Russia taught us one lesson last year—it sucks to be blacklisted from the global payments network.
On March 2022, VISA and Mastercard suspended services to several Russian banks to comply with US sanctions following Russia’s invasion of Ukraine. Overnight, Russians found their cards could no longer make payments on foreign websites. Many were left scrambling to find cash-dispensing ATMs as their fate had been decided by companies headquartered in the US—5,000 miles away.
It could have been a ghastlier tale if not for Mir, Russia’s state-backed payment system, which allowed domestic transactions to carry on as usual.
To be fair, Russia is a unique case. Nigeria isn’t currently at risk of being booted by a global financial superpower. But geopolitics aside, there are ample economic reasons for developing nations to be wary of over-dependence on foreign-owned payment networks. Dollar fees for international card services pressure local banks dealing with Nigeria’s FX scarcity. On top of that, the global microchips shortage is making chip-and-pin cards a scarce commodity.
Still, local payment systems don’t eradicate the need for international players. While local payment systems (like Russia’s Mir) are a good hedge against geopolitical risks, they’re often limited when it comes to international payments. That’s where global card companies like VISA and Mastercard retain a strong advantage.
Nigeria has talked a big game about expanding its digital economy. President Tinubu has promised one million digital jobs. Connecting our local digital economy to the rest of the world will require local and international payment infrastructure and Nigeria has set the pace for other nations on the digital payments front. Nigeria launched its instant funds transfer service, NIBSS Instant Pay (NIP), in 2011. By 2018, only 20 countries had an instant payment system. A 2021 report ranked Nigeria as the sixth largest real-time payments market, with 3.7 billion transactions in 2021 (ahead of the US, Japan and Brazil).
Despite these milestones, the recent cash crunch also exposed the cracks in our infrastructure. If there was any