In recent years, Nigeria has seen a surge in technology adoption and innovation, with a growing number of startups and significant increases in the volume and value of investments, especially in the fintech and payments spaces. Nigeria has the potential to become a global technology powerhouse; however, building world-class technology solutions still escapes the biggest economy in Africa.
Technology startups raised $976,146,000 in 2022, a significant increase from the $49,400,000 raised in 2015. Funded companies are currently employing 6,751 individuals, up from 5,225 from the previous year. These numbers sadly illustrate some of the huge resource gaps needed to be filled to solve the significant technology challenges the nation faces. For context, there are fewer people working in these funded companies than were laid off by Twitter, in its recent round of layoffs.
A world-class solution must solve a real problem that affects people’s lives. This problem could be social, economic or environmental. The solution must improve quality of life of people, creating jobs, and improving productivity. Payments, a key economic driver, had its shortcomings exposed by the Central Bank of Nigeria’s recent cashless policy directives. What should be a simple changeover led to an incredibly negative ripple effect on the broader economy and individuals’ ability to live normal lives. Nigeria has prided itself on a world-class payments infrastructure, but this bold claim does not go beyond the surface; ATMs had no cash, PoS terminals double-debited, and banking apps did not load. The failure of the payments network within the country left many stranded, leading to a local-currency black market, amongst other challenges.
Upon closer inspection, we should not be surprised. We must go back over two decades to identify the last significant infrastructure layout focused on payments. The layout focused on building out ATM networks, which have remained largely unchanged, in a country of over 210 million individuals.
Nigeria currently has 16.15 ATMs per 100,000 individuals as of 2021, according to World Bank data, flat from 16.19 ATMs in 2014. Compare this to South Africa, which has 43.55 ATMs per 100,000 individuals and a population of 60 million, and it is no wonder that we regularly have long queues at ATMs. PoS terminals have seen a rapid increase in deployment and use in the last 10 years.
According to the Nigeria Inter-Bank Settlement System (NIBSS), there were 976,898 registered up to June 2021, roughly one PoS terminal for every 200 Nigerians. The financial inclusion discussion should be over. This is not the case as bad networks, non-functional PoS terminals and the marrying of PoS terminals to cash transactions in most cases means the distribution challenge that affects ATMs has an impact on the overall usefulness of PoS terminals.
Mobile apps to the rescue. According to the World Bank, as of 2020, 36 percent, or 81 million Nigerians today, have access to the Internet. According to NIBSS, the number of bank accounts stood at 133 million in Dec. 2021 and enrolled Biometric Identification Numbers at 51.7 million.
Glancing at the top five banking app download numbers reveals First Bank, Access Bank, Zenith Bank, GTBank, Ecobank and UBA all have over five million downloads. While these numbers represent a small fraction of active customers using applications to carry out their financial services, the social media networks are riddled with horror stories of mobile apps not working and forcing individuals into inconvenient situations while their cash sits in their accounts.
What must we do to solve such a fundamental and obvious problem needed to unlock economic activity for hard-working Nigerians? The answer is obvious, but hard. Installed capacity must be upgraded and significantly increased; newer ATMs installed, PoS terminals updated with the latest 4G and 5G network SIMs, mobile apps made lighter and user friendly and the platforms they sit on, in the cloud or on premise, brought into the 21st century.
Interconnectivity between financial institutions must be seen as a key responsibility for all ISPs and telecommunications companies. Regulatory bodies such as the Nigerian Communications Commission and CBN must play a key role in creating a viable environment for research and development, which will lead to identifying the key issues, which need resources to bear to solve them.
They must create frameworks for developing local regulations and standards and aligning with international regulations and standards. These include data privacy regulations, cybersecurity regulations, and standards for software development.
Without the resources, human and otherwise, being brought to bear on the problem in a consistent and concerted fashion, the idea of world-class payments in Nigeria will remain just that: an idea.
Mordi was previously COO of Carbon (a lending fintech) and immediate past head of digital lending at Access Bank
