Nigerian Mobile Operators Can Now Offer Banking Services

Written by Peter Pedroncelli

Nigerian mobile operators can now offer consumers limited banking services thanks to regulatory policy changes aimed at improving financial inclusion in the country.

The change, instituted by the Nigerian central bank, means that mobile operators will be able to apply for a licence to become a payment service bank, creating a new category of financial institutions in Nigeria, according to EuroMoney.

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This opens up possibilities for telecommunications firms in the West African nation to offer mobile money services that were previously impossible without the involvement of a bank.

The central bank previously blocked mobile operators from getting licenses to move money for customers without using a bank in an effort to protect banks from competition.

The new regulations will allow mobile operators to collect deposits, enable payments and remittances, issue debit and pre-paid cards, provide financial advisory services and invest in government and central bank securities, according to IOL.

financial inclusion
Nigerian mobile operators are now able to offer consumers limited banking services to promote financial inclusion. Photo by Seyi Ariyo on Unsplash

The change of heart from the banks is designed to increase financial inclusion in a country where only 40 percent of the population has access to affordable financial products.

The central bank aims to increase that number to 80 percent of Nigeria’s adult population by 2020, according to PremiumTimes.

Data from the Enhancing Financial Innovation and Access department of the Nigerian central bank revealed that around 36.6 million Nigerian adults, representing 36.8 percent of the adult population, do not have access to formal financial services.

Increased financial inclusion through mobile money

Mobile money is big business on the continent, with 143 services active in sub-Saharan Africa, which accounts for about half of the services deployed worldwide, according to TandFonline.

Nigeria’s four major wireless carriers have 162 million active subscribers between them, EuroMoney reports, and this provides an incredible platform and opportunity for the central bank to push their financial inclusion objectives.

While the central bank is boosting the ability of mobile operators to offer banking services, it is still protecting the advantage that the established banks in the country have through limitations on the newly licensed payment service banks.

These limitations include the fact that the central bank will not enable licensees to lend, pay interest or accept foreign-currency deposits, according to IOL.

Without the ability to receive interest or apply from loans through the newly created payment service banks, consumers may not be motivated to venture outside the banking system, while those who are unbanked and requiring a loan will not be able to turn to the mobile operators for the financial assistance they need.

South African mobile operator MTN is one of the telecommunications firms in the country that have applied for a license, according to Moneyweb.

As one of MTN’s three biggest markets, Nigeria is very important for the mobile operator.

The Nigerian market accounts for 29 percent of MTN Group’s service revenue, 34 percent of the voice revenue and 30 percent of digital revenue, according to ITWebAfrica.

The operator recently agreed to pay a $52.6 million settlement to the Nigerian central bank after negotiating a fine that was originally set at $8.1 billion.

The central bank believes that amount was illegally expatriated by the country’s biggest mobile operator in the eight years leading up to 2015, according to Businesslive.