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Nigeria lags as mobile-money accounts now surpass bank accounts in Africa

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While mobile money is spurring financial inclusion in Africa as against the conventional bank accounts, Nigeria seems to be left behind as Africa’s largest economy is still in the process of giving license to Telecommunication companies to operate in the financial space.

A recent publication by the International Monetary Fund (IMF) shows that there are more mobile money accounts in Africa than the conventional bank accounts.

According to the Fund, the use of mobile money has grown exponentially over the past 10 years, making the region the global leader in mobile money innovation, adoption, and usage.

“Mobile money accounts now surpass bank accounts in the region and greater financial inclusion has benefited large swathes of the population that remain unbanked including the poor, the young, and women, ”Amadou Sy, an Advisor in the African Department of the IMF, said.

Nigeria with the highest population in Africa has 36.8 million of its population excluded from the financial cycle, owing to its bank-led financial inclusion model.

Between 2014 and 2017, the World Bank said there has been a significant increase in the use of mobile phones and the Internet to conduct financial transactions which contributed to a rise in the share of account owners sending or receiving payments digitally from 67 per cent to 76 per cent globally, while developing countries recorded 57 per cent to 70 per cent.

 Mobile Money is a payment solution that enables people to pay for goods and services from their electronic wallet on their mobile phones without necessarily using the internet.

As at the time Nigeria was considering the optimal approach needed to leverage new, innovative technology to deliver financial services to its people, the central bank analysed in some detail how to structure the guidelines and the regulatory environment to deliver the benefits on offer, without compromising the integrity of the financial system.

Africa’s largest economy needed to see how the regulation of mobile money could evolve owning to significant volumes of currency that could be circulating in mobile wallets, and may not be visible to the regulatory authorities.

As such it was clear that a better balance between the market and the regulatory structures was required.

Meanwhile, since then there has been an explosion in mobile money wallet usage in Kenya and other Africa peers, Nigeria’s CBN was rather focused on an independent bank-led model that would supplement and support the existing banking system.

 BusinessDay survey showed that the Telco-led model in driving financial inclusion in African countries reported tremendous progress owing to the already existing large customer base of the Telcos.

Kenya has about 60 per cent mobile money service penetration, while Ghana has about 40 per cent service penetration, and Nigeria with a lot more population number remains at 1 per cent owing to its bank-led model.

 Ghana’s decision to have a Telco-led model resulted in a 73 per cent increase in registered mobile money customers in just one year, according to World Bank data, and has helped lift financial inclusion rates in Ghana to 58 per cent in 2017 from 41 per cent in 2014.

This was not different for Ivory Coast who has experienced a mobile money revolution. As a result, there are now more adults with mobile money accounts of 24.3 per cent than with bank accounts of 15 per cent.

 “It is safe to say that Nigeria is playing catch-up when it comes to achieving inclusion and must look to learn from success stories like Ghana and Kenya if we are to achieve our goal of 80 per cent inclusion by 2020,” said Gbenga Adebayo, Chairman of the Association of Licensed Telecom Operators of Nigeria (ALTON) centered on Financial Inclusion.

In its quest to ensure it meets the set 80 per cent financial inclusion target by the year 2020, Nigeria’s apex bank on the 5th of October 2018, released an exposure draft guideline in which it proposed Payment Service Bank (PSBs), a payment service initiative which can allow Banking agents, Mobile Money Operators (MMOs), Retail chains (Supermarkets), Telecommunications companies (Telcos) to have license to operate under the structures and guideline specified by the bank.

At least 30 business names are currently undergoing registration as payment service banks with the functions to maintain savings accounts and accept deposits from individuals and small businesses, which shall be covered by the deposit insurance scheme; carry out payments and remittance (including cross-boarder personal remittance) services through various channels within Nigeria; issue debit and pre-paid cards,  and operate electronic purse.

Meanwhile, the Washington-based IMF explained in a statement that access to traditional banking services remains almost a mirage for most Africans, but the near-universal availability of mobile phones has allowed millions to access mobile money services.

BusinessDay analysis of data from the Fund revealed that in sub-Saharan Africa, there are 5 commercial bank branches per 100,000 people, this is compared to the 73 mobile cellular subscription point per 100 people.

“Sub-Saharan Africa is the only region in the world where close to 10 per cent of GDP in transactions occur through mobile money. This compares with just 7 per cent of GDP in Asia and less than 2 per cent of GDP in other regions,” the Fund noted.

According to figures by Nigerian Communications Commission (NCC), the country’s telecommunications industry has a reach of 86 per cent of the country, with 162.3 million customers (the single largest customer base of any industry in Nigeria).

This makes the industry till date, one of the most thriving sectors in the country and analysts have disclosed that it has the capabilities, including technology, infrastructure, distribution network and subscriber base.

Meanwhile, Nigeria’s Telcos industry players have a combined presence in 774 local government areas across the country further emphasising their ability to reach especially hard-to-reach areas of the country.

The communication service providing companies in Nigeria also have about 1,000,000 unique agents already in place selling airtime across the country, and analysts say this can quickly be converted to establish mobile money agent networks which can help reach out to the unbanked Nigerians especially those in the rural areas.

According to London based Group Special Mobile Association (GSMA), “from a regulatory perspective, one basic requirement for mobile money to succeed is to create an open and level playing field that includes non-bank mobile money providers such as Mobile Network Operators (MNOs).”

Yewande Adewusi, a Lagos-based financial  inclusion consultant said there are different schools of thought on how mobile money should work in Nigeria due to our peculiar challenges but if we are looking at how to maintain monetary system stability or still maintain financial inclusion with the right oversight then the banks and Telcos should work together to drive it.

“We don’t know what models work in Nigeria. A lot of factors make mobile money difficult to work in Nigeria, for example, there are some rural areas that don’t have Telcos network so even if Telcos drive mobile money, there will still be a problem of availability,” Adewusi told BusinessDay.

Adewusi explained that Nigeria is a huge market and it is very obvious that what the country has been doing in the past is not working. “However, moving forward it should be a combination of Telcos working together with banks or we should allow the Telcos have their own licenses which will be regulated through Special Purpose Vehicle (SPV) by CBN.”

“The fundamental obstacle to the rapid expansion of financial inclusion in Nigeria is the failure of the private sector actors in the telecoms and financial services ecosystem to collaborate effectively,” an analyst said in a statement.

 Umar Garbar Danbatta, Executive Vice Chairman of NCC told BusinessDay last year that security challenges on the telecommunications infrastructure in Nigeria were a contributing factor in holding back the licensing of Telco’s for mobile money services

Nurudeen Zauro, the Technical Adviser, Financial Inclusion Secretarial at the Central Bank of Nigeria also told BusinessDay recently that “most probably by the end of the first quarter of 2019 we’ll roll out PSBs.” 

“We did not want a situation whereby there is no proper regulation of the industry but I can tell you now that everything is in place,” Zauro said.

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