Policy flip flop, banks’ apathy stagnate ATM penetration

Regulatory uncertainties occasioned by the reluctance of deposit money banks to step up investments in the deployment of Automated Teller Machines (ATMs) has seen penetration levels stagnate in recent times, a situation that does not bode well for Nigeria’s quest to achieve financial inclusiveness, according to industry analysts.

Statistics show that Nigerians move N80 billion monthly through the ATMs. Even with the widespread usage and adoption of ATMs in Nigeria, Africa’s largest economy, the population of ATMs has been stuck at the 11,000 mark for the past six years, resulting in an average of 11.39 machines per 100,000 adults, according to latest industry findings. A World Bank report, however, shows that adults in the country account for about 56 percent (95.2 million) of the total population (I67 million).

In stark comparison, Indonesia, with an adult population of about 90 million, more than doubled its ATM installed base from 16,700 in 2011 to 36,500 in 2012, resulting in 37 ATMs per 100,000 adults, about three times the ATM per adult capita in Nigeria.

There has been a general lull in Nigeria’s ATM market, according to industry insiders. They say this is largely due to the Central Bank of Nigeria’s (CBN) misadventure with the Independent ATM Deployers (IAD) experiment of 2008 which barred financial institutions from deploying ATMs out counside their branches. This move, according to them, resulted in an abrupt halt in the momentum of ATM deployment by banks in the country.

“From 2006, when ATM deployment started, penetration was growing year-on-year. After the policy changed, it stopped. Yes, the CBN reversed the ban on offsite ATMs but when policy changes abruptly, it affects investor confidence,” said Victor Alaofin, chief executive officer, Ryte Internet Technologies, an indigenous technology company, in an interview with BusinessDay.

Austin Okere, group chief executive officer, Computer Warehouse Group (CWG) plc, said, “A pilot scheme would have uncovered the soft underbelly of the strategy, the major shortcoming being the fact that the cash in the offsite ATMs would have been too expensive for the IADs to carry, and compelled them to charge customers very exorbitant rates, or render them totally unprofitable at the flat rate of N100 per withdrawal, then allowed by the CBN.”

Six years later, according to Okere, Nigeria has less than the 11,800 achieved at the highpoint, “because many banks had to abandon the long-term rents secured for their offsite ATMs and wheel the ATMs into warehouses and parking lots because the IADs could not afford the book value to take on the sites and ATMs”.

The operational lives of those ATMs, about a third of the total volume, were cut short, as they were unusable two years later when the CBN rescinded its decision, he noted.