December 30, 2022/CSL Research
Based on data from the Nigeria Interbank Settlement System (NIBSS), financial transactions through mobile devices more than doubled between January and November. Transaction volume was up to 609.9m in November 2022 compared with 249.0 million in November 2021 while transaction value grew to N17.1trn in November 2022 from N6.9 trillion in November 2021. Point of Sales (PoS) transaction volumes also increased by 25.3% to 1.1bn in November 2022 from 877.9m in November 2021 while transaction value grew by 33.3% y/y to N7.6trn from N5.7trn. Despite the increasing payment channels available to Nigerian consumers, the digital payments industry remains significantly under tapped as payment for goods & services are still mainly done with cash.
The Nigerian payment industry remains at its nascent stage of development with a huge portion of transactions done in cash. Nevertheless, the payments industry has evolved in leaps and bounds with the development of electronic payments and Automated Teller Machine in Nigeria. The development of the industry in terms of payment channels and solutions stands with the most developed in the world with the recent use of QR Codes for payments. The average Nigerian consumer now has the option to make payments via multiple channels including Point of Sale terminals, Automated Teller Machines, Mobile Payments, web payments etc.
At a time when technology is disrupting the global financial services industry, Nigeria has not been left out of the change. Although a cash-based economy, Nigeria’s financial system has been receptive to the new transformations in the financial system, especially the introduction of technology. Nigeria is poised to lead the growth in non-cash transaction volume. According to the EDC, % of non-cash transaction volume was forecast to grow at a CAGR of c.39.0% over 2018 – 2023e faster than the c.21.0% forecast for Sub-Saharan Africa and global forecast of c.9.0%. The Central Bank of Nigeria (CBN), following the Naira redesign, released a new policy on cash-based transactions which stipulates cash handling charge on weekly cash withdrawals that exceed N500,000 for Individuals and N5,000,000 for corporates. This is aimed at encouraging electronic based transactions for payments of goods and services.
Despite the relatively large number of players in the industry amid the growing number of payment channels available to Nigerian consumers, we believe the digital payments industry remains significantly under tapped. Our view is underpinned by the relative dominance of cash payment in settlement of transactions. Additionally, we think increasing mobile and internet penetration will continue to support growth in the volume of online payments. Nigeria’s significantly under-tapped digital payments industry is poised for significant growth. A myriad of factors across industry fundamentals, positive country demographics and regulatory support have formed the base of expected accelerated growth for the fintech industry in Nigeria. This expectation has received much attention from investors which has led to significant investments as existing players look to position for future growth.
