Thankless Task?

Nigeria’s banks stand to gain more from mobile money than MTN

By David Whitehouse

Posted on September 5, 2019 08:30

MTN may find that it’s working for Nigeria’s banks as it seeks to repeat its mobile money success in east Africa.

The company’s Yello Digital Financial Services unit will provide access to simple money transfers and other financial services.

The potential seems huge: fewer than 6% of Nigerians use their phones for mobile money transactions, compared with 73% of Kenyans.

According to GSMA, which represents mobile operators worldwide, Nigeria, Ethiopia and Egypt are Africa’s three “mobile money sleeping giants”. The three countries could add over 110 million new mobile money accounts in the next five years, GSMA says.

In Nigeria, the banks and the regulators will hold the upper hand in managing take-up.

  • MTN has been granted a payments license and not a license to make loans as they do in other markets, notes Erik Renander, a fund manager at the HI EMIM Africa Opportunities Fund in London. “The banks in Nigeria are working together with the central bank to limit the success of MTN money.”

Mobile money requires heavy, long-term operational investments before it becomes profitable.

  • MTN is obliged by its license to do the expensive spadework of accessing unbanked customers in Nigeria’s rural areas, Renander says.
  • Data on these customers will be fed into the banking system, helping banks grow their customer base.

MTN, then, could simply find itself putting in the sweat for banks and potential customers who both find it too expensive to establish a relationship with each other.

  • “The central bank is protective of the local Nigerian banking industry and will be careful that a foreign owned telecom company is not going to hurt the profitability of the banks,” Renander argues.
  • Still, the banks are to some extent underestimating the likely popularity of MTN’s offer, he says.
  • “MTN is the most functional, dependable thing in Nigeria. The country runs on MTN.”

Cash in hand

Researchers led by Olayinka David-West at the Lagos Business School have argued that mobile money operators in Nigeria have tended to treat the potential market as a generic whole, paying insufficient attention to different customer segments. That’s one reason why  a profitable model for mobile money in Nigeria has yet to emerge, the paper published in March argues.

An ingrained Nigerian preference for cash payments will be a further obstacle.

  • According to GeoPoll, which surveyed a sample of 500 people in Nigeria in late 2018, 25% of the respondents preferred to pay cash for goods and services, despite almost all having used mobile money in the past.
  • Most of that 25%, GeoPoll says, could in theory access banking services, but choose not to.
  • When asked by GeoPoll for their preferred payment method, mobile money was the least favoured at 19%, while debit cards, cash, and credit cards scored 31%, 25%, and 24% of responses respectively.


The regulatory framework will be critical. A key difference with Kenya, Renander argues, is that the Kenyan government as the owner of Safaricom wanted to promote its MPesa mobile money.

  • “In the beginning at least, the regulator will try to be restrictive with MTN,” Renander says.

Deji Olatoye, a corporate lawyer at The Lodt in Lagos, argues that the central bank’s historical regulatory stance has been to treat electronic payments as a feature of electronic banking. Telecoms companies have been specifically excluded from applying as operators even under the non-bank category.

  • The exclusion of a sector that has the widest penetration is perhaps why Nigeria has not been able to “move the needle very much”, Olatoye says. “This is where the Kenyans have got it right from the get-go.”
  • What is unique to Nigeria, Olatoye says, is that it’s not yet clear how the central bank’s rules will work with Nigeria’s new competition law, the Federal Competition and Consumer Protection Act of 2018. “The regulation-enabled environment of Nigeria is not likely to permit an equal level of flexibility compared with Kenya,” he says.

Bottom Line: Nigeria’s banks are more likely than MTN to be the real winners from mobile money adoption.

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