The e-payment of contractors

THAT Nigeria has now joined the list of countries in the world adopting payments of contractors by electronic means and halting an age-long practice of cash payment is a big step towards a cashless economy. To give teeth to the commencement of this practice, the Accountant General of the Federation (AGF) Mr. Abraham Dankwabo had last year directed all commercial banks to dishonour with effect from January 2009, all cheques emanating from all Ministries, Departments and Agencies (MDAs) of the Federal government.

This however was not the first time that the Federal Government would focus on the e-payment initiative. In 2004, the Central Bank of Nigeria had established the Nigerian Payment System with the objective of encouraging the use of card technology for payments by Nigerians. Electronic transaction is a global phenomenon which Nigeria cannot afford to ignore. The adoption of the same for government payments is a welcome development. Close to three months later, however, the office of the Accountant-General should be in a position to review and assess the implementation of the e-payment system. The use of electronic payment system by government departments is still rather low.

Nevertheless, we commend the audacity of the Federal Government for taking this huge step that promises to herald unfathomable change and consequences in the Nigerian economy and polity. The Accountant General has started the implementation process in a consistent fashion since October 2008 and would appear that all stakeholders, including the Central Bank of Nigeria (CBN), the commercial banks and contractors, have been carried along to ensure a smooth transition. This is clearly a huge effort coming on the heels of the Nigerian factor which tends to resist change, any change that challenges age-old way of life, customs and tradition. The AGF in fact sign-posted this change with an already familiar banking practice in Nigeria such as the ATM cards to buoy up confidence in its implementation.

The main challenge of this new policy however, still lies in its implementation. There are doubts that the necessary infastructure is in place to facilitate an e-payment system. Past attempts at the use of electronic technology by government agencies had failed. These include the idea of electronic voter's registration, electronic voting and the National Identity Card process. What are the guaranties that government will not similarly run into methodical crises as it grapples with e-payment? There are challenges of capacity also.

One of the objectives of the e-payment system is to help stem corruption and boost transparency and accountability. Government must introduce safeguards to make sure it does not drive itself in the opposite direction. Even now, evidences abound to the effect that ATM mechanism, the example cited by the Accountant General of the Federation, is hugely abused by fraudsters. Will the e-payment system not open up the economy further to the nefarious activities of fraudsters? If that happens can government provide the needed checks and balances or can beating a retreat be an easy option if things become awry? By the way, is there enough technical capability in the system to drive the process? To what extent has government prepared itself and stakeholders for any eventuality?

The e-payment process will involve huge money payment to contractors. How will government ensure that the system is not hugely abused by way of corrupt practices of government officials and the stakeholders? Although this stage involves only Federal Government payment to its contractors, how soon will it become a standard economy-wide practice? This should be the ultimate goal.

The questions are endless. Government is clearly adopting the e-payment system on a low key, highly restricted in its implementation for now. Indeed government can easily lay claim to a gradualist approach even within its own domain. It will only affect, as Mr. Dankwabo asserted, Federal Government contractors in relation to huge payments. Government has also made it clear that e-payment is part of its e-governance programme.

The adoption of e-payment is good in principle but extreme caution must be exercised. It must be noted that the adoption of electronic payment in the advanced countries is attended with billions of dollars loss to fraud. Yet that system still finds the practice useful in net balance. Government must therefore be prepared to accommodate or deal with the activities of fraudsters in the limited case of adoption of the e-payment system. Just as commercial banks are counting millions if not billions of naira losses in their adoption of ATMs, the tracking mechanism must be well developed from the onset, giving no room to fraudsters, matching them wit-by-wit and then surpassing them.

Even at this limited scale, a stage-by stage approach should be adopted to prevent serious mistakes and ensure effective learning from experience. There should also be regular training and sensitization workshops for public finance personnel on the implementation of e-payment in order to build capacity and to make the transition from the old manual payment of salaries, entitlements, and contracts smoother.