The recent hike in service charges for Point of Sales (PoS) transactions may increase the number of unbanked Nigerians, especially in rural areas where access to financial services is limited.
The upward review of charges creates an additional cost for cash-strapped Nigerians dealing with high inflationary pressures.
Experts in the fintech industry say the increased cost might slow Nigeria’s financial inclusion drive towards increasing the inclusion rate to 95 percent in 2024 from 64 percent in 2020.
“It poses the threat of another layer of barrier that will not move us closer to the financial inclusion target,” Chinasa Collins-Ogbuo, head of Inclusion for All Initiative (Africa Practice), said.
She said this action represents an increased cost of providing formal banking services to the poor, which at best does not improve the inclusion rates and widens the exclusion gap, especially for the people who need it the most.
In a statement last Wednesday, the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) cited the impact of the rising inflation rate on agents as the reason for increasing PoS charges.
“The current economic reality in the country has negatively impacted the ‘cost to serve’ for agents. The agency business has become unprofitable for the majority of agents,” it said.
It said that the recent action, in direct response to the current economic realities in the country, aimed to ensure that agents could continue to stay in business.
“It is essential to remember that our services are not subsidised by the Central Bank of Nigeria (CBN) or any of the operators. The burden of the current economic reality lies squarely on the shoulders of each and every agent,” It added.
According to the association, the average agent faces numerous challenges such as surging inflation, overhead costs (such as source of funding, rent, staff salaries, PoS paper costs, data subscriptions, security, multiple taxation/levies), and various risks such as loss of funds through licensed operators’ channels, fraud, and robbery.
“We implore the CBN and other relevant stakeholders to bear in mind that while they remain in their boardrooms and offices, formulating policies, over 1.8 million mobile money and bank agents across the country are on the streets, serving Nigerians with little or no support, despite the overwhelming challenges they face,” it said.
Victor Olojo, national president of AMMBAN, told BusinessDay that Lagos, Ogun, Edo and Oyo states had already reviewed their prices and that other states were about to follow suit soon.
Although the reviewed prices for other states are not known yet, the Lagos chapter of AMMBAN has revealed its unified price list for PoS charges for withdrawals and deposits.
For example, to withdraw N1,000-N2, 400, a charge of N100 is levied; for N3,500-N4,000, it costs N200; N4,100-N6,400 (N300); N6,500-N7,900 (N400); N8,000-N10,900 (N500); N11,000- N14,000 (N600); N14,500-N17,900 (N700), and N18,000-N20,000 (N800).
For deposits, N100 is for N1,000-N4,900; N5000-N10,900 attracts N200; N11,000-N20,900 (N300); N21,000-N30,900 (N400); N31,000-N40,000 (N500), and N41,000-N50,000 (N600).
This makes financial inclusion more difficult than it was before since cost has always been an issue, Babatunde Akin-Moses, chief executive officer and co-founder at Sycamore, said.
“But that’s not the only issue: PoS operators are still mostly based in urban areas. For example, over 20 percent of them are in Lagos. This means that the increased price only worsens a problem that already exists in the first place,” he added.
In 2012, Nigeria developed its first financial inclusion strategy with the target of bringing up to 80 percent of its population into the financial system by 2020, according to Enhancing Financial Innovation and Access ((EFInA), a financial sector development organisation.
The country failed to meet the target as financial inclusion grew to 64.1 percent in 2020 from 63.2 percent in 2018. Although the inclusion rate dropped marginally from 36.8 percent in 2018 to 35.9 percent in 2020, the excluded adult population of 38.1 million in 2020 was higher than the 36.6 million in 2018, meaning 1.5 million adults fell into the exclusion circle in the last two years to 2020.
Out of the 106 million adult population in 2020, 66 percent of banked people are in urban areas compared to 34 percent in rural areas.
“Banking services are still not reaching all rural areas. However, the data show some increase since 2018. Rural adults continue to be more likely than those in urban areas to rely exclusively on informal financial services,” EFinA said.
The World Bank’s 2021 Global Findex report also showed that Nigeria’s banked population increased by 15.6 percentage points to 45.3 percent. This implies that almost 56 percent of Nigerians are unbanked.
“In the rural areas where the bulk of the unbanked and underbanked are located, the impact will be more telling owing to limited payment channels compared to the urban ones,” Israel Odubola, a Lagos-based research economist, said.
Temitope Omosuyi, investment strategy manager at Afrinvest Limited, said the charges may affect PoS businesses because they cannot afford to pass the extra cost to their customers in the form of additional charges.
“There are other competitive, cheaper and effective alternatives that consumers can rely on, especially in an inflationary environment where they would want optimal value for every naira spent,” he added.
Globally, agency banking is recognised by policymakers, researchers and development agencies as a financial inclusion initiative that has remained an integral tool in developing economies, particularly in the areas of poverty reduction, employment generation, wealth creation and improving welfare and general standard of living.
Over the past few years, the number of PoS agents, also known as mobile money agents or bank agents, has surged in Africa’s biggest economy, with the business serving as a means of livelihood for millions in urban and rural areas.
The agents, which are third-party retail outlets contracted by financial institutions to process clients’ transactions, are empowered to reduce reliance on over-the-counter transactions while providing convenient personalised services.
They are equipped to carry out services, which include account opening, cash deposits, airtime purchases, bills payment, withdrawals and money transfers. Many people prefer to visit PoS outlets to carry out transactions rather than banks as it saves them time and energy.
The opportunity to make an additional income is a major motivation for becoming an agent, according to a 2020 EFInA agent survey.
“Agents surveyed are signed up by different principals/service providers. Nevertheless, First Bank (First Monie), OPay, QuickTeller, and MTN top the list of principals with a majority share of agents,” EFInA said.
Data from the Shared Agent Network Expansion Facilities show that the number of bank agents surged by 1,456.9 percent to 1.3 million in 2022 from 83,500 in 2018.
Apart from the data on the number of bank agents, a recent International Monetary Fund survey showed the number of bank agent outlets per 1,000 square meters increased by 380.2 percent to 680.9 in 2021 from 141.8 in 2020.
Read also: Financial inclusion: IMF outlines five priority policy options for Nigeria
In the first quarter of 2023, the volume of PoS rose by 37.5 percent to 387 million from 281 million in the corresponding period of last year, according to the Nigeria Inter-Bank Settlement scheme.
A recent report by the GSM Association (GSMA) shows that the number of registered agents in the West African region rose by 160 percent to 6.5 million in 2022 from 2.5 million in 2021.
Some of the key contributors to the growth of mobile money in the past few years have been regulatory changes in large markets, Mats Granryd, director general at GSMA, said.
“In Nigeria, for example, new licenses have seen many new mobile money players emerge, and with this a 41 percent growth in the number of registered agents,” he said.
