“Since the naira redesign policy, I can now pay the person that helps with my shoe with transfers,” Kaliba Bilala, founder of Tanabit, a financial data analytics company, said while discussing the impact of the Central Bank of Nigeria’s (CBN) naira redesign policy of 2022.
Many Nigerians had to rely more on mobile payment platforms amid the scarcity occasioned by the policy. In October 2022, the apex bank announced that it would release redesigned naira denominations of N200, N500, and N1,000 by December 15, 2022.
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“90 percent of vendors will accept transfers today. But you have to be patient with them because about 80 percent of them will want to confirm receipt before you can go with the goods,” Peter Adebiyi, creative director of Petroyal Apparel, told BusinessDay.
Alongside the naira redesign policy, the CBN revised cash withdrawal limits. “Customers should be encouraged to use alternative channels (Internet banking, mobile banking apps, USSD, cards/PoS, eNaira, etc.) to conduct their banking transactions,” it said in a guideline.
These two policies led to a shortage of naira in circulation, with the money supply falling to N982 billion in February 2023 from about N3.3 trillion at the end of October 2022. This led to a surge in electronic payments activities, as cashless transactions rose by 44.84 percent to N126.73 trillion in the first quarter of 2023 from N87.49 trillion in the same period of 2022. This grew to N237 trillion in Q1 2024.
Mobile money providers were among the biggest beneficiaries of the naira redesign policy. Mobile transactions surged from N3.49 trillion in the first quarter of 2022 to N9.07 trillion in the same period of 2023, rising by 88.87 percent to N17.13 trillion in Q1 2024, according to new data from the Nigeria Inter-Bank Settlement System.
“I can tell you now that out of 10 small businesses in the street, eight will conveniently accept transfers compared to previous years when some merchants prefer accepting cash,” Ifeanyi Caleb, a financial analyst, said.
GSMA recently explained that mobile money growth has been driven by mobile network operator (MNO)-led and non-mobile network operator-led providers. It noted that both OPay and PalmPay are prominent non-MNO-led mobile money providers and have gained significant market share in the country.
“As of October 2023, OPay was Nigeria’s most downloaded app; it had over 30 million users, over 500,000 agents, and around 300,000 merchants. PalmPay has achieved a similar reach: in 2023, it had 30 million registered accounts, half a million registered agents, and 600,000 merchants,” GSMA said.
The growth of mobile money operations has driven financial inclusion, according to the global association for telcos, which said Nigeria’s mobile money growth pushed the Sub-Saharan Africa mobile money market to $912 billion in 2023.
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Bolaji Akinboro, chairman of Voriancorelli and cofounder of Cellulant, said the decline in ATM service quality since COVID-19 has been partially responsible for the growth in mobile transactions.
He said the CBN’s cash policy of 2022 played a big part in this shift. Looking ahead, Akinboro predicted that this growth will be sustained due to the country’s emerging social acceptance of digital payments.
“People are now more comfortable receiving transfers, and this social aspect will drive future growth,” he said.