CBN, NIBSS Have What it takes to Make Cheques Clear Instantly – Yele Okeremi, CEO, Precise Financial System

Yele Okeremi is the Chief Executive Officer of Precise Financial System, an indigenous Information and Communications Technology firm with over 20 years of experience in the Nigerian market and 34 other countries across the globe. PFS is currently handling the Central Bank of Nigeria’s cheque truncation initiative. In this interview with ADEYEMI ADEPETUN, he bares his mind on challenges confronting the growth of ePayment in Nigeria; perceived lull in lull in local software growth and how far the CBN has gone with cheque truncation. Excerpts…


THE Central Bank of Nigeria (CBN) has announced same day cheque clearing. How has this boosted the apex bank’s e-payment regime?

I commend CBN for this initiative and many others. Firstly for their boldness, courage and leadership and the ability to try out new things. Of course this is something they know cannot fail anyway, because if you look at the job and responsibilities of a CBN governor, he’s concerned about the payment system; movement of money; controls money supply and one of the things that affects the economy of any nation is what the economist like to call the velocity of money, how fast can money move from one account to another, which is what defines a payment system.

  Now, we noticed that the CBN lately has been encouraging the use of electronic money and if you look at what the global players, even the World Bank have been doing, they were initially discouraging cheques and truly if you are observant you will notice that cheque has been declining in Europe among others, but they have not told us why.  What the CBN has done is to unpack it, the reason being that cheque payment are extremely slow all over the world. The reason for this is simply because the logistics of managing cheque payment and that is the reason it takes six to 15 days to clear but by the initiative of the apex bank and NIBSS, today Nigeria has truncated cheques and what this has done is that it has brought cheques to the realm of electronic payment.

   This is also why the CBN and NIBSS are taken it further to saying that cheque will be able to clear within the same day. I am not CBN and can’t speak on their behalf but if I can take a peep into the minds of the apex bank management, I actually see them taken this further sometime in the future to say that cheques will be cleared instantly because I am aware that the apex bank and NIBSS does have what it takes to make cheques clear instantly and that is a very significant because now the world can come and learn from Nigeria.

    Nigeria will become a nation where the world can come and learn from. So it’s such a great thing will have multiplier effect on eCommerce and makes the payment system better. The other beautiful thing is that it will make users to have choices of payment depending on the circumstances.

In a simple way, how do you define cheque truncation?  

What cheque truncation means is that banks will no longer need to exchange physical paper cheques among themselves in order to facilitate payment. If you look at the life cycle of cheque payment in the past before truncation came into being, when you give me your UBA cheque and I take it to First Bank, what happened is that First Bank receives it in their branch and sometime later in the day, they send it to their clearing and there is a place called central clearing where banks meet on a daily basis to transacts and exchange cheques.

   But what cheque truncation says is that you don’t need to exchange that paper any more. All that needs to be done has now been taken over by technology. So by images and data relating to the cheques the bank can do the cheque. So, now there is no physical clearing anymore, it is now electronic. So, the banks now sit down in their respective offices and cheque clearing is done.

With PFS championing cheque truncation, what is the acceptability level?

Cheque truncation has already come into the system. PFS has cocktail of solutions to support the process. We have done the automation for banks. Quite enough, a few banks run on our applications and the way we have done is to bring out the beauty of cheque truncation, which is bringing the banks closer to the customer in a manner the banks are able to deal with the cheques. What PFS is doing is to ensure you sit at the comfort of your home or office and clear your cheques. Few banks are already talking about putting ATMs kiosk that will accept cheques which makes it possible for you to deposit them 24by7.

Looking at the slow speed nature of Nigeria’s ePayment system, how can the CBN upscale the initiative in the light of the various challenges?    

Again, I think the CBN is probably aware of these challenges and they are getting feed backs as well. One of the challenges is even define what constitutes electronic payment. At a time people were defining electronic payment as any payment other than cheques and cash. Later, the apex bank has to correct that to say no, that electronic payment doesn’t involve cash. But today, cheques have come in the realm of electronic payment.

  The challenges that we have concerning ePayment in the initial focus are not about that the process was not working, it is 100 per cent workable, but they are particular that we have challenges especially with infrastructure. Even I have experienced those challenges, where I will go places and would want to make payment with my cards even in metropolitan centres including Lagos and Abuja and the counter party tells me…sorry, our PoS is not working and these are myriads of challenges. It is not working because there is no electricity; connectivity among others. So those things have limited the growth.

   However, some of these things are being taken care of by infrastructure providers and CBN is engaging those involve, including service providers.

  The CBN have also make things easier by the further shortening of the clearing cycle for cheques in view of the fact that should all these other channels fail, that you will still be able to transact with cheques. That is one of the beautiful things the CBN is doing to jumpstart the ePayment process in Nigeria.

