NextBillion - An Initiative of the William Davidson Institute at the University of Michigan

Monday, February 23, 2015

Like any other country, Nigeria has its problems. However, Nigeria perched now as Africa’s “Golden Child” with a GDP of $510 billion, ballooning past South Africa who has numerous economic challenges ahead.

On the continent and Africa’s two leading economies, the poor seem to be left behind. As with winning the lotto, the winning is not as exciting as really knowing what to do with the money. So it is with Nigeria. A booming economy, globally recognised businessmen who are leading investor sentiment and attracting FDI to the country, Nigeria is an ‘investors pick’ these days.. Then there is Boko Haram and the constant threat of terrorism that has reached the heart of Nigeria in the city of Abuja.

The real theme of Nigeria’s next challenge rest on the unbanked. The world’s challenge in this same category is the 2.5 billion unbanked adults, most of whom are women. These are the ones that need inclusion and access to the financial system that will expose the advantages of economic freedom and empowerment, self-actualisation. It goes without saying that technology has yet to report the success envisaged in this space of bragging rights.

The first mobile money service was launched in Nigeria in 2011 but, so far, there has been little mobile money adoption. InterMedia Financial Inclusion Insights (FII) Tracker Survey of Nigeria, conducted in fall 2013, measured mobile money usage at a paltry 0.3 percent of the Nigerian adult population (2.6 million). The Nigeria FII Tracker Survey, and a recent study by MicroSave’s Helix Institute of Digital Finance, identified some of the likely reasons for mobile money’s limited uptake, including:

– Lack of knowledge among consumers about how to open a mobile money account.

– Low levels of trust in mobile money’s performance and safety.

– Unstable mobile networks.

– Ineffective agent training and management, leading to a lack of proper monitoring and operational support for agents.

– Lack of business incentives for MNOs to fully invest in mobile money partnerships with banks

To this extent, Nigeria’s banking system continues to face strong headwinds in two areas, revenue and the cost of business and commercial banking. It may seem as though the banking industry shrunk between 2004 and 2014 due to massive consolidation in the market, however, these mergers and acquisitions (M&A’s) actually represented approximately 60% of the organic growth for the remaining (stronger) banks. There is also the trickle-down effect from the 2008 recession that left many banks in Nigeria exposed and most of whom have closed. The market however has solid growth for “inclusion growth.”