Ahmed Ajanaku, a 37-year-old ICT professional, had just finished an official assignment around Ikeja Under Bridge Bus Stop on Tuesday, December 1, and wanted to use one of the bank ATMs to get money to board a commercial bus going back to his office. Commercial buses in Lagos, Nigeria’s economic capital, are yet to get around the idea of cashless payments.
The queue on the bank premises was too long because only one of three ATM terminals was dispensing cash. He left the queue for the Point of Sale (PoS) operator across the road.
“Oga na N300,” the PoS operator/banking agent, a lady, said nonchalantly in Pidgin language when Ajanaku handed her his bank debit card and asked to withdraw N10,000. She was referring to the commission fee.
“Ah! I thought it’s N200,” Ajanaku said.
“No sir. N5,000 is N200 and N11,000 is N400,” the lady replied.
Ajanaku’s experience is just one out of a growing trend many Nigerians have come to see as normal. Many banking agents are charging higher commissions than they should, and this is proving a disincentive to many who would have used their services, thus derailing from the financial inclusion objective that led to their emergence.
Kayode Olaitan, a 32-year-old computer trainer who stays at New Road, off Lekki Epe Expressway in Lagos, for instance, backed out after a PoS operator living within his neighbourhood asked him to pay N900 commission for a withdrawal of N9,000.
“I was struggling to restrain myself from lashing out at him in anger,” Olaitan said. “I simply walked away to wait my turn at the nearest bank ATM.”
Agents are meant to charge a N200 fee for transactions, according to CBN mandate. In return, they are expected to pay tax as a business, aside from settling super-agent providers and banks. Agents are also subject to stamp duty and VAT charges.
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An agent levy document seen by BusinessDay also showed that those who own shops in Lagos, for instance, are expected to pay taxes and levies depending on where they are located. The specific levy is also determined by the type of business the shop owner is doing. A small shop in an area categorised as rural pays between N500 and N2,500.
Financial services/banking agents, popularly known as PoS operators, are considered as one of the last jigsaws to the puzzle of providing financial services to over 40 million adult Nigerians who are unbanked. So important are they to achieving the 80 percent inclusion target of the Central Bank of Nigeria that the apex bank practically muzzled the entire deposit money banking sector to create the Shared Agent Network Expansion Facilities (SANEF).
The SANEF project, which is a joint initiative of the CBN, deposit money banks (DMBs), licensed mobile money operators (MMOs), and super agents, involves the establishment of a 500,000-strong agent network over the next few years. It also places higher target priorities on the geopolitical zones in Northern Nigeria where financial exclusion is predominant.
Essentially, agent banking is supposed to provide an effective way to improve financial inclusion. And the bulk of financially excluded Nigerians are in the rural areas where bank branches are very few, the internet is unstable – where it exists – and the level of income is such that discourages many from even having the desire to walk into a bank.
In the years following the establishment of SANEF, the number of agents across the country has grown. The CBN said in July there were now over 250,000 agents in the country.
But high cost of operations and other factors are compelling the operators to charge higher commissions, derailing the financial inclusion objective.
In a September 2020 survey, EFInA (Enhancing Financial Innovation and Access) found that PoS agents have more than doubled their commission, even as account opening has decreased since 2015.
The survey noted that nearly two out of five agents charge above maximum fees stipulated by CBN, and report charging extra fees to make more money. On average, their commissions make up 55 percent of the customer charges.
The EFInA survey also found that the locations of the agents were such that the urban centres benefit more than the rural areas. 54 percent of agents are located in urban centres compared to 27 percent in rural areas. Lagos, which has the largest concentration of the banked population in Nigeria, is also home to about 40 percent of PoS operators in the country.
Tosin Eniolorunda, CEO of TeamApt, said the best pricing model for banking agents is to allow the free market system to determine the fees. He said the market is at the early stage in which the barrier to entry is very low, hence the influx of many people into the market as agents.
In the beginning, the agents have many cost obligations to meet, but Eniolorunda sees a form of consolidation in agency business that could lead to competition in the market and eventually drive prices down.
Then, he said, “If you charge customers too high they will move to another agent shop.”
For him, the large location of agents in urban centres is simply a function of demand. Banking agents being businessmen and women would naturally set up their shops in locations where there is demand.
But even in the urban centres, the PoS operators face a lot of challenges, BusinessDay findings show. In Lagos, for instance, the agents have faced harassment from different taskforce officials claiming to be working for one local government or the other.
PoS operators within Agbado-Okeodo LCDA under Alimosho Local Government Area had received a circular a week before 25 July informing them of the N600 weekly levy which officials of the LGA moved to enforce in August.
Olojo Tobi, chairman, Association of Mobile Money and Bank Agents in Nigeria (AMMBAN), the umbrella body in charge of POS operators, told BusinessDay that it was the first time its members were being asked by any state government to pay the levy.
Stakeholders also say the barrier to entry is partly responsible for the lack of uniformity in pricing. While super agents like Accelerex and commercial banks charge as much N20,000 to N50,000 for first time agents, OPay and a few others issue the PoS terminals free but agents have to pay a N10,000 connection fee.
Eniolorunda said the agent banking market in Nigeria is still evolving, hence the challenges consumers are facing. It is expected that the entrance of telecommunication companies like MTN and 9Mobile, in recent times, could bring some efficiency in the market.