    The CBN will continue to do things to ensure that it becomes easier for Nigeria, first of all doing something like this, there are three aspects, which include the technology, legislation (I know the CBN is working hard to get appropriate legislation) and the most important part of it is the social, how do people respond to this and I can say that there have serious enlightenment campaigns, education among others.

   Another thing, which I will like the CBN do very seriously, is to monitor the banks. One of the challenges I have seen with the ePayment era, as a user I don’t even know what my bank charges are any more. The banks just charge arbitrarily. Recently, I did a transfer on my savings account and I got an entry in the account telling me COT charges on a savings account…you can imagine that. I had to call the bank, ofcourse they did the calculation manually and they said to me that it was electronic issues and I told them I am going to report them to CBN. These are the issues, when we do transfers we don’t even know how much to expect as charges from the banks. I think it is one of the areas the CBN need to focus more to ensure ePayment didn’t fail. To me one of the beautiful things of electronic payment should among others be to ensure the velocity of money increases and secondly reduce the cost. Infact, it was one of the promises, when we are talking about cash-less, remember, the CBN said 90 per cent of Nigerians were subsidizing 10 per cent, doing high cash volumes. But what is happening today, pretty much, every body’s cost have increased, it even get worse if your cost increases and you are aware of it you can plan, but in a situation where you don’t even know what to expect.

How has the country fared with the cash-less economy initiative, which has gone nationwide?

What cash-less policy is trying to do is to as much as possible discourage much use of cash. Looking at it very well, carrying much cash about doesn’t really appeared safe. Today, barring the challenges of cost I spoke about earlier, but if they are removed, it is better. Carrying cash all around doesn’t really make sense because you wont be able to achieve much on that. There are various channels that can aid faster money transfer all around.

   The business of PFS in this is to make the corporate to be able to have the benefit of these in a seamless manner. Truly, when you look at what is happening, if an individual wants to give someone money, you can write a cheque instantly or you do transfer using the mobile phone or through the Internet Banking platform, but if you wanted to do that on PFS, it’s not possible that way, no corporate does that.

    First of all, how do corporates pay, they must pay upon the receipt of an invoice or demand notice. Then there is internal processes that fix it, which has a link to some payment switches either Remita, Interswitch, eTranzact, among others. When a corporate does this, it is important for them to ensure that the records are kept and the double entry are posted and passed. These are all processes that ideally, they are supposed to happen simultaneously. So what PFS does is that it provide the application that allows corporate end to end to take care of all these processes. The cash-less initiative has come to simplify processes for Nigerians.

PFS runs software, how will you access the local industry in Nigeria?

As far as the local software development is concerned, we are far from where we ought to be. It must however, be said that there have lots of efforts. That the industry is still foot dragging, there are myriads of problems.

   Dispassionately, if you go to institutions such as Institute of Chartered  Accountant of Nigeria (ICAN) with a beautiful building on the Island; the Nigeria Society of Engineers (NSE); Chartered Institute of Banks of Nigeria (CIBN), I began to wonder why  is it that the Institute of Software Practitioners of Nigeria (ISPON) does not have an edifice? Are we saying that the value the practitioners deliver are less that these other professionals?, I beg to disagree on this. The reason is that if you look at the trend world over, who are the richest people in the world? How many bankers are there? If you see any banker that claims to be rich…such is a thief.

    But if you look closely on the world map of the richest, who are those that you will see there, you will see good number of people from the software sector. But why is different in Nigeria? These are questions we should ask ourselves. The answers are not difficult to see. They are very visible from the standpoint of our compensation mechanism.

   Here, compensation is not commensurate to value addition. Secondly, which I have harped on times without number, there is a huge market for software in Nigeria and everybody is buying but where is the money going?

  We buy software in this country, shipping money to India, America and Europe. I said this earlier that there are three aspects including legislation; technology and social. Take a look at Microsoft; Oracle, Google, Facebook, some of their best programmers are Nigerians and Africans. So, this tells me that the ingredients and the capabilities for Nigerians to develop excellent software are available.  But the value system that galvanized this is seriously lacking.

   First of all, there is no policy traction yet. However, we can see that the Ministry of Communications Technology under the leadership of Dr. Omobola Johnson is trying to entrench and institutionalized a software policy in the country and encourage local content development. But having said that, it is nice to say patronize local on the other hand we must develop capacity. This is because one of the challenges we have in this part of the world is that it is possible when you say can you make this pen (as an example) for me, one unit? And I said yes. I can do one unit, you will say excellent, but you tell me to produce a thousand unit, you will discovered that none of the thousand unit can pass the test of time and these are issues that has to do with capacities.

   These are things, ISPON for example is doing. The institute is very focus on developing capacity in the sector and if you look at the programmes of ISPON, you will discover that they are making efforts to see how we can engage at the lowest possible level to develop this sector and make Nigeria competitive.

