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THE POWER OF M - Nigerians fight shy of M banking.

Summary: Nigeria, with a population of 168.8m in 2012, is the most populous country in Africa, so it is no surprise that it is viewed as one of the potentially most lucrative places on the whole continent for mobile banking. But Nigeria is surprisingly slow in the roll-out of mobile banking services. Why is this so? Sherelle Jacobs explains.

Mobile banking is still at an embryonic stage in Nigeria and t he sophistication and popularity of mobile banking is not on a level comparable with the African trendsetter in this area - which is Kenya, the birthplace of mobile banking in Africa. Currently, mobile banking makes up just 2% of payments in the banking sector in Nigeria. Nonetheless, increased uptake of mobile banking will be a strong trend in the coming years. So will the widening choice of mobile banking services and increased competition between banks to establish themselves as the leaders in mobile money as the sector starts to find its feet.

There are strong building blocks for mobile banking to really take off in Nigeria. Apart from its high population f igures, the number of Africans who own a mobile phone in Nigeria is currently 82%, the seventhhighest f igure in Africa after Cote d'Ivoire, which has a 93% mobile-phone ownership rate.

Egypt, Senegal and South Africa have 90% mobile ownership rates, fol lowed by Ghana with 88% and finally Cameroon, where 86% of people own a mobile phone. What is more, a quarter of Nigerian mobile users own a smartphone, which is higher than in several African countries, including Kenya, where the figure is just 13%. Furthermore, although feature phones still dominate the market, at 60% in Nigeria, they are less prevalent than in some countries, such as neighbouring Senegal, where the figure is 81%.

Moreover, the telecoms a nd internet sectors, which provide crucial infrastructure for the mobile banking industry, are going from strength to strength in Nigeria. The government is aiming to increase internet broadband penetration fivefold by 2018. Several new base stations have been installed in recent months. Telecoms companies are reported to be spending up to $6bn on infrastructure over the coming years and telecoms companies are working hard to expand network coverage throughout the country, especially in more isolated areas.

According to a study by Pyramid Research, it is expected that mobile broadband in Nigeria will expand at a compound average growth rate (CAGR) of 28.1%, although Pyramid Research warns that the rapid growth of the industry may lead to a decline in service.

Network expansion plans in the pipeline include recent deals between Globacom and Huawei, and Globacom and ZTE, which combined are worth $1.25bn. In May 2013, Etisalat got the go-ahead for a $1.2bn loan enabling it to finance its own network expansion project in the West African country. Telecoms firms are certainly making a healthy profit to fund investment in infrastructure; revenues in the sector came to a healthy $9.3bn in 2012.

Telecoms providers in Nigeria are making changes which should encourage more Nigerians to either start using a mobile phone or increase their mobile phone usage in the long term - a trend which would, in turn, increase the potential customer base for mobile banking.

For example, in the spring of last year, a change in regulation could lead to a downward pressure on mobile phone tariff prices; customers will be able to change mobile provider every 90 days without being obliged to change their mobile number, a move which could increase competition between mobile service providers. It is an important step as, at the moment, Nigeria has one of the worst records in the world in terms of mobile service affordability, coming a disappointing 135 out of 161 in an International Telecommunications Union report in 2012.

Slow take-up of system

The Central Bank of Nigeria (CBN) looks set to be an important driving force behind the expansion of mobile banking over the next few years. It is promoting mobile money as part of its new vision to reduce the number of unbanked Nigerians to 20% of the population by 2020. In 2011, the Central Bank of Nigeria introduced its own mobile money service, which 5.73m people now reportedly use. In July 2013, transaction volumes reached N6.85m ($43,000).

The CBN is working with mobile service providers to ensure the roll-out of mobile payments services across Nigeria. The bank is at the last stage of an MoU signing with the Nigeria Communication Satel l ite, which will provide Wi-Fi technology at various locations in Nigeria so that connectivity would be made easier.

Nonetheless, usage of mobile money ser v ices in Nigeria is st i l l extremely limited and some experts feel that the adoption of the service has been disappointingly slow. The Nigeria-based research organisation, NOI, recently carried out a study which found that only 59% of Nigerians were even aware that mobile money services existed, and just 13% of those who knew about mobile money had mobile money accounts. The study also found that just 7% of mobile money users had accounts which were separate from their existing traditional bank accounts. It would appear that Nigerian customers are extremely reluctant to use mobile money as a complete substitute to traditional banking and perhaps see mobile banking as a useful added service rather than a complete, radical alternative to normal banking.

