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How can Nigeria build on the payment evolution brought about by the Naira shortage
By Mxolisi Msutwana – Chief Operating Officer at Baxi
All around the world, governments are trying to encourage cashless payments. Their reasons for doing so are multiple, including expanded financial inclusion and transparency, wanting to formalise the informal economy, and to drive economic growth and innovation. Nigeria is no exception.
By the end of 2022, the move towards a cashless policy as a means to eradicate cash was high on the government’s agenda in Nigeria. In early 2023, a bid by the Central Bank of Nigeria (CBN) to introduce new banknotes and lower cash withdrawal amounts led to a serious shortage of cash .
Unfortunately, there were not enough new notes in circulation to serve the needs of a country that’s historically been as heavily cash-dependent as Nigeria. While the initiative itself is a step in the right direction, there’s no denying that it caused issues.
The economic effects were far from positive. According to S&P, amidst widespread protests, many Nigerians were left scrabbling for ways to pay for day-to-day goods and services. As a result, many people who’d never previously used digital payment services had little choice but to adopt them. Fintechs in particular stepped up to the plate, helping Nigerians meet a fundamental need at a time when their lives had been massively disrupted. A report from Nigeria’s Inter-Bank Settlement System (NIBSS) found that there was a 125% increase in mobile payments during January compared with the same period in the previous year. Additionally, Bloomberg reports, the value of mobile-money transactions has jumped by a quarter to 2.5 trillion naira (US$5.4 billion).
As the shortages abate, it will be crucial that digital payment providers do not let the resulting move to digital payments go to waste. In a country with a long history of relying on cash as the primary means of payment as Nigeria, they will have to work hard to retain the customers they’ve gained in recent months and position themselves for continued accelerated growth.
How digital payment providers evolved
Before looking at how digital payment providers can do so, it’s worth taking a deeper look at how they responded to the situation. That the crisis represented a particularly big opportunity for digital payment providers that allow people to make transactions with their mobile phones is to be expected. After all, as Bloomberg points out, just under 40% of Nigerians have access to bank accounts, compared with mobile-phone penetration of 117% in the country, giving them the opportunity to expand rapidly. Given the comparatively low levels of mobile money use prior to the cash shortages, it should be clear just how much potential for growth there was (and still is).
Of course, those operators still had to work hard to ensure that they were able to properly service the growing pool of customers looking to make and receive digital payments. MTN Nigeria, for example, is planning to deploy 224 000 agents to boost the adoption of mobile wallet use.
At Baxi, meanwhile, we onboarded record numbers of agents, ensuring that people were able to easily send and receive money. We also supported merchants in providing solutions for payment collections during that period by deploying additional point-of-sale (POS) terminals, allowing customers to pay via card and transfers, and allowing merchants to generate account numbers for payment collections.
Of course, not everything went according to plan for every digital payment provider. As a recent column in TechCabal pointed out, many Nigerians complained about the high failure rate in digital transactions.
Cash will always be important
Even in the face of such growth, it’s important to remember how dominant cash has historically been in Nigeria. Despite cashless transactions rising 42% in 2022, cash-based payments still accounted for 63% of all POS transactions in the same year, according to the FIS Worldpay Global Payments Report 2022. That’s significantly higher than the global average of 17.9%. It also puts Nigeria well ahead of the average for the Middle East and Africa region, where cash accounts for 44% of POS payments.
The reasons for the dominance of cash in Nigeria are deep-seated too. They range from a lack of access to bank accounts (just 39% of Nigerians aged 15 and older have a formal bank account) to trust issues with the formal economy. An extensive informal economy and infrastructure challenges also play significant roles while the power of force of habit can’t be ignored either.
In other words, digital payment and mobile money providers cannot simply assume that the boon they’ve experienced as a result of the cash shortage will continue unabated. They also can’t assume that cash will be displaced. It will continue to play a significant role in Nigerian society for a long time to come.
Instead, they should focus on using the situation to ensure that Nigerians and merchants alike understand the very real advantages that digital payments and mobile money have in specific situations.
Security, convenience, and increased access
When it comes to consumers, for instance, payment providers need to highlight that the day-to-day transactions that they enabled during the cash shortage were just the start of what they can offer.
Of course, it’s important to keep emphasising that digital payments offer consumers better security and convenience, especially when it comes to large transactions.
But it’s also important to highlight the additional benefits that digital payments offer. Thanks to advanced integrations, for example, customers can access audio and video streaming services without needing a formal bank account. In many cases, the promise of access to something you didn’t previously have access to is a much more powerful incentive than being able to complete existing tasks more conveniently.
For merchants, meanwhile, security is also a benefit that can continue to be emphasised. For small businesses especially, using electronic channels makes tracking your cash-generating activities easier than ever.
Here again though, there are other significant benefits that should be emphasised, including the ability to automate takings. The digital records made available by having digital payment offerings as an option can also ease the path towards formalisation for small businesses. That, in turn, makes it easier to access things like growth financing.
