How scarce PSB licence slows Nigeria’s mobile money take-off

More than two years after the Central Bank of Nigeria (CBN) gave an official node to nonfinancial companies to apply for mobile banking licences to assist in deepening access to financial services, not much has changed.

While two smaller Telcos and a payments company have been given mobile money licences, the country’s largest mobile operators, MTN and Airtel are yet to receive the licence.

Targeted at Nigeria’s over 40million unbanked population who are mostly in the rural communities, the payment service bank (PSB) by the apex bank would enable Telcos and other non-financial institution to offer financial services while deepening the country’s financial inclusion rate.

“If Nigeria wants to deepen financial inclusion with the right oversight, then the banks and Telcos should work together to drive it,” Yewande Adewusi, a Lagos-based financial inclusion consultant said.

Adewusi says it is “obvious that what the country has been doing in the past is not working.”

Before now, only banks and licensed financial institutions were allowed to provide financial services (bank-led financial inclusion model). Although telecom operators and other fintech companies indicated interests to operate in the market, the CBN policy would not allow them.

The regulator eventually shifted because of the increasing rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access.

The apex bank has a target to ensure that 80 percent of the country’s adult population is financially included in the financial cycle by the year 2020. The CBN had in a circular on July 2018, lamented that Nigeria was not meeting any of the financial inclusion targets agreed and contained in the 2012 Financial Inclusion Strategy.

Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved a 60.3 percent financial inclusion rate in 2012, it declined to 58.4 percent in 2016 against a target of 69.5 percent, translating to financial exclusion of about 41.6 percent.

According to Enhancing Financial Innovation and Access (EFINA), Nigeria’s dream to include 80 percent of its adult population into the financial inclusion net in 2020 may have been unrealized.

While EFINA is expecting to release its 2020 official figures in March 2021 due to COVID-19 pandemic, the organisation which has covered Nigeria’s financial inclusion space in the last 12 years said it is unlikely that Nigeria met last year’s 20 percent exclusion target by the CBN as available data shows half of the adult population in the country are still without a bank account.

“It is unlikely that we will have met the target of 80% of Nigerian adults being financially included,” Ashley Immanuel, CEO, EFINA said.

According to Immanuel, EFINA is currently in the process of conducting its 2020 survey, and as a result, does not yet know the exact rate of financial inclusion in 2020. “However, there are some data points we can look at to get a hint of how financial inclusion has changed in the last couple of years.”

The organisation which measures Nigeria’s financial inclusion rate through nationally-representative access to financial services survey said it based its projections on the data from the Nigeria InterBank Settlement System Plc (NIBSS) which shows Nigeria had 46 million BVNS as of mid-january 2021.

While the BVN data from NIBSS shows there has been an increase from two years ago, EFINA says: “it still means that less than half of the roughly 100 million Nigerian adults are banked,” and as such, it believes it is unlikely the 80 percent inclusion target was achieved.

Financial inclusion, according to the World Bank means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.

The 2018 and most recent data by EFINA put Nigeria’s financial inclusion rate at 63.2percent, meaning that as much 36.8 percent of Nigerian adults, as of two years ago lacked access

Even though the population of Africa’s largest economy is 2.6 percent of the total world population, the World Bank Global Findex Report 2017 estimates that 3.4 percent of Nigerians are among the global 1.7 billion adults who are unbanked and financially excluded.

“From a regulatory perspective, one basic requirement for mobile money to succeed is to create an open and level playing field that includes non-bank mobile money providers such as Mobile Network Operators (MNOS),” Londonbased Group Special Mobile Association (GSMA) said.

Telco led financial inclusion model has played a significant role in the level of progress reported in some African countries as the telecommunication companies in the countries leveraged on their already existing infrastructure to deepen access to finance.

Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more population remains at 1 percent owing to its bank-led model.

Ghana’s decision to have a Telco-led financial inclusion model resulted in a 73 percent increase in registered mobile money customers in just one year, according to World Bank data, an initiative that lifted financial inclusion rate in the West African country to 58 percent in 2017 from 41 percent in 2014.

This is not different for Ivory Coast who has experienced a mobile money revolution. There are now more adults with mobile money accounts of 24.3 percent than with bank accounts of 15 percent.

With a customer base of over 200 million and a combined presence in the 774 local government areas in Nigeria, the Telco industry in Africa’s most populous country which has the largest subscription for any sector in the country shows it has the facility to take financial services to the hard to reach areas in the country.

In its quest to achieve the 20 percent financial exclusion target by the year 2020, Nigeria’s apex bank on the 5th of October 2018, released an exposure draft guideline in which it proposed PSB, a payment service initiative which can allow Banking agents, Mobile Money Operators (MMOS), Retail chains (Supermarkets), Telecommunications companies to have a license to operate under the structures and guideline specified by the bank.

Out of the 30 business names which have applied for PSB licence, only three companies have obtained the mobile money licence.

As of August 2020, the apex bank announced that it has granted a licence to Hope PSB a subsidiary of Unified Payment, Globacom’s Money Master and 9Mobile’s 9PSB to provide mobile money services.