Analysis: How telcos, fintechs are driving Nigeria’s mobile money growth

Sub-Saharan Africa (SSA) has continued to lead global mobile money adoption, according to GSMA.

This has been made possible by growth in Nigeria, Ghana, and Senegal. In 2023, SSA’s mobile money market was worth $912 billion.

In its recently released The State of the Industry Report on Mobile Money (2024)’ report, GSMA, the global association for telcos, said, “Mobile money is often considered an African success story, and in many ways, it is. Sub-Saharan Africa has the highest levels of mobile money adoption in the world.”

Since 2013, the number of registered mobile money accounts in Nigeria has doubled. In 2023, over a third of new registered and active 30-day accounts globally were mainly from Nigeria, Ghana, and Senegal. Regulations in Nigeria have driven growth in mobile money agent networks globally since 2022.

The telco organisation said, “With several mobile money providers now holding a licence to operate in Nigeria, the country has seen a rapid rise in the use of digital financial services.”

While spotlighting the country, GSMA disclosed that mobile network operators (MNO)-led and non-MNO-led providers are responsible for mobile money growth in the country.

Both are subject to different types of licences, which allow some similar activities but with slight differences. In 2018, the Central Bank of Nigeria (CBN) introduced the Payments Service Bank (PSB) licence, which allows MNOs to offer financial services. This licence is reserved for nonbank mobile money providers, and 25 percent of their operations must be in rural areas. PSBs can provide deposits and withdrawals, cross-border remittances, and can issue debit cards, GSMA highlighted.

By November 2023, Airtel had 20 million mobile money accounts, and MTN had 19 million (as of March 2023). The telco organisation said MNO-led mobile money offers a significant opportunity to grow financial inclusion in the country.

“MNO’s large capital base, strong countrywide brand presence and technology collectively offer the ability to scale,” GSMA stated.

In MTN Nigeria’s financial audited report for 2023, the telco disclosed that its number of active mobile money wallets rose to 5.3 million.

“This helped to drive MoMo PSB revenue, which rose by 8.1 percent. The growing adoption and increased activity within our fintech ecosystem spurred transaction volume growth of 49.2 percent year-on-year.”

Airtel added 1.7 million active customers at the end of December 2023. “Annualised transaction value for Nigeria SmartCash grew by 45 percent in current quarter as compared to quarter ended September 2023,” the telco said in its financial report for the nine-months period ended December 2023.

Non-MNO-led mobile money providers hold a mobile money operator (MMO) licence. They are not permitted to provide savings accounts, are not required to have a dedicated focus on rural operations and need a partnership with a financial institution to accept deposits and issue debit or prepaid cards.

GSMA noted that OPay and PalmPay are the most prominent non-MNO-led mobile money providers and have gained significant market share in Nigeria since receiving their MMO licences. As of October 2023, OPay was the most downloaded app in the country, with over 30 million users, over 500,000 agents, and around 300,000 merchants, it said.

PalmPay also has over 30 million registered accounts, half a million registered agents, and 600,000 merchants as of the end of 2023. “The growth of non-MNO-led mobile money providers in Nigeria has driven financial inclusion, alongside the rising use of PSBs,” GSMA said.

It noted that mobile money growth has also contributed to a rise in digital payment use in the country. GSMA added that the increase in mobile money penetration has helped improve access to digitally enabled services in the country.

“Today millions of users are making or receiving payments, taking out productive credit to meet short-term financing needs, paying for government services or accessing savings and insurance products to protect themselves from shocks,” Mats Granryd, director general of GSMA, said.

While mobile money operators have successfully onboarded many unbanked users using lower know-your-customer (KYC) requirements, this has also raised the risk of fraudulent activity. To address this, the CBN introduced a new validation requirement in December 2023. This stricter KYC process may impact short-term growth, but it is necessary to ensure the long-term sustainability of the country’s mobile money ecosystem.