An opportunity not to be missed
Ultimately, there’s never been a better time for digital payment providers to press home what they can offer to both consumers and merchants. But they must make the most of that opportunity. Their best hope for doing so isn’t to degenerate the role of cash but to emphasise the very real opportunities they can help unlock.
This week, three top football players of Nigerian origin who have played in the National Football League (NFL), also known as the American Professional Football League, will be guests on the Glo sponsored Cable News Network magazine show, African Voices Changemakers.
Three football players, Christian Emeka Okoye, Kenneth Odumegwu, and Haggai Chisom Ndubuisi, are featuring in the personality interview program.
Okoye was born on August 16, 1961, and was known as “the Nigerian Nightmare” while he was a fullback for the Kansas City Chiefs of the NFL from 1987 to 1992.
He had an NFL rushing champion title in 1989, first-team All-Pro honours in 1989 and second-team All-Pro honours in 1991, two Pro Bowl appearances in 1989 and 1991, and three post-season appearances during his successful six-season NFL career. He was well-known for his explosive running abilities and ability to break tackles.
He mentored Ndubuisi and Odumegwu, among others, and is credited with helping to shape the future of many professional American football stars. In 2000, he was admitted to the Kansas City Chiefs Hall of Fame.
Odumegwu, on the other hand, is a Nigerian professional linebacker who plays defensive end for the Seattle Seahawks of the NFL. He was born in Lagos on November 29, 2000.
Before attempting American football in 2022, he played basketball and soccer while attending the National Open University of Nigeria.
He started his professional career with the Green Bay Packers in 2023 as a member of the NFL’s International Player Pathway Program (IPPP).
Ndubuisi, the NFL’s defensive lineman for the Washington Commanders, turned 24 on October 15.
He joined the NFL through the International Player Pathway (IPP) program and has played for the San Antonio Brahmas of the United Football League (UFL), the Denver Broncos, and the Arizona Cardinals.
Scouting for gifted athletes to teach American football skills, the NFL’s International Player Pathway Program has been at the forefront.
The programme airs on Saturday 8.30a.m. on CNN Channel 401 with repeats at 12.00p.m. same day; Sunday 4.30a.m., 7.00p.m and Monday 4.00a.m. The same edition will be repeated on Saturday 8.30a.m., 12 noon and on Sunday at 4.30a.m., 7.00p.m. and 4.00a.m. on Monday.
Broadcasting
Halilu’s Next One Year in Office: NASENI to Upscale Commercialization of Technologies, Products
By Chinyere Obiora-Ekwuazi, Henry Ukwadia, Hadiza Abdul Abubakar
The National Agency for Science and Engineering Infrastructure (NASENI) was strategically established in 1992 as the only purpose-built intervention agency of the Federal Government, having the mandate of nurturing an appropriate and dynamic science and engineering infrastructure base for achieving home-initiated and home-sustained industrialization of Nigeria.
Without the application of Science, Technology and Innovation (STI), it is difficult for any nation to optimize the benefits of her possession of both human and material resources. Against this background, NASENI has continued to make giant strides in Nigeria’s technological landscape through its eleven (11) Development Institutes, each contributing to the development of STI for economic development of the nation. Nevertheless this is not without some attendant challenges ranging from funding to human capacity building and development.
However, the Agency heaved a sigh of relief when in September 2023, President Bola Ahmed Tinubu appointed a young, energetic technopreneur, Mr. Khalil Suleiman Halilu who has brought to bear his wealth of experience from the private sector to administer NASENI, giving it a new result-based orientation with market in focus.
On assumption of office, he set his goal of transforming the Agency, saying he would make it a central player in Nigeria’s technology revolution by adopting, adapting and domesticating cutting-edge technologies. To build a national brand, going forward, every household in Nigeria will have one NASENI product or the other.
Today, NASENI stands as hope for Nigeria’s indigenous technological advancement, aligning with its core mission of fostering needed dynamic science and engineering Infrastructure for national progress. The Agency under Halilu has articulated a bold vision and promoted shared management-staff philosophy hinged on 3Cs principles of Creation, Collaboration and Commercialization to fuel Nigeria’s innovation and sustainable future.
This approach has indeed opened more doors to result-oriented NASENI partnerships with both national and international corporate communities to foster EVC/CEO’s commitment toward the commercialization of NASENI’s products. In just one year, KSH as he is fondly called, spearheaded unprecedented collaborations cutting across many sectors with local and international partners in both public and private sectors, resulting in numerous groundbreaking agreements, making his vision for viable commercialization and rolling out innovative products for public consumption.
Briefing newsmen recently in Abuja, in commemoration of his one year in office, Mr. Halilu reiterated his resolve to make NASENI “the number One Technology Transfer Agency in the country.” This stems from his earlier promise in 2023 to take NASENI products from the shelves to the market. So far, not less than 36 products from NASENI are already in the corporate market.
During the media briefing, he disclosed the plans to have a showroom where people can walk in and buy NASENI products in retail, explaining that there are already plans to this effect. Halilu further noted that all the products of the Agency developed in the last one year are products of collaborations with strategic partners and Original Equipment Manufacturers (OEMs) with local content inputs.
