Financial inclusion in Nigeria: mobile money services, payment services, banks and telecoms operators

Back to African Regional Forum Publications

Rotimi Akapo

Advocaat Law, Lagos


Glory Ogungbamigbe

Advocaat Law, Lagos


Financial inclusion has been described as ‘the provision of a broad range of high quality financial products, such as savings, credit, insurance, payments and pensions, which are relevant, appropriate and affordable for the entire adult population, especially the low income segment.’[2] It has been recognised as a possible critical tool for tackling poverty and inequality, generating employment, creating wealth, and improving welfare and living standards for a substantial number of people, particularly the rural poor and the financially excluded.

Two of the initiatives adopted by the Central Bank of Nigeria (CBN) in its financial inclusion drive, the licensing of Mobile Money Operators (MMOs) and Payment Services Banks (PSB), have been of particular interest to telecoms companies (Telcos) as they both rely extensively on the infrastructure and technology they provide. Under the mobile money scheme, Telcos provide infrastructure to drive the exchange of messages for mobile payment and PSB licencees are expected to leverage on mobile and digital channels for the provision of their services, thereby enhancing financial inclusion and stimulating economic activity at the grassroots through the provision of financial services. Telcos are therefore critical stakeholders in the digital financial ecosystem and in achieving the CBN’s financial inclusion objectives.

Mobile money services

Mobile money involves the use of mobile phones for the initiation, authorisation and confirmation of the transfer of a value out of a current/checking, savings, or stored value account. Some analysts are of the view that the low success rate of mobile money services in Nigeria can be attributed to the existing legal framework which specifically excludes Telcos from being ‘the lead initiator’ even in the non-bank led model.[3] This position is premised on the fact that the success stories of the adoption of mobile money services in Africa have been in countries where Telcos have taken the lead in the provision of the services.

In Nigeria, since 2011 the CBN has licensed 21 mobile money operators (MMOs). It is reported between January and September 2018 there was a 50 per cent increase in the volume of mobile money transactions, this amounted to NGN1.2tn (approx. US$3.13bn), against NGN795.18bn during the same period in 2017. Mobile money users have also reportedly increased from 3.2 million users in 2017 to 5.54 million during the same period in 2018.[4] Compare this however with reports that show that transactions worth over US$1bn a day were processed by MMOs worldwide with over 690 million registered users in 90 countries making it the leading payment platform for the digital economy in many emerging markets.[5]

There are many examples of Telcos taking the lead providing mobile money services in such places as Kenya, Tanzania, Uganda and Ghana.[6] Nigeria’s mobile money landscape is, however, dominated by banks, technology and financial services companies.

The arguments in favour of a Telco-led mobile money framework is further supported by their subscriber numbers, available infrastructure and agent network which far surpasses that of the banks in terms of numbers and geographical spread.[7] Ghana is often cited as an example of how a review of the legal framework to allow Telcos to apply directly for mobile money licences has had a positive impact on the adoption of mobile money services, resulting in an increase of about 72 per cent in the number of mobile money users.

Although the CBN recognises the importance of Telcos in operating the mobile money scheme given the necessity of the infrastructure they provide, it nevertheless feels compelled to prohibit the Telco-led option in order to ensure it retains full control of monetary policy operations, minimise risks and that the offering of financial services are driven by organisations which have been licensed by it. Telcos are therefore restricted to the provision of telecoms network infrastructure for the use of mobile money operators (MMOs).

Payment service banks (PSBs)

In October 2018, the CBN pursuant to its statutory powers issued the Guidelines for licensing and Regulation of Payment Service Banks in Nigeria (the Guidelines).[8] The Guidelines require licensees to ‘leverage on mobile and digital channels to enhance financial inclusion and stimulate economic activities at the grassroots through the provision of financial services’. The PSBs are to further ‘facilitate high-volume low-value transactions in remittance services, micro-savings and withdrawal services in a secured technology-driven environment to further deepen financial inclusion and help in attaining the policy objective of 20 per cent exclusion rate by 2020.’[9] The primary targets of PSBs are therefore those without bank accounts, the underserved and the financially excluded.

The list of approved promoters of PSBs include banking agents, Telcos through subsidiaries, retail chains (supermarkets, downstream petroleum marketing companies), postal (Fintechs), financial holding companies and any other services providers and courier companies, MMOs, switching companies, financial technology companies entity on the merit of its application subject to the approval of the CBN.[10] The minimum capital requirement for a PSB is NGN5bn (approx. US$13m) or such other amount that the CBN may occasionally prescribe.[11]

PSBs are required to operate mostly in the rural areas and locations without banks, targeting financially excluded people, with not less than 25 per cent financial service touch points in such rural areas. They are allowed to enter into direct partnership with card scheme operators and[12] deploy point of sale devices, appoint agents,[13] and roll out agent networks. They are also expected to be technology-driven and conform to best practices on data storage, security and integrity.[14]

