Mobile money and growth challenge in Nigeria

The fast growth of Mobile Money (MM) services in emerging countries such as Kenya, Tanzania and South Africa has buttressed the need to deepen the platforn in Nigeria’s financial services sector, especially to capture the unbanked. Despite two years of deployment in the country, the scheme seems to be crawling, as painted by a recent poll. But experts however, appear optimistic of its growth. ADEYEMI ADEPETUN writes
AS predicted, poor access channels, inadequate distribution or agency networks, lack of proper awareness and poor mass education have become major challenges troubling Nigeria’s mobile money initiative presently.
The sub-sector, which according to financial analysts, is worth N150 billion, but if adequately maintained and proper policies in place, is projected to have growth capacity of N300 billion in another three years.
Indeed, in August 2011, the Central Bank of Nigeria (CBN) licensed 16 banks and other financial institutions to deploy the services across the country.
Touted as Bank-led initiative, the mobile money service is seen as a viable tool to provide basic financial services through the mobile technology platform, which is aimed at creating a veritable tool of payment, especially for the unbanked Nigerians in the rural areas, and also help drive financial inclusion in the country.
The growth in mobile money use is expected to benefit many sectors of the Nigerian economy, thus contributing to national economic growth. Today, in the country, a large proportion of households lack access to financial services as in many other emerging countries.
Research showed that only about 25 per cent of the Nigerian population (170 million people) has bank accounts or access to financial services.
The Director, Banking and Payments System Department, CBN, Mr. Dipo Fatokun, in Lagos, confirmed this huge gap recently.
In his presentation, entitled: “Mobile Money in Nigeria: Prospects, Opportunities and Challenges,” at the meeting of the Ikeja District Society of the Institute of Chartered Accountants of Nigeria, Fatokun said surveys conducted on financial services in Nigeria revealed that banking penetration was relatively low because of a number of factors, some of which include proximity to financial service outlets, product complexity and cost of service.
He noted that no nation could progress or truly develop if majority of its population are under-banked or has no access to financial services.
To this end, Fatokun said the CBN was vigorously working to ensure the success of the mobile money initiative as a financial inclusion strategy to reduce the nation’s unbanked population by 20 per cent.
He said: “The percentage figure of Nigeria’s unbanked population currently stands at 46.3 per cent and the CBN will work to ensure the success of the strategy.”
According to Fatokun, a survey carried out in 2008 by an international agency, Enhancing Financial Innovation and Access (EFInA), on access to financial services in the Nigeria revealed that banking penetration was relatively low with only 21 per cent of adult population in the country having access to banking services, while 74 per cent had never been banked.
The remaining five per cent, previously banked, in other words, had left the banking system, Fatokun added.
Interestingly, the NOI polls showed that mobile money scheme has not been embraced by the unbanked Nigerians.
The polls result showed that six in 10 (59 per cent) Nigerians are not aware of mobile money services and only 13 per cent of the 41 per cent that are knowledgeable of it, have adopted it, depicting a very low acceptability rate.
In the NOI polls, which tried to determine the ratio of mobile money users with bank accounts to those without, responses revealed that all of the respondents (100 per cent) that use mobile money services operate a bank account.
“This suggests that the level of awareness and adoption of mobile money services amongst Nigerians without accounts is currently very low and almost non-existent,” the report stated.
In the area of proportion of users that operate their mobile money account in connection with their bank accounts, the report showed that 93 per cent of Nigerians operate their mobile money account in connection with their bank account and seven per cent operate their mobile money account separately. This further affirmed previous findings where the majority indicated banks as their provider.
Furthermore, to gain insight into the transactions users carry out on mobile money services, 65 per cent of respondents said they use mobile money for funds transfer, followed by bill payment (54 per cent), money withdrawal (36 per cent) and “payment for purchased goods and services” (25 per cent).
“Analysis based on geopolitical zones revealed that the North-west zone (80 per cent) had more respondents that carry out “funds transfer” on their mobile money account, the South-West zone (93 per cent) accounted for the highest proportion of respondents that use their account for “Bills payment”.
“Also, the South-West zone (54 per cent) had the highest number of respondents that use their account for Money withdrawal while the South-East zone (57 per cent) accounted for the highest proportion of respondents that use their mobile money account for the “Payment for purchased goods and services”.
The NOI findings also revealed the majority agree (55 per cent: 25 per cent+30 per cent) that the service is easy to use, on the other hand 38 per cent (nine per cent+29 per cent) are of the opinion that the service is not easy to use.
In reference to the accessibility of service providers, the majority (55 per cent 21 per cent+34 per cent) agree that service providers are easily accessible.
Reacting to the NOI’s findings, the Principal Associate, Mobile Money Africa, Mr. Emmanuel Okoegwale said the outcomes of the NOI polls came with some disappointments, saying however, that he cannot fault them “since they explained the processes used to reach the outcomes though there are some contentious issues raised but that is for another day. Despite the gloomy pictures painted, there is still hope for the industry in Nigeria and I hope all the stakeholders will take time to review the outcomes of the survey and work towards a better score card in near future.”
Relating Nigeria’s case with that of Kenya, (Safaricom’s mPesa), which has become a source of reference in the Continent because of its successes within few years of existence, Okoegwale said, “these are two different climes. The mobile network operator that is also the largest organization in that country is also the provider of the mobile financial services in the country mentioned. They have everything under their control from subscribers, access channels and distribution points and a primary product (airtime), which was used to cross sell the mobilemoney value proposition. We have also seen smaller MNOs do well in that space like Econet in Zimbabwe. In the case of Nigeria, most of the factors to scale up the deployments were external to the providers and will take some time, resources and efforts to achieve.”
The mobile money expert agreed that the current agent capacity in the country is still very low, saying agency network recruitment, training, monitoring and incentifying, require significant resources for an industry that do not have existing distribution network to act as transactions points. It is a challenge that the stakeholders are trying to sort out. Gradually, agency network is growing but the incentive is not a strong motivation yet because it is a low value business that is still running at low volume.
The Programmes Director of One Network, an industry-focused organisation whose target is to deploy mobile money agents across the country, Mr. Sola Bickersteth, said for the Mobile money services to be successful, an estimated number of 250,000 as against the about 3,000 would be required.
Bickersteth explained that the mobile money service has not been fully expanded in the country; adding that this accounts for the slow adoption of the process.
Chief Technology Officer, eTranzact International, Richard Omoniyi, agreed that there was need to step up ‘education’ on the scheme.
“One thing that is important is education. GSM is working despite the hiccups. Once in a while, we still have communications issue, but I believe that it’s a matter of time, we will get there.
“CBN needs to push further, awareness is vital. People still find it hard to believe that in their cell phones, they could send money,” he said.
Butressing Omoniyi’s claim, Okoegwale said the challenges facing the initiative in Nigeria are peculiar to the industry anywhere in the world but that “government through the regulatory agency must continuously review policies, ensure certainty, appropriate risk and balance regulation with innovation.
“The international development organisations are also keen to assist in many ways. Government must demonstrate willingness to make mobilemoney a success by actual usage. If all current government conditional cash transfer programs are disbursed through mobilemoney then we will have better score card with the NOI polls.”