About this research
State of play: Fintech in Nigeria is an Economist Intelligence Unit report, sponsored by Mastercard and MTN Group. The report examines key trends in the fintech sector in Nigeria and assesses both industry drivers and impediments to further growth.
This report combines extensive desk research and insights from interviews. We conducted in-depth interviews with industry experts and executives at regulatory bodies and fintech firms. The interviews were conducted in January and February 2020. Our sincerest thanks go to the following participants (listed alphabetically) for their time and insights:
- Emmanuel Agha, CEO, Innovectives
- Denis Barrier, co-founder and CEO, Cathay Innovation
- Olayinka David-West, senior fellow, Lagos Business School
- Khaled Ben Jilani, senior partner, AfricInvest
- Musa Jimoh, director, payment system management, Central Bank of Nigeria
- Babatunde Obrimah, chief operating officer, Fintech Association of Nigeria
- Kenechi Okeleke, senior manager, GSMA Intelligence
- Emmanuel Quartey, head of growth, Paystack
- Ham Serunjogi, co-founder and CEO, Chipper Cash
Adam Green is the author of the report and Melanie Noronha is the editor.
Executive Summary
Nigeria, Africa’s largest country by GDP and population, is among the continent’s fintech leaders with a lively crop of start-ups and a growing suite of digital offerings from mainstream banks. Fintech revenues are forecast to reach an estimated US$543m by 2022, driven by increasing smartphone penetration and its unbanked population.
What solutions are Nigerian fintech providers focusing on? How healthy is the broader ecosystem in terms of venture capital investment, skills and the regulatory environment? What are the key challenges and bottlenecks facing the country as its fintech sector matures? This report, based on desk research, data analysis and expert interviews, traces the evolution of fintech in Nigeria.
Key findings of the report:
- Nigerian fintechs are branching out from payments into lending, micro-investment, wealth management, peer-to-peer transfers and insurance. Payments and remittances are the most developed subsector to date. The country has seen a surge of new and simplified apps to help merchants, businesses and consumers. Mainstream banks, initially slow to react to the digital era, have quickly adapted to offer apps and tools in areas like loans, while non-traditional players—including telecom companies and retailers such as supermarkets—are entering the finance space.
- Nigeria’s regulatory environment balances innovation and consumer protection but must continually evolve to respond to market dynamics. The Central Bank of Nigeria has passed laws and regulations to promote digital payments and allow more actors to enter the space, boosting competitiveness and consumer choice. But it is balancing these with consumer protections through its cybersecurity framework and data protection regulation. Recent reforms, such as easing entry of start-ups into the capital markets and the creation of a fintech sandbox, could also lead to an enrichment of the ecosystem. While there is no fintech-specific law as yet, a sector roadmap provides overarching direction to the industry. A legal framework may prove necessary to manage the emergence of new types of fintech and accelerate fintech solutions for “insurtech” and wealth management.
- To develop and flourish, Nigerian fintech needs to address shortcomings in the broader ecosystem. While venture capital investment is forthcoming, the majority comes from abroad with Nigerian investors currently playing a small role. As the sector matures, skills gaps are emerging outside of product development in areas such as business management and marketing. Given the challenges that fintechs in all markets are facing in terms of profitability, expertise in business management and corporate governance is needed. Some experts question whether fintech has truly moved the needle on financial inclusion, believing that it is easing financial transactions for those already in the system. But the jury is still out. Although a causal link with the rise of fintech is unclear, surveys conducted by Enhancing Financial Innovation and Access, a financial sector development organisation, reveal that the percentage of financially-excluded adults in Nigeria reduced from 41.6% in 2016 to 36.8% in 2018.
