As the year 2022 ends, there has been a huge revolution in various sectors; and the Nigerian payment industry has not been left out. We want to review the different activities that coloured the Nigeria payment landscape in 2022.
The year 2022 saw the continued rise of Nigeria tech start-up funding. As of August, a total of $747,908,000 was raised by 107 fintech start-ups in Nigeria. To show the growth of the fintech space, Nigeria’s fintech unicorns have grown to five with Flutterwave, Opay and Andela attaining unicorn status last year, joining Interswitch and Jumia.
While the fintech sector has grown in the year, there is more to be done as there are still gaps to fill. Across the fintech spectrum, the payment and remittance, lending and finance sub-sectors showed a lot of activities. The Blockchain and invest tech sub-sectors showed significantly increased activities. However, the Insure-tech and secure & ID tech are still lagging. It is therefore important to deliberately grow investors’ confidence to push for long-term investment, increased funding and diversification into less-performing fintech spaces such as insure-tech, open banking and security &ID.
The year also saw an increase in enrolments for Biometric Verification Number (BVN) by bank account owners. According to the data released by the Nigeria Inter-Bank Settlement System (NIBSS), a total of 4.3 million new BVN registrations brought the total number of BVN to 56 million. With a total of 133.4 million account numbers, it shows that there is still more to be done. However, there is a situation where a single BVN is linked to multiple account numbers. Concerted efforts should be put in place by the CBN and the banks to increase enrolment as this unique identity (BVN) adds protection to the sensitive and personal information of the owners and drives security and ID
The Central Bank of Nigeria announced the launch of a national domestic card scheme. According to the apex bank, the scheme is geared towards accelerating financial inclusion and delivering lower-cost payment services that are more accessible and affordable for Nigerians.
The existing card schemes in the Nigerian market leveraged the growing card payment market and accelerated cashless transactions. The popular card schemes in Nigeria are Mastercard, Visa and Verve with the first two being international card schemes and the third being a successful domestic card scheme with international footprints.
Prior to 2009, the Nigerian payment space was dominated by international card schemes. This meant that there was no domestic card scheme specifically tailored to the local consumer. By 2009, the Verve card scheme was introduced into the Nigerian market as a domestic card scheme addressing specific local nuances such as low cost, quicker processing time, and wider acceptance by Nigerians and Africans across all social strata. The Verve Card scheme seems to have been expanding its products and benefits to also cater to the digital and web payment needs of customers on the global stage.
Although CBN in a statement issued by CBN Director, of Corporate Communications, Mr Osita Nwanisobi, pointed out that the proposed national domestic scheme could further enhance data sovereignty, enabling the development of locally relevant products and services and reducing demands on foreign exchange; financial experts believe that government can actually support existing domestic cards such as Verve, with favourable policies and funding to enable them to perform even much better rather than compete against it.
As Nigerians race to beat the deadline of depositing their old naira notes to make way for the new naira notes, following the CBN’s announcement to redesign the Naira, Nigeria is still somewhat a ‘cash-heavy’ economy. According to the CBN, the redesign of the Naira is part of its move to reduce the economy’s heavy dependency on cash and make cashless alternatives more acceptable. Experts believe that this will drive the adoption of digital payment options including cards.
A 2021 survey shows that cash and debit cards are the most common payment methods chosen in stores, restaurants, and similar outlets. As of November 2022, Nigerians spent N318.66 trillion on electronic transactions, a 41.75% increase from the N224.79 trillion transaction value that was registered over the same period in 2021.
To achieve the planned cashless drive, the CBN should engage with the card companies, fintech and banks to build a thriving business environment for all the players, create policies that safeguard their continued profitability and implement initiatives that guarantee the growth of the ecosystem for the benefit of the players and Nigerians. The CBN and similar regulatory agencies should build confidence that will encourage increased private investments and players in the space rather than stifling existing players out of the market.
This year also saw an increase in Agent Banking with an all-time high of about 1.4 million agents spread across the country, through the Shared Agent Network Expansion Facility (SANEF). Consequently, the volume of PoS transactions rose by 24.3 % to 878.4 million as of September 2022, from 706.8 million in the corresponding time last year. The value stood at 4.6 trillion.
Agent Banking channel is expected to bring financial services closer to the unbanked and underbanked segments of society. Experts say the business model has been adopted by young people and women to reduce the unemployment gap. It is therefore important that the government provides infrastructure and favourable policies that ensure their continuity and profitability.
According to NIBSS, there was a 153% growth in the use of mobile for financial transactions, surpassing the N8 trillion recorded in 2021. The surge was bolstered by the rising mobile connections across the country. According to the Nigerian Communications Commission (NCC), active subscriptions for mobile services across the networks of MTN, Airtel, Globacom and 9mobile hit 218.6 million in November 2022.
Following the introduction of the payment service banks (PSBs) licence aimed at achieving 95% financial inclusion by 2024, to boost financial inclusion, especially in rural areas and facilitate transactions, three more licenses were awarded to Telecommunications companies such as MTN (Momo PSB), Airtel (SmartCash PSB) and Globacom (Moneymaster PSB). This has given customers more options than traditional banking services.
In all, despite the huge achievements seen in the Nigerian fintech space, there is still room for more growth in the industry. All the players should play their roles with the intention of growing the industry. The government should ensure a level playing field for all the players, and implement policies that will attract longer-term investors. The recent policies by the CBN have left very little to be desired. From the controversial cash withdrawal policy to the international transaction limit, and the domestic card launch. All of these policies are stifling the industry and casting doubts on the CBN’s ability to sustain the industry and drive economic growth.