Why Mobile Money Has Failed in Nigeria


Mobile Money as a financial product is inherently a fast moving consumer good, which Nigerian banks are ill-equipped to market and promote, Andrew Morton posits

Financial Inclusion remains a big Nigerian problem. Indeed for an economy that is unarguably the biggest on the continent it is an indictment of sorts on the country that it has been unable to garner far more than it currently boasts in the area of financial inclusion.

Inadequate progress in the area of financial inclusion is not necessarily for lack of trying. A few years ago, for instance, the Central Bank launched a mobile money program. Mobile Money essentially enables a customer to send or receive or even store money on his mobile phone.

Nigeria’s inability to make reasonable progress in the area of Mobile Money contrasts sharply with the progress that has been recorded in many other African countries such as Kenya, Uganda, Tanzania, Rwanda, Botwana, Senegal, Cote d’Ivoire and neighbouring Ghana. Indeed, so successful has mobile money been that it has since broadened successfully into mobile financial services that span credits and even cross-country remittances of money. In other cases, it has expanded into insurance, helping to enhance awareness of the essence of insurance and deepen insurance penetration.

Mobile Money has been phenomenal at stimulating financial inclusion across many markets in Africa. Riding on the pervasiveness of the mobile phone, mobile money has by helping to provide essential services hitherto exclusive to formal banking, helped to tactically bring millions of people especially in developing countries, under the formal banking umbrella.

Despite the introduction of mobile money in Nigeria and its presence herein for many years, mobile money is yet to take off to any reasonable degree of success in the country. Indeed, Nigeria is classified alongside Morocco and Egypt as “sleeping giants” as far as mobile money is concerned. Fortunately for Morocco, however, it already has a very pervasive bank network across the country and as such is not as hard-pressed as Nigeria to fast-track financial inclusion.

The Central Bank of Nigeria and its partner deposit money banks seem to appreciate that Mobile Money remains in a state of arrested development in Nigeria. For some inexplicable reason, though, they seem to believe that doing the same thing over and over again to drive mobile money penetration will achieve the different result of enhancing its penetration.

Recently, the Central Bank together with deposit money banks and others, launched a new initiative, tagged the Shared Agent Network Expansion Facilities (SANEF). The initiative is touted as one that will empower 500,000 agent networks to offer basic financial services such as cash-in, cash-out, funds transfer, bill payments, airtime purchase, BVN among others, to an estimated 50 million Nigerians who are currently under-banked. This was disclosed by the chairman of the Body of Banks’ CEOs Mr. Herbert Wigwe.

In the new arrangement, according to the CEO of GT Bank, licensed mobile money operators and super agents are expected to immediately deploy financial services agents’ outlets in under-served urban and rural areas in Nigeria with priority to be accorded the northern geopolitical zones where financial exclusion has been predominant over the years.

In a similar vein the CEO of UBA added that that both the CBN and deposit money banks will over the next few months, roll out new initiatives, products and services to deepen financial inclusion in Nigeria.

Incidentally, these are the same sound bites we have heard over the years, “ambitious” plans and projects that we have heard before. The bankers and the CBN are treading a well-beaten path of professing faith in the plans for enhanced mobile money penetration in Nigeria in the hope that it will in due course help to bring millions of Nigerians under the organized financial umbrella.

The only problem is that like all of the other initiatives before it, this is likely to lead to the same dead end that has to a large extent, been the fate of mobile money in Nigeria.

Judging from the experiences of several countries, no initiative has proven as potent as stimulating financial inclusion in record time as mobile money. The reason is simple: In the last two decades, the mobile phone has become the most pervasive tool in the hands of Africans. From farmers in rural areas to their middle-men buyers in semi urban areas, from artisans in urban areas to their rural counterparts, across the various demographic segments in rural and urban communities, the mobile phone has become the unifying gadget that is in the possession of all.

It is in latching on to the pervasiveness of the mobile phone and delivering real value to all that mobile money earned for itself, the trust and acceptance of millions of people especially across Africa and parts of Asia.

The mobile phone on its own part, has lent itself to immense innovation. From only providing voice calls and SMS some 15 years ago, today in addition to all of that, the mobile phone is at once a camera, a computer, a music device, a game console and in Africa, the most pervasive tool with which people connect to the Internet.

As it has evolved so has the mobile phone grown in its relevance to the lives of people especially on the African continent, recruiting millions of users in the process.

In societies that are severely under-banked, people found in the mobile phone, a device that could enable one transfer money across vast distances instantaneously without the need for bank intermediaries. Of course, such transactions which took place in their millions on a daily basis proved to be profitable for all parties including the facilitators at the back-end – the distributors, agents, mobile phone companies and others, all of whom earned small commissions for facilitating the transactions.

It is important, however, to recognize that in all of these countries, mobile money has not grown automatically in tandem with proliferation of mobile phones. If it did, Nigeria would have had the most stellar success story so far, especially given its huge population coupled with the mobile phone penetration across the country.

On the contrary, mobile money has grown on the back of tactical and deliberately painstaking regulation that seeks to empower mobile money to run on the wings of the mobile phone revolution. Such regulation typically recognizes that though mobile money may by definition be called a financial product, in practice, it is actually more aligned to what is referred to as Fast moving consumer good (FMCG) such as airtime by mobile phone companies. As such, it is best promoted and marketed with mobile phone companies which have a thorough understanding of consumer dynamics and marketing in the FMCG space, playing the role, with the banking and financial services sector, playing a supporting role.

For instance, mobile phone companies have exceedingly wide distribution networks. In Nigeria for instance so vast are the distribution networks of the mobile phone companies that you could literally get airtime anywhere in urban and rural areas including in traffic jams and motor parks. Banks, on the contrary, have much fewer distribution outlets such as branches and e-branches/ATMs. Mobile phone companies also boast millions of customers who have been carefully nurtured for several years and as such, not only do they enjoy the advantage of economies of scale, they typically portend a much superior customer experience than banks do. On the average all it takes to transfer funds from one’s phone using the popular M-Pesa by Kenya’s Safaricom is a mere three clicks.

Little wonder, therefore, that in deliberately providing a regulatory framework that is led by mobile phone companies rather than banks, Kenya has long provided the biggest success story on the mobile money universe with the successes recorded by its iconic M-Pesa product. M-Pesa is the mobile money product promoted by Safaricom, Kenya’s leading telecom company. As at the end of the 2017 financial year, M-Pesa had 19 million active users and had generated annual revenues of US$548 million, a huge incentive for Safaricom to continue to put promotional dollars behind it and in the process, continue to bring more Kenyans under the financial inclusion umbrella.

The bank-led mobile money model wherein the deposit money banks play the lead role as is the case in Nigeria and a few other countries, has not made much headway in driving mobile money adoption across the continent, certainly no where as near the sort of results that the telco-led model has generated for financial inclusion.

For a country of close to 200 million people with a predominantly youthful population segment (median age of 18), the potential of mobile money to drive financial inclusion is massive. But Nigeria’s regulatory authorities need to come to terms with the fact that the bank-led model is not suited to deliver the kind of results we need. The CBN and the deposit money banks need to come to terms with this paradigm. Mobile money may be a financial product but it is inherently a fast moving consumer good (FMCG) which banks are ill-equipped to market and promote. Nigeria’s financial inclusion needs will be best met when the country adopts a telco-led mobile money regime.

• Morton, an economist, is of mixed Nigerian and British parentage and a keen observer of the technology and financial services space in Africa