It would seem to be a sure thing for firms offering mobile money transfers: large population, a growing economy and just about everyone has a mobile phone, but as with many things that seem to be a sure bet, particularly in Nigeria, there’s a catch.
Mobile companies have been thirsting to mimic the success of other African markets and tap into the potential for money transfers by phone in Nigeria, but a number of factors have slowed the service’s development.
“Nigeria might be a bit late... and there has not been a lot of good news yet,” said Emmanuel Okoegwale of the Mobile Money Africa consultancy group.
“I think the central bank saw mobile money as a bit of a risk,” he added.
Nigeria’s central bank has been cautious so far, blocking mobile companies from running their own cash transfer services and forcing them to partner with banks.
Telecos like South Africa’s MTN, the continental giant, said they should be able to run their own services, given their proven success in other markets, but in Nigeria they were positioned as junior partners.
Four years ago, Nigeria’s banking sector was plunged into crisis due to massive corruption and mismanagement which led to huge amounts of bad loans and forced a $4 billion bailout. Bank executives were sacked in the process.
The central bank’s efforts in leading the sector to recovery have been widely lauded, and it has been reluctant to relax control in a country considered one of the world’s most graft-ridden.
Some in the mobile industry say that by withholding licenses from phone companies, the central bank was simply seeking to protect a lucrative market for Nigeria’s banks.
“The network operators said, ‘if you are not allowing me to claim the market, why should I help you?’” according to Okoegwale.
Central bank spokesman Ugo Okoroafor said the rule was designed simply to protect Africa’s largest oil producer and warned that if not properly regulated mobile money could cause inflation.
Analysts further noted that a broad mobile money scheme could pose systemic risks to Nigeria’s economy if it goes sour.
In Uganda, MTN’s MobileMoney has seen massive success since its launch three years ago, registering more than two million users who pay at least 33 cents per transfer.
But earlier this year, the company revealed that more than $3 million was stolen through a fraudulent MobileMoney scheme in which some of its employees were implicated.
“Look at what happened to MTN in Uganda (and) now imagine if that leads to a contagion effect,” in Nigeria, said Okoegwale.
The revenue potential in Nigeria is huge: only 38 percent of the country’s 160 million people use a formal bank account, according to a 2010 poll by Gallup and NOI-Polls, a Nigerian opinion research firm.
Meanwhile, there are more than 93 million mobile phone subscriptions in Nigeria, the most in Africa, according to a 2011 report by the GSM Association of mobile phone operators.
The delays in Nigeria, caused largely by the time taken to finalise regulations, have been frustrating, said the General Manager of MTN’s MobileMoney in Nigeria, Usoro Anthony Usoro.
“Obviously, I would prefer a telco led model. It would mean less having to manage too many players before taking the product to market,” Usoro told AFP.
Examples from other African nations show what is possible. Indeed, versions of the service are now used by 16 percent of the sub-Saharan population, according to an April World Bank study.
To use the basic cash transfer service, the sender loads their account with a registered agent, sometimes the same person who sells talking time cards.
The recipient gets a text message with a transaction code and can collect the money by presenting the message and a piece of identification to an agent elsewhere.
The commissions vary depending on the size of the transaction, and the technology has gained traction by being cheaper than services like Western Union and more reliable than human couriers.
Kenya’s Safaricom, a mobile phone company, was the African pioneer: its M-Pesa programme, launched in March 2007, claimed 14.7 million registered users on its five-year anniversary.
The possibilities can be easily imagined in densely populated Nigeria, where many people have family members in faraway cities. Most of the population lives on less than $2 per day.
“In Nigeria, you have a significant young population... and the challenges that the existing population has in opening a bank account are still there,” said Okoegwale. “For me, these challenges are an opportunity.”