Paga, one of Nigeria’s leading mobile money operators in Nigeria marked 10 years of its
existence and announced that it had processed c.US$4.6m transactions since it began
operations. The firm currently has over 12.1m active users, over 20,000 agents and has
processed over 17m transactions.

The Paga mobile payment service was launched in 2009 and obtained a full operating licence from the Central Bank of Nigeria (CBN) to operate a mobile money service in December 2010. The company’s subscriber base of 12.1m indicates a subscriber base penetration of 6.2% (subscribers as a proportion of the estimated total population).

To put the service subscription numbers in perspective, the firm’s current subscribers as a percentage of total active mobile subscribers (which stood at 174.0m based on data provided by the Nigerian Communications Commission as at
January 2019) is 7.0%.

We compare these achievements to those of M-Pesa, a similar mobile-phone based money
transfer and micro-financing service first launched in Kenya by Safaricom. Safaricom, in
which Vodafone Kenya owns 40%, currently has over 162,000 agents. The service,
launched in 2007, has enjoyed high subscription growth with Safaricom reporting that the
number of M-Pesa customers increased to 29 million subscribers in 2018 driving the
growth in M-Pesa revenues. M-Pesa has 54.5% mobile payment penetration.

Coming back home, similar mobile payment systems have not been able to replicate the
same success as M-Pesa. While mobile telecommunication subscribers have increased
rapidly in recent years, mobile payment penetration remains low. Many have blamed this
phenomenon on the bank led model adopted in Nigeria compared to the telco led model
adopted in Kenya. To aid faster penetration, the CBN had recently given the telecommunication giants an option to apply for a licence to act as payment service banks (PSB).

The National Communications Commission and the Central Bank of Nigeria signed a
memorandum of understanding in 2017 and the guidelines for the licencing and regulation
of PSBs were approved in October 2018. While the model is yet to be implemented, there
are reports that many Nigerian telcos are interested in applying for the PSB licence.
Interestingly, the likes of MTN Nigeria and Airtel Nigeria have already signalled interest in
acquiring the PSB license.

Under the existing guidelines, a total of 21 mobile money operators’ licenses have been
issued by the CBN made up of 15 non-bank operators and 6 bank operators. Considering
the large subscriber base of the telco operators, we believe this may be the trigger required
to deepen the penetration of mobile service payments particularly in the underserved and
unbanked population.

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