Africa’s biggest mobile network, MTN’s ambition to become the largest bank on the continent is not going as planned as the Central Bank of Nigeria (CBN) appears under pressure not to allow telecommunication operators to be part of the mobile money business in Nigeria. Several sources has alluded to intrigues from top guns in the banking sector aimed at ensuring telcos do not come to the mobile money party ever.
Mobile money, an important offshoot of financial technology (Fintech) is a payment solution that enables customers pay for goods and services using their mobile phones. It typically offered by mobile operators include person-to-person transfers, disbursements, bill payments, merchants payments, airtime top-ups, getting cash into the system, as well as getting cash out.
Growing mobile penetration numbers in Africa – overall subscriber penetration reached 44 per cent in 2017 according to data from GSMA – and telecommunication companies’ push in countries like Kenya, Ghana and Ivory Coast has largely been responsible for the popularity of mobile money. It is also seen as the biggest ally to achieving financial inclusion target of 80 per cent set for the year 2020 by the CBN.
While it has seen significant success in places like Kenya and Ghana, mobile money has failed to live up to expectations in Nigeria where it is closely associated with financial inclusion.
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In the case of Nigeria, a combination of regulatory apathy and big banks’ suspicion of ‘outside’ players has ensured the growth of mobile money remain a toddler even at the expense of increasing foreign interest in the space. Apart from telcos, companies like Transsion, Google, Alibaba, Opera are known to be waiting for the CBN to give the go-ahead for non-financial institutions to acquire mobile money license.
The CBN’s Guidelines on Mobile Money Services in Nigeria excludes non-financial institutions to own a license.
However, according to our source MTN Group found an opportunity to bend CBN’s arm while battling with the apex bank over the $8 billion fine it imposed on it. As part of the settlement with the federal government, MTN demanded that it be allowed to do mobile money as it was already doing in 14 African countries.
“The core digital service we have decided to put our money on is mobile money,” Rob Shuter, CEO of MTN said during the Deloitte Africa in 2018 Outlook conference in Woodmead.
The company is the second largest mobile money operator on the African continent with 21.8 million active customers. MTN believes that a licence in Nigeria will help it surpass Safaricom which holds the top position on the continent with 33.3 million customers.
“Mobile Money is a vitally important opportunity for MTN, especially in markets where most of their customers are unbanked, and where MTN has a dominant market share (like Nigeria, Ghana and Uganda),” Paul Theron, CEO of Vestac said in an interview earlier this year.
In its settlement negotiation with the federal government, MTN is believed to have also informed the regulator that its failure to get a license could continue to cut off Nigerians living in northern Nigeria who form the majority of the unbanked people in the country.
“The federal government agreed and passed this to CBN.” The source said.
Left with no choice, the CBN approved in principle MTN’s license application. Buoyed by this development, mobile money operators in Nigeria including MTN, Airtel, Globacom and 9Mobile met on Tuesday September 4, 2018 in a show of solidarity.
Apparently, MTN’s manoeuvre was not done in secret as some bank CEOs got wind of it. The CEOs convened an emergency meeting at the Chartered Institute of Bankers of Nigeria (CIBN). Two tier 1 bank CEOs were said to have chaired the meeting.
“The banks were furious, and they vowed that if CBN goes ahead to give the license to MTN, they will stop funding MTN’s distributors which effectively would kill MTN,” the source disclosed.
Apparently the CEOs had banked on MTN’s inability to provide credit to their distributors as they do not have the credit management skills, nor do they have the assets of their distributors as collaterals should they default in paying back.
The bankers may have prevailed. Again, the CBN was forced to retrace its step and back off from issuing a license. As compensation to the CBN, the bank CEOs agreed to fund the Shared Agency Network Expansion Facility (SANEF) with N25 billion.
In keeping MTN at bay, the banks can also count on NIBSS which provides the national central switch that enables all the mobile money licensees to operate. At a recent function, the acting managing director and CEO of NIBSS, Ezekiel Oyeniyi Ajao, told BusinessDay that “the regulator is very clear in Nigeria about those that can have mobile money licenses are banks and the non-banks who are not telco-led.
“The telcos need to make sure the signal strength of their frequencies is strong enough all over the country. Let them focus on it and get that to work well,” he said
NIBSS committed N7 billion to the SANEF project. N4 billion will be used to purchase Biometric Verification Number (BVN) devices, while N3 billion will be used to fund agents doing the BVN capture.
In terms of metrics, the project is expected to net 500,000 new agents, 30 million additional bank accounts which correspond to 75 per cent reduction in financial inclusion. The super agents NIBSS gave the mandate to drive the initiative include Inlaks, Capricorn Digital, Innovectives, UPSL, 3 Line, and IFIS (Interswitch). The super agents would get fees from the services they perform for the banks such as BVN (N100), account opening (N200), card linking (N200), cash-in (N100), cash-out (N150), transfer 1.5 per cent, airtime, 4 per cent, etc.
In all, the CBN, banks and NIBSS committed N32 billion to the SANEF project. On August 2018, the project was extended to 25 states. We should note that telcos have been given a role to play in the SANEF project with regard to their mobile agent licences.