   For this to happen, two things must work. Firstly, the market must be ready for us and be willing to accept what we produce and secondly practitioners must be ready to give the market what it wants. Agreed, it is not a simple thing at all, particularly when the market has alternatives and remains and unforgiven one, so we need to be aware of this. This is where the government must come in and cushions the effect of the intrigue startup period, such that applications that we are producing might not yet be up to that point in terms of maturity. That is where we talk about subsidy. I am an advocate of subsidy on the short run and subsidy that is capable of paying back itself in multiple folds.

   I do not believe in perpetual subsidy and that is where the kind of thing we can begin to do and guarantee that we have people capable of making Nigeria become software development power house world over. I see a lot of engagement happen between government and ISPON.

   Looking at those of us in ISPON today, we are running the institution with our money. The reason is the passion and I can say it authoritatively that what we are doing today is not about ourselves but those coming behind us. Those coming behind us don’t have to have the same struggle we had, we have to create an environment for them to be able to succeed way above whatever level of successes we have had.

   ISPON planned to do a lot but the resources are not yet sufficient, even the environment itself is still a little bit hostile. Corruption is even another major factor confronting our development. The Indians are easy to convinced to buy Nigerian software, it is ‘your’ brother in that place that will work against you because he wants a bribe. Why development will continue to elude us is because out there in the developed world offenders, especially on corruption are dealt with but here in Nigeria nobody cares.

    However, the journey of a thousand miles begins with a step; I believe gradually things will change.

Can we say ISPON’s strategies will encourage software development in Nigeria?

Yes. The strategies are already working. It is just that some people believed that the country is complex to do business. The politicians are the one making this country look as if is bad. Nigeria is one of the easiest nations to live. I have managed PFS for the last 20 years and we are growing bigger daily. There were days that we couldn’t pay salaries in this company, but things have changed dramatically, those who worked with me them none of them left, we are still together now. The leadership of ISPON is to grow the sector and we are very much ready to help in developing this country.

Why do people still prefer foreign software to local brands in Nigeria?   

To be clear about this, I will say the readiness of even the practitioners is critical in this move. Smart nations understand this process. The bottom line is about building a capacity. However, I must say that it is a very vicious cycle because it is the market that must encourage us to develop.

   On the other hand, the market itself must believe in indigenous practitioners. We must believe in ourselves to be able to move forward. Instead of telling ourselves fifty reasons why the economy is not working, we must look at one reason why the economy will work then we pursue it and achieve result. This was why the likes of Oracle, Google and others succeeded. For the sector to become successful, the environment must allow it.

    So many things must change in Nigeria; we must stamp out corruption by all means so that things can be in proper shape not only in the software sector, but also across the economy.

For Nigeria to become a core computing nation, what advice will you give to government and the private sector? 

The fact remains that there is no local software anywhere. Software is global. One thing you will notice is that all perception of problems are localized. Because for you to develop a solution you must appreciate a problem.

   The market is here, but there must be a concerted effort and this starts from policy implementation. I said earlier that three things are critical, legislation; technology and social. There must be policy and even legislation to encourage our people to do things that are good and discourage the taking of Nigerian wealth to strangers. There must be reward for doing the right thing and punishment for doing anything bad.

   We must celebrate those doing good in this country and not corrupt politicians. The society must come up with practices and systems that add values.

You are handling Demo Africa initiative for the ministry of Communications Technology, what is this and benefits to the Nigerian economy?

Demo Africa is what you can call a technology launch pad for young technopreneurs. It is specific to technology. What this initiative tries to do is to bring young technology startup together. One of the challenges that people face in business is funding, how do I get capital. Today, most people talk about the financial capital, but the beauty of technology is that the biggest capital you need is intellectual capital. So, we are talking about people who already have the Intellectual capital, whom we bring together with those who already have the financial capital, who will provide guidance and mentoring for them, which is one of the challenges we have in the software sector. The industry because of what it has gone through, we have not been able to see many people who have learnt software from the best.

   So, what Demo Africa is trying to do is to bring in people with intellectual capital together with people who have financial capital, emotional capital and organizational capital. When all these come together, we all know what the impact will be, where we will have the biggest explosion.

  Demo in itself has been holding in the United States for long, so, Demo Africa is an initiative of  the United States Department of States and Lions Africa.

   Lions Africa is conglomeration of global huge companies including Microsoft; Google among others. They come together because they have now realized, like I said no local software anywhere, that the next Google might just emerged from Nigeria, so, they brought it to Africa. They have had two episodes in Kenya last year and year before and by the efforts of the minister of Communications Technology; the ministry and NITDA, they felt this should happen in Nigeria and this year the country got the hosting right. It will happen this September, later in the month.

     What Demo does is to invite applications across Africa, they are scrutinized, adjudged by select judges all over the world with 40 finalists emerging and it is this set that comes to the event and they are mentored and they do their pitching, which is done on a level playing ground, from which they can get investors.

CREDIT: http://www.financialtechnologyafrica.com/