Nigeria's cash crisis provides boon for fintech and mobile money operators, Fitch reports
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Victor Oluwole
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Nigeria's cash crisis has forced consumers to adopt digital payment methods, providing a short-term boon for fintech firms and mobile money operators.
According to Fitch, mobile money operators are well-placed to capitalise on Nigeria's unbanked population, particularly in rural areas, where the physical distance from a brick-and-mortar banking institution prevents people from opening an account.
Nigeria's Central Bank hopes that the growing use of e-payments will increase the number of citizens within the formal financial system and reduce corruption and black market trading.
Nigeria is experiencing a cash crisis due to a demonetisation effort by the Central Bank of Nigeria. While this has caused considerable social unrest, the crisis has been a short-term boon for the country's fintechs and mobile money operators such as MTN and Airtel Africa. The lack of physical money in circulation has been a significant catalyst to the adoption of digital financial services, as consumers have been forced to adopt digital methods of payment at point-of-sale (POS)
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The latest data from Nigeria's Inter-Bank Settlement System shows a pronounced uptick in e-payment adoption at physical POS. In January 2023, the value of transactions carried out at POS devices reached NGN807.2bn, which is 40.7% higher than the same month in 2022. This increase in e-payment adoption is a positive development for mobile money operators in Nigeria.
Data for month of January in each respective year. Source: Nigeria Inter-Bank Settlement System, Fitch Solutions
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Each of the country's mobile money operators had been awarded a Payment Services Bank (PSB) license by the Central Bank of Nigeria by Q222. However, the operators were only able to participate in Nigeria's mobile financial services market through indirect means, leaving them unable to capitalise on the accelerating digital transformation shift. The current cash crisis provides additional momentum to these budding mobile money operations.
MTN, the country's largest mobile operator, is attempting to rapidly expand its mobile wallet platform's (MoMo) customer base. To boost adoption, MTN is deploying 224,000 new merchants nationwide in addition to the existing 1mn active merchants. This will encourage consumers to open MoMo wallets using their old banknotes. According to its Q322 release, there were 1.8mn active MoMo wallets, 9.9mn registered accounts, and 188,000 active agents. The former figure represented a decline of 29.4% YoY, but the company is still well-placed to capitalise on the country's unbanked population.
The impetus behind the Central Bank of Nigeria's decision to replace higher denomination banknotes was to lower the amount of cash in circulation, control liquidity and inflation, and stimulate the shift to a cashless economy. To support this, the Central Bank of Nigeria also limited cash withdrawals, implemented cash withdrawal fees of 3% for individuals and 5% for businesses, and pushed towards digital money.
The Central Bank of Nigeria hopes that the growing use of e-payments will increase the number of citizens within the formal financial system and reduce reliance on cash. Supporting this are operator commitments to expanding rural network coverage, as the majority of the financially excluded reside in rural areas. As 46.5% of Nigeria's total population live in rural regions, extending coverage to these areas is seen as a critical means of achieving organic growth in the mobile subscriber base, as well as providing the necessary infrastructure that enables connectivity to online financial channels.
Despite the chaos that has ensued nationwide in response to the cash crunch, the circumstances are a positive development for fintech operations and mobile money operators. The Central Bank of Nigeria's decision to replace higher denomination banknotes has led to a significant uptick in the adoption of digital financial services, providing additional momentum to budding mobile money operations.