"More than a year into its introduction, the [CBN mobi le banking] scheme has suffered slow adoption by Nigerians as the licensed operators of the mobile money services have not made great headway in the deployment of the services across the states. This has attracted great concern and worries from experts and stakeholders. In line with this, one major challenge the scheme has faced is the low awareness of the total process and its benefits to stakeholders," said NOI in a statement.

"Some other challenges associated to the slow roll-out and adoption of the mobile money process include the lack of finance and basic infrastructure, few agents and t he exclusion of mobile operators from taking part in the execution of the service," NOI a lso stated. The NOI survey was revealing in other ways. According to its findings, awareness of mobile money did vary between different geographic locations in Nigeria. For example, in the South, people had a higher awareness of mobile money - 54% had some knowledge of mobile banking. The figure was lower in the Southwest and North Central regions, where awareness of mobile banking stood at 54% and 46% respectively. Nigerians in the Northeast had the lowest awareness of mobile banking followed by those in the Southeast. In terms of age, 48% of people aged 35 to 44 had an awareness of mobile money, as did 46% of 45- to 54-year-olds. In contrast, 78% of people aged 18 to 21 and 79% of Nigerians over 64 had no knowledge of mobile banking.

The NOI poll also revealed that, of the various services that mobile banking provides, transfer of funds is the most popular by some margin, with 65% of users taking advantage of this service. Using mobile money to pay bills was the second-most-popular function, with 54% using mobile money services for this purpose. Thirty-six per cent reported using mobile money to withdraw cash and just a quarter said they used it to pay for goods and services.

Banks take the lead in innovation

Despite the slow roll-out of mobile banking services and the country lacking the dizzying array of different mobile banking products on offer in Kenya, a number of new mobile banking services have still emerged recently. Many of them have been introduced by Nigeria's leading banks. There are signs that Nigeria's banks are keen to tap into the underexploited potential of mobile payments for internet shopping, for example.

In October, Stanbic IBTC partnered with Mobile Media Info Tech Limited to launch a new mobile money product which allows users to shop online using mobile money rather than having to use a credit card.

"We want to provide more opportunities for the underbanked in every part of Nigeria, especially the small business owners; and we want to be known as the financial service partner that opens doors for our customers, empowering them to grow their businesses and lives," said the head of E-Business at Stanbic IBTC Bank, Thabo Makoko.

The CEO of Mobile Media Info Tech Limited, Jide Akindele, also said: "We are excited about our partnership with Stanbic IBTC Bank. We see this as a great opportunity for Stanbic IBTC MobileMoney subscribers who will be able to make more financial decisions."

Banks have also introduced mobile banking products focusing on more general services l ike transfer and payment services. Earlier in 2014, FirstBank launched FirstMonie to lure customers with mobile money services, for example. At a conference, the director of regulatory affairs and special projects, Osondu Nwokoro, said that the launch was well timed given the Central Bank of Nigeria's current interest in mobile money.

GTBank recently introduced GTBank Mobile Money, which allows customers to make payments and transfers to any other mobile phone in Nigeria.

Shortly after, Western Union also revealed its keen interest in exploiting opportunities in the mobile banking sector in Nigeria when it introduced a new mobile money service, which a l lows people using t he a l ready established eTranzact Mobile Money platform to receive mobile money transfers via Western Union from 23 different countries.

Nonetheless , there are still restrictions on the mobile banking industry, which may be preventing the sector from expanding further. For example, currently telecommunications companies are not allowed to offer mobile money services.

At a banking seminar in July 2013, the director of CBN, Dipo Fatokun explained: "What we have seen is that because of the way mobile payment had taken off in some countries where telecoms companies were in t he forefront, the Nigerian scenario is quite different.

"We excluded telcos from providing mobile payment because of reasons of not having direct control over them. The CBN believes that the core business of t he telecom companies is not banking and payment, and therefore it does not have supervisory power over telecom operators."

Moreover, Niger i a's mobi l e broadband infrastructure is st i l l underdeveloped and it will be some years before it is at a level which will encourage f urther use of mobile banking services.

Although the mobile banking products on offer in Nigeria are not as extensive as in Kenya, Nigerian customers currently have a number of different mobile money service providers to choose from, and the selection is likely to only improve in the coming years.

Finally, awareness-raising will be key to the mobile money revolution really taking off in Nigeria, as research shows t hat knowledge of mobile banking is still at a disappointing level. More intense advertising campaigns from mobile banking service providers may then be a strong trend in Nigeria over the coming years. ua


In 2011, the Central Bank of Nigeria introduced its own mobile money service, which 5.73m people now reportedly use. In July 2013, transaction volumes reached N6.85m ($43,000)

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Publication:African Banker
Geographic Code:6SOUT
Date:Feb 17, 2014
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