The Agency has in the past one year introduced about 36 market-ready products which includes Solar Irrigation pumps, electric cars (EV), Android Smartphone, Solar Home System, Smart Prepaid Meters, Power Stove, Hatchbox, Pick-Up vehicle, Power Storage, Car Battery, Laptop, CCTV, Solar Street Lamp, Solar Wall Light, Electric Tricycle, Mobile Science kit, amongst others.
In addition, NASENI has established one of Nigeria’s largest CNG reverse engineering centre at Utako in Abuja to help Nigeria save cost on fuel products as well as cut fossil fuel emission in line with the SDGs on renewable energy. Also, under one year in office, the NASENI EVC/CEO made sure that the Agency carried out several administrative reform initiatives, such as Rebranding the Agency’s vision; introduced a new vision for NASENI’s brand identity, reposition NASENI with the 3Cs, increased NASENI’s valued investments to USD3.25 billion and launched the accelerated Technology Transfer Framework.
The initiatives also included the development of the Agency’s 2023-2027 strategic launchpad, reformed NASENI’s governance structure, enhanced staff welfare, established an Innovative Hub at NASENI HQ, launched Hatch Box for STEM education, digitalized Agency services and operations and positioned the Agency as Nigeria’s technology transfer agency, provided policy recommendations and contributing to economic growth, reduced dependency on imports and promoted domestic production.
Having attained these milestones, NASENI now is focusing on innovations and homegrown solutions that will contribute to the Agency’s job creation drive and the growth of the economy. Hence the mandate of NASENI to support the diversification of the Nigerian economy and strengthen the Agency’s position in the global technology and manufacturing landscape remain viable options through its accelerated technology transfer initiatives.
Moreso, NASENI has mapped out strategic plans that will upscale commercialization of the Agency’s technologies and products and drive the Nigeria economy in 2025. Some of these upcoming projects include; NASENI Renewable Industrial Park, MTS (spare parts support), NASENI Holding Company, NASENI Technologies Limited, NASENI Asset Recovery, CGIWC – Land awarded, Lekki FTZ Partnership, Vehicles refurbishment, Small arms assembly, Ammunition production, NASENI Innovation Hub, NASENI Xceler8, Future-Makers by NASENI – 2025, NASENI Public Challenge – 2025, Global Return Programme – 2025, DELT-Her v2.0 – 2025, NASENI Governing Council and NASENI Campus. All these are geared towards economic growth, job and wealth creation for Nigerians.
Multichoice Group, South African Pay-TV operator, has announced that it has written off N31.6 billion ($21 million) in cash that was held with the recently liquidated Heritage Bank.
A write-off is the decision decision by a company or government to accept that they will never recover a debt or an amount of money that has been spent on something.
The company made this disclosure in its financial results for the six months ending September 30, 2024.
Earlier, in its FY 2024 annual report released in June, the group had reported a deposit of N33.7 billion with the bank as of March 31, 2024, the end of the fiscal year.
However, following cash remittances made before the bank’s liquidation on June 3, 2024, the balance was adjusted to N31.6 billion.
“Following the revocation of Heritage Bank’s banking licence by the Central Bank of Nigeria on 3 June 2024 and its subsequent liquidation, the group wrote off its receivable relating to the cash held with the bank,” Multichoice stated in a note to the $21 million listed as part of its operating losses for the half-year under review.
The Group reported that the continued depreciation of the naira against the US dollar led to additional foreign exchange losses on non-quasi equity loans, particularly on the USD-denominated intergroup loan from MultiChoice Africa Holdings B.V. to MultiChoice Nigeria Limited.
Despite these challenges, the Group successfully repatriated some funds from its Nigerian operations to its headquarters, although the amount was lower compared to the previous year.
“The group extracted USD65 million from Nigeria in the period (1H FY24: USD91 million) at an average rate of NGN1,516:USD (1H FY24: NGN794:USD), incurring extraction losses of USD1 million or ZAR20 million (1H FY24: USD28 million or ZAR518m) in the process.
“The group held USD11 million in cash in Nigeria at period-end, down from USD39 million at end FY24, a consequence of consistent focus on remitting cash, the impact of translating the balance at the weaker naira and the write-off of the USD21 million receivable relating to the cash held with Heritage Bank before its license was revoked and the bank was liquidated,” it stated.
After the Central Bank of Nigeria (CBN), revoked Heritage Bank’s banking license on June 3, 2024, the Nigeria Deposit Insurance Corporation (NDIC), was appointed as the liquidator.
The NDIC has since begun paying insured deposits, with a maximum coverage of N5 million per depositor.
While Multichoice initially stated in June that it would work with the NDIC to ensure a reasonable outcome regarding its funds in the liquidated bank, its deposit exceeds the maximum amount insured by the NDIC.
Recently, the NDIC announced that it is actively working to ensure that depositors with amounts exceeding the N5 million insurance limit are compensated through liquidation dividends generated from the sale of the defunct bank’s assets.
The Corporation also confirmed that it has begun efforts to recover debts and liquidate investments and physical assets from the bank to facilitate timely reimbursement for uninsured depositors.
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