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Why Did Mobile Money Flop In Nigeria?

BY Jessica McKenzie | Thursday, September 5 2013

Two years have passed since a mobile money service was deployed by the Central Bank of Nigeria (CBN) and it still has yet to catch on with the masses. According to a recent poll by the Nigerian research company NOI, only 6 out of 10 Nigerians know about the service (59 percent), and of that number only 13 percent are using it.

Even more discouraging is that 93 percent of the mobile money adopters are using it in conjunction with an existing bank account, and that the remaining 7 percent had a bank account, but operated it separately. That implies that the target audience—the unbanked—is missing out entirely.

Only 25 percent of the Nigerian population (170 million people) has a bank account or access to financial services; this leaves 75 percent, or roughly 510 million people, without access to either. The expectation was that mobile money could solve that problem for millions of people.

Dipo Fatokun, the Director of Banking and Payments Systems at CBN, has cited several factors that have led to low banking penetration, including proximity to financial service outlets (in the case or rural habitants), product complexity and cost of services.

This does not bode well for Nigeria's ambitious goal of being among the top 20 world economies by the year 2020. It was hoped that mobile banking would inject more participants into the country's economy, as well as decrease the cost of banking services.

Nigeria, along with countries like Kenya and Tanzania, will soon rule the world in mobile money transactions, predicted Shiletsi Makhofane, the Head of Marketing and Strategy at Ericsson, speaking at the unveiling of his company's Digital Agenda for Africa.

"Apart from competition, Nigeria and some other African countries have population advantage to leverage on, especially on the large population of the unbanked in rural communities," he added.

Unfortunately the recent NOI findings do not support his prediction, at least as it applies to Nigeria.

The success of M-Pesa in Kenya, on the other hand, cannot be denied. When techPresident wrote about that companies outstanding progress earlier this year, we mentioned a Brookings Institution report on why mobile banking has not been as successful elsewhere. They found governments might be hesitant to support mobile banking if it meant offending the powerful banking sector. That, or governments would assume the popularity of an initiative and not lay the necessary groundwork ahead of launch time.

One big difference is that a traditional bank is piloting mobile money in Nigeria, whereas in Kenya it's powered by Safaricom.

“These are two different climes,” said Emmanuel Okoegwale of Mobile Money Africa, when asked about mobile money in Nigeria versus M-Pesa in Kenya.

He elaborated:

The mobile network operator that is also the largest organization in that country is also the provider of the mobile financial services in the country mentioned. They have everything under their control from subscribers, access channels and distribution points and a primary product (airtime), which was used to cross sell the mobile money value proposition. We have also seen smaller MNOs do well in that space like Econet in Zimbabwe. In the case of Nigeria, most of the factors to scale up the deployments were external to the providers and will take some time, resources and efforts to achieve.

In other words, give them a bit more time.

Personal Democracy Media is grateful to the Omidyar Network and the UN Foundation for their generous support of techPresident's WeGov section.

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