User:Ongmay/sandbox

Introduction
AfriGo (portmanteau of Africa and Go) is Africa’s inaugural national domestic card scheme introduced by the Central Bank of Nigeria (CBN) to enhance the payment infrastructure within Nigeria. Launched on January 26, 2023, by former CBN Governor Godwin Emefiele in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS), this initiative represents a significant step by the Central Bank to foster a cashless economy and promote broader financial inclusion across Nigeria. AfriGo offers various card products, including debit cards, credit cards, virtual cards, and prepaid cards, aimed at providing more accessible financial services to Nigerians. The scheme is noted for being the fourth major player in the Nigerian card payment landscape, alongside international counterparts such as Mastercard, Visa, and the Nigerian-owned Verve. In a statement, Emefiele highlighted that "International card schemes would not be restricted in Nigeria. Instead, AfriGO aims to offer additional options for domestic consumers while promoting service delivery that is more innovative, cost-effective, and competitive." .

AfriGopay Financial Services Ltd, an affiliate of NIBSS, holds a license from the CBN to manage and deploy the AfriGo card scheme. Established in 2023, AfriGo offers a range of products including debit cards, credit cards, prepaid cards, and virtual cards. As of 2024, the scheme has distributed over 3 million cards.

In March 2024, the federal government of Nigeria announced its intention to launch a payment-integrated ID card using the infrastructure provided by AfriGo. This initiative is designed to improve the accessibility and efficiency of social and financial services across the country.

Background
Prior to the launch of AfriGo, Nigeria's payment system was predominantly dominated by international card schemes such as Mastercard and Visa, along with the locally established Verve. These schemes facilitated transactions within Nigeria, which has a population of approximately 218 million. Despite the widespread use of these services, the Nigerian payment landscape was still fraught with several challenges. The Central Bank of Nigeria identified a number of issues impacting the effectiveness and inclusivity of these systems:

Low Financial Inclusion
The Nigerian government, alongside entities like Enhancing Financial Innovation and Access (EFInA), has identified a considerable gap in financial inclusion across the country. This issue pertains to the restricted access to financial services for individuals and businesses, especially affecting the unbanked and underbanked populations. The challenge of low financial inclusion arises from various factors including limited banking service availability, high transaction costs, insufficient financial literacy, bureaucratic obstacles in obtaining necessary documentation, geographical limitations, distrust in formal financial institutions, and stringent regulatory frameworks.

To address these issues, the Central Bank of Nigeria endorsed the Maya Declaration in 2010, which set a target to reduce financial exclusion to 20% by 2020. This led to the formulation of the National Financial Inclusion Strategy (NFIS) in 2012, aiming to achieve an 80% rate of adult financial inclusion by 2020. Despite these efforts, adjustments like the NFIS 2.0 for the period 2018-2020 were necessary to adapt to the changing financial landscape. However, projections by the CBN for the period 2019-2024 indicate a financial inclusion rate of 64.1%, missing the 80% target set for the end of 2020. A closer look at the data reveals underperformance across several sectors, including payments, savings, credit, insurance, pensions, and services provided to formally banked individuals, which lag by an average of 30%.

Low Payment Card Penetration
Concurrent with Nigeria's low financial inclusion, there are significant challenges with payment card penetration. As of 2022, Nigeria ranked 75th globally in debit card ownership per capita, with only 32% of adults owning a debit card. Additionally, credit card penetration is even lower, with Nigeria ranking 114th globally and only 3% of the population possessing a credit card. This limited use of payment cards is often attributed to Nigeria being a low-trust society with a preference for physical cash transactions. The consequences of low payment card penetration are multifaceted, impacting economic development by restricting access to financial services, increasing reliance on cash, and limiting the effective tracking and monitoring of financial transactions.

Foreign Exchange Issues in Nigeria
In recent years, Nigeria has faced significant economic challenges, marked by escalating inflation rates resulting from monetary policies that have precipitated a notable depreciation of the Naira against the US dollar. These issues have been exacerbated by the country's heavy reliance on dollar-based transactions within its domestic payment industry, particularly through international payment card schemes, which has considerably exacerbated Nigeria's foreign exchange (FX) challenges. This dependency has several ramifications:


 * 1) Increased Demand for Dollars: The facilitation of transactions in US dollars by payment networks has increased the domestic demand for the currency. This demand places additional strain on Nigeria’s limited foreign exchange reserves and contributes to the ongoing devaluation of the Naira..
 * 2) Impact on Foreign Currency Reserves: When Nigerians use their payment cards for transactions with international or online vendors, it intensifies the drain on the nation’s foreign currency reserves. This further exacerbates the scarcity of foreign exchange.
 * 3) Exchange Rate Volatility: The reliance on dollar transactions heightens exchange rate volatility, which in turn affects transaction costs. This volatility impacts both consumers and businesses, altering the economic landscape.
 * 4) Increased Costs: As the Naira depreciates, dollar-denominated transactions become more expensive for Nigerians, which raises the overall cost of living and the expense of conducting business.

