Telcos’ Worries in Mobile Money Penetration

Nigerian telecoms operators are worried about the slow penetration rate of mobile money, while blaming the situation on the bank-led model, which they insist lacks the capacity to bridge the existing wide gap in the country’s financial exclusivity ratio, writes Emma Okonji

In 2009 the Central Bank of Nigeria (CBN) presented a brilliant idea to the general public of its intention to introduce a smart and cashless economy for Nigeria, through the cashless policy, designed to drive mobile money operations that would reduce physical cash flow among Nigerians. High cost of printing naira notes, the risk and cost of moving physical cash to different banks, including the individual risk of carrying cash about for every financial transaction, were some of the reasons given by CBN for the planned introduction of cashless economy.
Nigerians, who saw the great need for a cashless economy through mobile money, commended the CBN for its brilliant idea, and gave their full support for its implementation.

Pleased with the support, CBN in 2009, commenced the issuance of the first mobile money licences to drive financial inclusion in Nigeria. In 2012, CBN commenced implementation of the cashless policy with a pilot scheme in Lagos. In 2013 it extended cashless policy initiative to additional five states, namely Ogun, Rivers, Abia, Anambra and Kano, including the federal capital territory, Abuja.

Having perceived as success, the implementation of the cashless policy in the six states, including Abuja, the CBN in July 1, 2014, commenced nationwide cashless policy by extending it to the remaining 30 states of the federation.
All through the implementation stages, the CBN decided to use the bank-led approach, which technically knocked out telecoms operators from participating in the cashless policy that seeks to drive cashless economy through mobile money operations, allowing only the banks to drive the entire process. Although the telcos frowned at the position of CBN on the bank-led approach, but it could not do anything to upturn the decision of the CBN.

Nine years after the commencement of the issuance of mobile money licences and six years after the implementation of the cashless policy, Nigeria is still rated as a predominant cash nation because of the weak penetration of mobile money in the country, which is put at one per cent, thus making the journey towards financial inclusion to be very slow, with the current financial exclusion level, which stood at about 40 per cent. Based on the slow penetration level, the telcos are calling on CBN to reconsider its position on bank-led approach and then consider licensing of telecoms operators to further drive mobile money penetration in the country.

Telcos’ initial position

From the inception of the issuance of mobile money licences by the CBN in 2009, telecoms operators presented a position and made it known to the apex bank that it would be more profitable to Nigerians if the implementation of cashless economy through mobile money, was telcos-led as it is the case with M-Pesa in Kenya. The telcos had justified their position with the fact that telecoms operators have the infrastructure and network as well as the number in terms of subscriber number, which they said, far surpassed the number of bank customers who are bank account holders across all the banks.

The Chairman of Globacom, Mr. Mike Adenuga (Jnr), was the first to raise the alarm, when the telecoms operators first discovered that the CBN was only interested in the banks to drive the entire process. Adenuga then argued that telecoms operators have the capacity to drive the initiative, owing to their large network rollout and huge subscriber number. He gave example with the huge success in mobile money recorded in Kenya, through M-Pesa, and called on the CBN to involve the telecoms operators in the Nigerian cashless initiative. But in spite of his argument, the CBN instead it must be bank-led, while riding on the network of telecoms operators to achieve the cashless initiative of the federal government.

CBN’s position

Despite agitations from the telecoms operators and the strong position of Adenuga, the CBN went ahead to use the banks alone to drive the initiative, thus excluding the telecoms operators from the entire financial inclusion processes. According to CBN, cashless economy is all about financial transaction and that it would be wrong to leave financial transactions of the country in the hands of telecoms operators to manage, since they are not financial experts.

Telcos’ current position

Contrary to CBN’s position on bank-led in the entire process of cashless economy, the telecoms operators are still insisting that they are in the best position to drive cashless economy through mobile money. Their current position, which is not different from their earlier position, was based on the poor performance of the county’s mobile money penetration, nine years after, which is put at one per cent since inception, coupled with the rating of Nigeria as a predominant cash economy, where its citizens still prefer physical cash for all transactions, despite the associated risks.

Worried about the situation, four telecoms operators: Globacom, 9mobile, Airtel and MTN, penultimate week, had a meeting that was facilitated by the Academic Director and Senior Fellow at Lagos Business School, Yinka David-West, where the telecoms operators resolved to invest more in the financial inclusion initiative of the CBN, that is currently driven by the banks. At the meeting, they resolved to clearly articulate their commitment to deepening financial inclusion and providing Nigerians with access to a range of affordable financial services.

Reiterating their commitments as industry stakeholders, the telcos said they remained the largest investors in telecoms in Nigeria, and have decided to come together to deliver a concrete commitment to Nigeria – a promise to materially improve financial inclusion rates and to deliver access to financial services to 90 million customers over the next 30 months.

According to the telcos, following the issuance of Nigeria’s first mobile money licences in 2009, the journey towards financial inclusion has been slow, as current financial exclusion levels stand at over 40 per cent.
“There is a significant gap to be covered in order to meet Nigeria’s target of 20 per cent financial exclusion by 2020. In Nigeria, telcos are excluded from accessing mobile money licences directly under current guidelines, while in most sub-saharan African markets where mobile money is successful, telcos are given a level playing field,” the telecoms operators said collectively at the recent meeting.

According to David-West, “It is clear that as a country, we have to work, not just to drastically increase the number of financially included persons, but also to increase the quality of inclusion and access we give, especially if we hope to positively impact the economy and the quality of the lives of Nigerians in any meaningful way.”

The projection

The projection of the telecoms operators, which is based on statistics from the Nigerian Communications Commission (NCC), the telecoms industry regulator, shows that the telecoms industry has a coverage of 86 per cent of the country, with 162.3 million customers, representing the single largest customer base of any industry in Nigeria.
They explained that industry players have a combined presence in 773 local government areas across the country, which further emphasised their ability to reach, especially the hard to reach areas of the country in a bid to deepen access to financial services. They also have one million unique agents already in place selling airtime across the country, creating a strong distribution network that can quickly be converted to established mobile money agent networks.

The telcos argued that the telecommunications industry recognised that with an issue as critical as financial inclusion, it is important to focus on sustainable solutions. This requires inclusivity and collaboration of varied solutions providers in order to achieve real results. The telecommunications industry has the capabilities, technology, infrastructure, distribution network and subscriber base that can quickly be leveraged to provide these solutions, they said collectively.

NCC’s position

Reacting to the situation, the Executive Vice Chairman of NCC, Prof. Umar Garba Danbatta told THISDAY that the penetration of mobile money in Nigeria is still at its lowest ebb at one per cent penetration because it is bank-led.

“With a population of about 190 million, one per cent mobile money penetration is still on the low side and it has not improved and not encouraging also. I have it on good record that about 40 per cent of the total 190 million population of Nigeria is financially excluded,” Danbatta said.

According to him, the reason for the low penetration of mobile money service in Nigeria is because of the modules of operation, which is bank-driven, yet the banks leverage on the infrastructure and network of the telecommunication operators to drive mobile money in Nigeria. It appears they do not have the capacity to drive mobile money and the telecoms operators have expressed their desire to be part of the driving processes, but this has not been approved by the CBN that regulates mobile money and financial services operation in Nigeria. The telecoms operators have said severally that they have the capacity and infrastructure to drive mobile money and that they are willing to provide additional capacity, yet mobile money is still bank-led and the penetration level has been too slow,” Danbatta added.

“I am convinced that once CBN licenses telecoms operators to provide mobile money service, the penetration level will increase and the level of financial exclusivity will be drastically reduced,” he added.