Economic Update

A wave of agreements signed between telecoms companies and financial institutions in Nigeria looks set to shore up a nationwide campaign to boost mobile banking services aimed at moving the country along the path of becoming a cashless society.

The mobile banking segment is widely viewed as having significant potential for growth, with Standard Bank listing the country as the 10th-largest mobile market in the world.

While the cashless initiative poses challenges, such as a lack of infrastructure and connectivity problems in rural areas, industry players are optimistic that mobile money will go some way to bridging the divide between the banked and unbanked segments of the population.

The country stepped up its bid to increase the number of cashless transactions late last year when the Central Bank of Nigeria (CBN) issued the first operating licences for mobile banking services to 11 companies. Under their terms, mobile network operators are permitted to provide network infrastructure only for mobile banking and cannot directly receive deposits. They are also obliged to let subscribers use the mobile payment service of their choice.

On May 31, Mainstreet Bank, together with five other financial institutions, launched the Quick Teller Mobile Banking product (QTM) in partnership with Globacom. According to the head of telebanking at Glo, Tunde Kuponiyi, the internet-based mobile platform incorporates the core applications of partner banks to deliver mobile banking services to customers on the Glo network.

Just weeks earlier, telecommunications service provider MTN Nigeria finalised an agreement with Stanbic IBTC Bank, a member of the Standard Bank Group, to provide mobile money services to Nigerian nationals. The deal follows the signing of a memorandum of understanding (MOU) in February between First Bank of Nigeria and Airtel Nigeria to offer mobile banking services throughout the country.

The governor of the CBN, Mallam Lamido Sanusi, announced in late May that to date, 15 mobile payment operators in Nigeria had been given licences. Alongside their introduction, other initiatives aimed at encouraging banked consumers to switch to cashless transactions and driving growth in mobile banking are also taking effect, such as the CBN’s “Cash-less Lagos Project”. The project, which was launched on January 1, restricts daily cash withdrawals and can result in fines for customers who exceed the limits.

Speaking to the local press, Sullivan Akala, the director of business development for eTranzact, highlighted the rapid rate at which mobile telephony was developing in the country, saying he believed Nigeria had the potential to become the largest mobile payment market in Africa. Akala pointed out that although banking was well established in Nigeria, there were only 25m accounts in existence, while the number of mobile phone subscribers in the country had already topped 80m, just 10 years after the telecoms sector was deregulated.

The CBN cited some of the benefits that mobile banking offered, which it said included lower costs for volume cash-handling, reduced risks of cash-based crimes and the introduction of more money into the formal economy. The bank concluded that take-up would support the country’s monetary policy, which was aimed at curbing inflation and boosting economic growth.

Stanbic IBTC Bank agreed that mobile banking offered key advantages for the West African nation’s economic development. “Mobile money solutions will play a major role in integrating Nigeria’s huge informal economy, which is driven by small-scale farmers, traders, craftsmen and other types of small and medium-sized businesses, into the formal economy,” the bank said.

The expansion of mobile services is also expected to provide the labour market with a boost. When Unity Bank announced in February that its mobile banking platform had the potential to generate 100,000 jobs, the company’s group managing director and CEO, Ado Wanka, pledged to collaborate with the National Directorate of Employment to recruit, train and finance eligible Nigerians.

In the same month, eTranzact International, which recently launched its mobile payment service “PocketMoni”, made public its own plans to deploy 50,000 agents across the country within the year.

But before Nigeria can achieve its aim of becoming a cashless society, it will need to address key challenges facing the sector, particularly a lack of comprehensive regulations that are needed for monitoring mobile transactions. New schemes will highlight staff training needs, while industry expansion will also require additional infrastructure, especially in rural areas where phone connectivity is underdeveloped and the majority of Nigeria’s unbanked population lives.