Despite Nigeria’s 126 million internet connections, as much as 37 percent of the adult population were unbanked in 2018. Among these unbanked, the World Bank noted that only 10 percent have access to both a mobile phone and internet connection.
These are some of the findings on the recently published research on Fintech in Nigeria. The research was conducted by The Economist Intelligence Unit with support from MasterCard and MTN.
On the other hand, Nigeria has one of the most mature fintech and tech markets in Africa with huge prospects of generating revenue and solving some of the country’s problems.
Fintech revenues in Nigeria are expected to grow from $153 million in 2017 to $543 million in 2022. This amounts to over 254 percent increase.
Nigeria also has unique subscriber connection of 50 percent. With 100 million unique subscribers, Nigeria’s tech industry is set for a giant leap.
In addition to this prospect, the unbanked in Nigeria could be an attractive pool of potential consumers for fintech firms. Currently, Nigeria’s fintech industry has provided options for payments and remittances.
It provides much of the tech wiring for Nigeria’s online banking system as well as personal and business financial products.
Nigerian fintech companies are also expanding to lending. There has been a marked increased in mobile lending products targeting the small and medium-sized enterprise.
The industry has also provided for wealth management. Brands like Cowrywise are bringing online investment product to Nigeria’s middle class. Digital insurance and digital banking are other products that have been provided by Nigerian Fintech.
Apart from the direct value addition from these products, they have also stimulated competition in some of Nigeria’s mainstream industries such as banking. This has contributed to the efficiency of those industries.
Full development of these products can help reduce financial exclusion in Nigeria. But growth of Nigerian fintech is constrained by several factors.
One of these is the regulatory environment which is overseen by different authorities. Some of these include the Central Bank of Nigeria, the Securities and Exchange Commission, and the Nigeria Communication Commission.
Fees to gain financial services license is also high. For example, to register a fintech company, a minimum fee of ₦50 million (or $139,000) is charged. This has a discouraging impact on small businesses and local ingenious ideas.
Other constraints include weak cyber security. This has limited the protection of consumers and businesses. Fintech firms are also constrained by limited access to consumer data due to the Nigeria Data Protection Regulation of 2019.
Within the skills ecosystem, there is also deficit in aspects such as business management, marketing, and communications.
Positively, Nigerian companies are proving a draw for investors to boost their investment capital.
To access the full potentials of these million-dollar industry, efforts must be made to address some of these constraints.
Particularly, to convert these prospects to resolve the high level of financial exclusion, changes should be made in the regulatory environment. Efforts should be made to open licensing to new players, reduce fees and charges, and encourage the business ecosystem.
This will improve the fintech industry and stir competition. In addition, an effective measure should be developed against cyber and financial crime. To crown it, efforts to improve financial literacy among consumers and SMEs will be essential to achieve a more robust financial inclusivity in Nigeria.