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TMCNet:  Implications And Challenges of E-Payment System

[October 18, 2010]

Implications And Challenges of E-Payment System

Abuja, Oct 18, 2010 (Leadership/All Africa Global Media via COMTEX) -- The advent of information and communications technology (ICT), not only in Nigeria, but the world over has brought with it some level of simplicity in the way business transactions are being carried out.

In advanced economies like Japan, China, Europe and America, the system has been operationalised several years ago and the people are savouring the advantages there for the technical, economic as well as the overall socio-political development of their people.

Nigeria has also been implementing the policy for a couple of years now, but as it is usual with any new policy, the challenges facing the policy are numerous and no doubt, they cannot be wished away.

Some experts have posited that the federal government should jettison the idea, while some are of the opinion that e-payment has brought with it good things as it has cut down the way some funds hitherto not remitted to the government's coffers.

Some have critically bashed the policy for making it almost impossible for them to get paid for jobs done. This, in most cases, is the lot of contractors and businessmen and women, especially those who transact business with the federal government, states and local governments in the country.

In other words, the level of accountability and transparency in public financial management witnessed in Nigeria today is brought about by the cumulative effects of the combination of various strategies among which is the e-payment system and it is being improved for new and better results.

This payment regime was unveiled by late President Umar Musa Yar'Adua during the presentation of the 2009 annual budget in October 2008 to the National Assembly as one of the measures for ensuring transparency and accountability.

He directed that all financial transactions of the federal government should be made electronically and this took effect since January 1, 2009.

E-payment is described by some experts as a subset of e-governance which is the application of electronic means of interaction between government and citizens and government and businesses.

It is a form of direct payments and banking without physical appearance at the ministries, departments and agencies or bank through the means of electronic, interactive communication channels and other technology infrastructure.

E-payment can also be described as the method of effecting payments from one end to another through the medium of the computer without manual intervention beyond inputing the payment data.

Consequent upon the take off of the policy, the office of the accountant-general of the federation issued treasury circular on the policy with guidelines on its implementation to income generation agencies of government like PHCN, FIRS, the Nigeria Customs Service, NNPC among others.

Speaking on the topic 'E-payment System: Processes, Procedures, Challenges and Prospects' at a recent function in Abuja, Director, Consolidated Accounts Department Office of the Accountant-General of the Federation, O.I. Osibote highlighted the objectives of the policy to include; elimination of the use of cash to facilitate speedy payments for all transactions, fast tracking the implementation of government policies through the elimination of delays in government payment system.

Minimise interactions of government officials and contractors to eliminate opportunity for corruptive tendencies, achievement of economy and efficiency in government financial transactions, enhanced real time reporting and improve quality of financial reporting system in the public sector.

It is also to eliminate many risks associated with carrying large sums of money such as armed robbery, fraud theft and others.

According to him, by implication, the introduction of the e-payment system is to put an end to the use of cheques or cash payments to beneficiaries, no physical contact between the accounts officials and beneficiaries in the ministries, departments and agencies, and to promote effective use of computer and computer software applications.

Osibote however stressed that normal book-keeping would continue to be effected in all ministries and agencies even as the Federal pay officers, Pensions pay officers, Police pay officers and the Customs area pay officers are still the sub-accounting officers for Federal agencies in the States.

On the challenges of the system, he said that the use of microfinance and mortgage institutions that are not linked with banks by beneficiaries poses a problem for ease of transfer of funds; problems from switches in effecting transfer from one bank to another; the absence of a legal framework for the policy is a problem; admissibility of electronic payments as evidence in court not yet in statute books.

He observed that since the implementation of the policy, there has been late returns or no response in respect of unapplied funds, use of different IT platforms by different banks causing lack of interconnectivity, no uniformity of account numbers as different banks use different numbers of digits and none naira based transactions not available.

Of important consideration is the fact that several risks are also involved that must not be treated with levity Osibote said, pointing out that technology system-has in it risks like downtime, systemcrash, lack of connectivity, delay due to queuing up of transactions, internet based attacks, file corruption, system compromise due to virus attacks.

There are also issues of wrong authorisation, failed transactions, reversal of mandates wrong amount credited into wrong account, vulnerability to world wide attack and so on, he added.

To mitigate these challenges facing the e-payment system, the Accountant General of the Federation (AGF), Alhaji Ibrahim Dankwambo constituted a committee made up of representatives from the 24 banks and the Central Bank of Nigeria (CBN), Osibote said adding that the committee meets regularly to proffer solutions to the problems.

The AGF, according to him, has also intimated the CBN on the need to champion the completion of the national switch which would address the problem of interconnectivity between the banks.

"The AGF has written the Central Bank of Nigeria to issue circular addressing sanctions on unacceptable delays in returning of unapplied funds. Microfinance banks have been called upon to be e-payment compliant if they wish to be in the business of banking" he declared.

The prospects of e-payment in Nigeria should be looked at taking into consideration certain other issues. For example the plan to increase power generation by the three tiers of government points in the right direction.

It is pertinent to note that these tiers of government have agreed to release $5 billion for the completion of the national integrated power project (NIPP).

With this, it is hoped that some of the power projects may be completed by the end of 2010 and this should improve power generation by at least 20 percent.

If power is improved as anticipated, the programme will run smoothly because if the unstable power supply of the country continues, then there may be very little or no gain because the programme will suffer huge set backs that will inadvertently affect the economy negatively.

While pointing the way forward, Osibote stressed the need for adequate investment in ICT, saying "This could be planned on any form that may be acceptable and convenient for the government.

He also called for security of CDs, flash drives, stating that measures should be taken to ensure that storage medium is delivered as intended. Osibote further said that applicable regulations including those for electronic approval processes consumer protection and e-transaction should be deployed and standardized as needed.

According to him "e-payment is still new and so, series of sensitisation meetings should be arranged at all levels, the banks and other stakeholders must be educated and informed of the need to consolidate efforts to make e-payment successful via reliable banking application and interface." Osibote advised the office of the Accountant General of the Federation (OAGF) to take the responsibility of assessing the level of compliance in all ministries, departments and agencies, adding that a work plan should be developed in this regard.

Also, it is a relief that the OAGF is already being repositioned for effective implementation of the e-payment through the Government Integrated Financial Management Information System (GIFMIS), which has an e-payment module integrated.

Information from the OAGF has it that GIFMIS will come on stream by 2011, to facilitate the end of end-processing of the e-payment initiative in order that the MDAs will make e-payments directly to the beneficiaries from the infrastructure installed in their offices.

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