Victor Oluwole Head and Editor at Business Insider Africa
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Markets. Leaders. Careers. Lifestyle. Africa Collective. Markets. Leaders. Careers. Lifestyle. Africa Collective. facebook. twitter. instagram. linkedIn. Business Insider Edition. United States. International. Deutschland & Osterreich. Espana. India. Japan. Mexico. Nederland. Polska. South Africa. BI Africa. >. local. >. markets. Victor Oluwole. Moniepoint in a Pharmacy. Nigeria's cash crisis has forced consumers to adopt digital payment methods, providing a short-term boon for fintech firms and mobile money operators. According to Fitch, mobile money operators are well-placed to capitalise on Nigeria's unbanked population, particularly in rural areas, where the physical distance from a brick-and-mortar banking institution prevents people from opening an account. Nigeria's Central Bank hopes that the growing use of e-payments will increase the number of citizens within the formal financial system and reduce corruption and black market trading. Nigeria is experiencing a cash crisis due to a demonetisation effort by the Central Bank of Nigeria. While this has caused considerable social unrest, the crisis has been a short-term boon for the country's fintechs and mobile money operators such as MTN and Airtel Africa. The lack of physical money in circulation has been a significant catalyst to the adoption of digital financial services, as consumers have been forced to adopt digital methods of payment at point-of-sale (POS) Recommended articles. markets Nigeria’s income decline is owing to food insecurity, malnutrition, and climate change - according to Nigeria’s government. markets 10 African countries with the highest inflation rates in 2023. markets Kenya gets an energy deal from the European Union and another deal from Australia on the same day. The latest data from Nigeria's Inter-Bank Settlement System shows a pronounced uptick in e-payment adoption at physical POS. In January 2023, the value of transactions carried out at POS devices reached NGN807.2bn, which is 40.7% higher than the same month in 2022. This increase in e-payment adoption is a positive development for mobile money operators in Nigeria. Data for month of January in each respective year. Source: Nigeria Inter-Bank Settlement System, Fitch Solutions. BI Africa. Each of the country's mobile money operators had been awarded a Payment Services Bank (PSB) license by the Central Bank of Nigeria by Q222. However, the operators were only able to participate in Nigeria's mobile financial services market through indirect means, leaving them unable to capitalise on the accelerating digital transformation shift. The current cash crisis provides additional momentum to these budding mobile money operations. MTN, the country's largest mobile operator, is attempting to rapidly expand its mobile wallet platform's (MoMo) customer base. To boost adoption, MTN is deploying 224,000 new merchants nationwide in addition to the existing 1mn active merchants. This will encourage consumers to open MoMo wallets using their old banknotes. According to its Q322 release, there were 1.8mn active MoMo wallets, 9.9mn registered accounts, and 188,000 active agents. The former figure represented a decline of 29.4% YoY, but the company is still well-placed to capitalise on the country's unbanked population. The impetus behind the Central Bank of Nigeria's decision to replace higher denomination banknotes was to lower the amount of cash in circulation, control liquidity and inflation, and stimulate the shift to a cashless economy. To support this, the Central Bank of Nigeria also limited cash withdrawals, implemented cash withdrawal fees of 3% for individuals and 5% for businesses, and pushed towards digital money. The Central Bank of Nigeria hopes that the growing use of e-payments will increase the number of citizens within the formal financial system and reduce reliance on cash. Supporting this are operator commitments to expanding rural network coverage, as the majority of the financially excluded reside in rural areas. As 46.5% of Nigeria's total population live in rural regions, extending coverage to these areas is seen as a critical means of achieving organic growth in the mobile subscriber base, as well as providing the necessary infrastructure that enables connectivity to online financial channels. Despite the chaos that has ensued nationwide in response to the cash crunch, the circumstances are a positive development for fintech operations and mobile money operators. The Central Bank of Nigeria's decision to replace higher denomination banknotes has led to a significant uptick in the adoption of digital financial services, providing additional momentum to budding mobile money operations. Victor Oluwole Head and Editor at Business Insider Africa. FOLLOW BUSINESS INSIDER AFRICA. Our newsletter gives you access to a curated selection of the most important stories daily. Thanks for signing up for our daily insight on the African economy. We bring you daily editor picks from the best Business Insider news content so you can stay updated on the latest topics and conversations on the African market, leaders, careers and lifestyle. Also join us across all of our other channels - we love to be connected! Recommended articles. Nigeria’s income decline is owing to food insecurity, malnutrition, and climate change - according to Nigeria’s government. 10 African countries with the highest inflation rates in 2023. Kenya gets an energy deal from the European Union and another deal from Australia on the same day. Here are the best neighborhoods for condo living in Singapore. Where to play video slots for real money. China Energy is building a $5.1 billion green hydrogen project in Egypt. 10 African countries whose citizens may find it hard to borrow money owing to high-interest rates. Kamala Harris’s visit to Africa is intended to engender some economic growth on the continent. Chipper Cash, Silicon Valley Bank, and Silvergate Bank: What the future holds. Trending. Uganda is on its way to becoming Africa’s third nuclear-powered country. Botswana to end its 54-year-old partnership with a UK-based firm if Botswana continues to feel cheated. Tanzania is fast becoming one of the best investment destinations in the world. Kenyan shilling hits an all-time low. Home. Markets. Leaders. Careers. Lifestyle. About us. Advertise with us. Terms & Conditions. Privacy Policy. Business Insider Africa Awards. 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