Data Sovereignty
Alongside foreign exchange challenges, the Nigerian government has raised significant concerns regarding data sovereignty in the context of international payment schemes. The principal issue is the protection of personal and financial information of Nigerian citizens, which is managed by global payment networks. Specific concerns raised by Nigerian authorities include data localization, particularly the the storage and processing of sensitive financial data outside of Nigeria’s jurisdiction. There is also anxiety over data security. Potential security breaches could compromise the privacy and financial integrity of individuals and pose broader risks to national security.

Domestic Payment Schemes
A card scheme is a system that supports the processing of transactions made with debit, credit, or prepaid cards at automated teller machines (ATMs) or point-of-sale (POS) terminals. Commercial banks rely on these card schemes to issue cards to their customers.

Domestic payment schemes are systems established within specific countries to manage electronic transactions predominantly within national borders. Regulated by the government or other designated authorities, these schemes often involve cooperation among banks, financial institutions, and other stakeholders. They offer the necessary infrastructure and standards for processing various types of transactions, including card payments and bank transfers, tailored to meet the country’s specific regulatory and operational requirements.

Domestic payment schemes include a subset known as card schemes, which are designed to facilitate transactions using debit, credit, virtual, or prepaid cards issued by local financial institutions. These schemes typically operate independently or in collaboration with international card schemes. They serve a pivotal role in facilitating transactions within the country's borders by providing the infrastructure required for card issuance, authorization, settlement, and clearing of transactions.

'''Several domestic card payment schemes have experienced significant growth in recent years, exemplifying the global trend towards localized financial solutions. Notable among these are:'''


 * Cartes Bancaires: This French card scheme manages 60% of all card transactions in France and has partnered with Visa or Mastercard for global card acceptance.


 * Verve: Managed by Interswitch Group, Verve is the largest domestic card scheme in Africa, with over 19 million cards active across the continent.


 * Rupay: Launched by the National Payment Corporation of India (NPCI) to propel India towards a ‘Less Cash’ economy with a low-cost debit/credit card . In 2012, Rupay partnered with Discover Financial Services to bring international services to Indians . As of November 2020, 603.6 million Rupay cards have been issued by nearly 1,158 banks.


 * Nets: The Network for Electronic Transfers (NETS) was established in 1985 by Singapore’s three largest banks: DBS, OCBC, and UOB . NETS runs Singapore's primary debit scheme, allowing customers from major banks to conduct transactions using physical or contactless ATM cards, along with mobile devices. Participating banks comprise DBS Bank/POSB, HSBC, Maybank, OCBC Bank, Standard Chartered Bank, and UOB.


 * Other notable domestic Card payment schemes include: Troy (Turkey), Meeza (Egypt), Mada (KSA), Mir (Russia), Elo(Brazil), PromptPay (Thailand), Swish (Sweden), iDEAL (Netherlands), IPP(UAE).

The AfriGo Domestic Card Scheme
In response to challenges such as low financial inclusion, a cash-dependent economy, minimal penetration of debit and credit cards, high transaction fees denominated in USD, concerns over data sovereignty, a heavy reliance on the US dollar, and significant pressure on foreign exchange reserves, the AfriGo domestic card scheme was introduced.

Launched on January 26, 2023, by former Governor of the Central Bank of Nigeria (CBN), Godwin Emefiele, in collaboration with the Nigeria Inter-Bank Settlement System (NIBSS), AfriGo aims to transform the Nigerian payment landscape. Since its inception, the scheme has successfully established a comprehensive payment infrastructure, sanctioned three card manufacturers, set up a testing laboratory, and launched a variety of products including contactless debit, credit, virtual, and prepaid cards. These initiatives are designed to mitigate longstanding financial challenges and enhance economic participation in Nigeria.

Key Benefits of the AfriGO cards:


 * Cost-effectiveness: The CBN states that AfriGo cards will be more affordable than existing options, with costs expected to be below ₦1,000—the typical price for obtaining a debit card from most Nigerian banks.


 * Reduction in Operating Fees: The scheme is anticipated to lower the costs associated with card operations significantly, with all fees payable in Naira, thus reducing exposure to foreign exchange rate fluctuations.


 * Alleviation of Forex Pressure: Prior to the introduction of the AfriGO scheme, all Nigerians encountered significant challenges accessing foreign exchange for both personal and business transactions . The main reason for this was the limited availability of the dollar. By conducting transactions in Naira, AfriGo aims to ease the demand on foreign exchange reserves, thereby lessening the economic strain from USD scarcity.


 * Data Sovereignty: AfriGo ensures that all transaction data remains within Nigeria, offering an alternative to the current models where data is managed overseas by companies like Visa and Mastercard. This initiative is expected to enhance the protection and management of local financial data.


 * Greater Financial Inclusion: By making cards more accessible and reducing fees, the CBN hopes to expand the use of AfriGo across Nigeria, aligning with the national goals of financial inclusion set in 2012.


 * Products for its people: With comprehensive insights into the local payments landscape, AfriGo is positioned to develop financial products that are specifically suited to meet the needs of Nigerians, underpinned by robust security measures and regulatory oversight.