one has its own business model with its own area of specialization."
He said the directive will end up limiting the options available to consumers.
However, Evans Woherem, executive director, operations and IT for Unity Bank, said Nigeria was in need of a central switching system in order to enhance interoperability in the payment system.
"I think it is a good thing because of the need for proper convergence. There was that need for proper interconnectivity and the way the country chose to do it was through the NIBSS (Nigeria Inter-Bank Settlement System)," he said.
Evans Woherem, who was the former chairman of Interswitch, said there was nothing wrong if the CBN reverses an earlier decision, so long as it was for the common good.
"I think it is understandable that you might proceed on a particular path only to realize that you ought to have done it differently. l think it is okay. It shows that we are making progress," he said.