Nigeria’s fintech and mobile money operators rise as cash shortages continue

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, which prevented them from capitalizing on the accelerating digital transformation shift. The current cash crunch is giving added momentum to these burgeoning mobile money operations.

MTN, the country’s largest mobile operator, is trying to rapidly expand its mobile wallet platform (MoMo) customer base. To increase usage, MTN is deploying 224,000 new merchants across the country in addition to the existing 1 million active merchants. This will encourage consumers to open MoMo wallets with their old notes. According to the Q322 release, there were 1.8 million active MoMo wallets, 9.9 million registered accounts, and 188,000 active agents. The former figure represented a 29.4% year-on-year decline, but the company remains well positioned to capitalize on the country’s unoccupied population.

The driving force behind the Central Bank of Nigeria’s decision to replace notes with higher denominations was to lower the amount of cash in circulation, control liquidity and inflation, and stimulate the transition to a cashless economy. To support this, the Central Bank of Nigeria also restricted 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 residents in the formal financial system and reduce reliance on cash. In support of this are operator commitments to expand network coverage in rural areas, as the majority of the economically excluded reside in rural areas. As 46.5% of Nigeria’s total population lives in rural regions, expanding 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 to enable connectivity to online financial channels.

Despite the chaos that has occurred across the country in response to the currency crisis, the circumstances are a positive development for fintech operations and mobile money operators. The Central Bank of Nigeria’s decision to replace notes with higher denominations has led to a significant increase in the adoption of digital financial services, giving added momentum to burgeoning mobile money operations.