PSBs are permitted to accept deposits from individuals and small businesses and carry out payments and remittances (including inbound cross-border personal remittances) services through various channels within Nigeria. They are also permitted to sell foreign currencies realised from inbound cross-border personal remittances to authorised foreign exchange dealers, issue debit and pre-paid cards in their names, operate electronic wallet, render financial advisory services, invest in FGN and CBN securities and carry out such other activities as may be prescribed by the CBN.[15] They are however forbidden from granting any form of loan, advances and guarantees (directly or indirectly), accept foreign currency deposits and from dealing in foreign exchange markets, except as prescribed in relation to inbound cross-border personal remittance.[16]

Telcos are permitted to be promoters of PSBs through subsidiaries established solely for that purpose and are further required to obtain a ‘no objection letter’ from the Nigerian Communications Commission (NCC) in support of their application to the CBN.[17] To encourage fair competition among licensees, the Guidelines provides that a parent company or any other related entity of a PSB, which renders services to its PSB, shall extend similar services to other entities that so desire on the same terms and conditions.

A parent company of a PSB or any other related entity is banned from offering any preferential treatment to its PSB subsidiary. The anti-competitive provisions in the Guidelines are expected to provide a level playing field between PSBs that are Telco subsidiaries and other PSBs.

PSBs are licensed by and under the supervision of the CBN and are required to render various returns to it, including a return on the number of financially excluded customers signed-up during the quarter to which the returns relate.[18] They are further required to comply with relevant provisions of the Money Laundering (Prohibition) Act, 2011 (as amended), Terrorism Prevention Act, 2011 (as amended), CBN AML/CFT Regulations for Banks and Other Financial Institutions 2013 and other existing laws and regulations on Know Your Customer issued by the CBN.[19] All CBN regulations on the operations of electronic payment channels are also applicable to PSBs.[20]

MTN Nigeria and Airtel networks, two of the largest Telcos in Nigeria, have announced their intention to apply for PSB licences so as to take advantage of the projected opportunities.[21] These announcements would definitely be welcomed by the CBN as it signifies the Telcos’ acceptance of the legal framework. The Telcos are expected to leverage on their existing customer base, distribution and agent networks, infrastructure and their geographical footprint across Nigeria and are currently in the process of setting up subsidiaries to apply for the licences as required by the Guidelines.


The Mobile Money scheme and the PSB model will run concurrently and will hopefully drive the CBN’s financial inclusion objective while, at the same time, providing another revenue stream for Telcos. The adoption of the PSB model by India has demonstrated the potential of the model in supporting its government’s goal of realising financial inclusion. Under India’s model, licences have been issued to Bharti Airtel, Vodacom India as well as other companies. Reports have shown that modest gains have already been achieved even though the scheme appears to be weathering some challenges.

The ban of the granting of loans by PSBs is an opportunity missed to promote financial inclusion further, as access to loans from banks and financial institutions continues to be a major issue for the informal sector, micro, small and medium enterprises which only require minimal capital for their businesses. These businesses should be able to benefit from any financial inclusion drive.

We expect the Telcos to continue to be important stakeholders in achieving the government’s financial inclusion targets by playing a significant role in providing access to financial services, economic growth of the target areas and the alleviation of poverty.

[1]EFInA survey, ‘Access to Financial Services in Nigeria 2018’, 11 December, 2018, available at:  https://www.efina.org.ng/our-work/research/access/, last accessed 8 November 2020.

[2]EFiNA, ‘What is Financial Inclusion?’, available at: https://www.efina.org.ng/about/financial-inclusion, last accessed 7 November 2020. The Revised National Financial Inclusion Strategy of 2018 provides that financial inclusion is achieved when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at affordable costs.

[3]See the provisions of the Regulatory Framework for Mobile Payment Services in Nigeria and the Guidelines on Mobile Money Services in Nigeria.

[4]Damilare Famuyiwa, ‘Just like MTN, Airtel announces plan to apply for payment banking licence’, Nairametrics, 2 December 2018, available at: https://nairametrics.com/airtel-joins-league-of-telcos-vying-to-establish-payment-service-bank, last accessed 7 November 2020.

[5] Mats Granryd, Director General, GSMA, ‘Sub-Saharan Africa remains the dominant force in mobile money’, Businessday Newspaper, 28March 2018, p 26.

[6]Within five years of its launch, M-Pesa in Kenya had 15 million customers, equivalent to 37.5 per cent of the population, and was processing US$10bn annually. See Rajiv Lal and Ishan Sachdev, ‘Mobile Money Services – Design and Development for Financial Inclusion’, 2015.

[7]There is telecoms network coverage in about 86 per cent of the country with presence in 773 local government with total mobile subscription of 172.4 million subscribers as of December 2018.

[8]In August 2020, the CBN issued a reviewed guidelines which among other provisions, include the inclusion of Switching Companies as eligible promoters

[9]Guidelines, pp 4 and 5.

[10]Guidelines, article 5.

[11]Guidelines, article 9.1. It should however be noted that pursuant to the CBN’s Regulatory Framework for licensing super agents, MTN Nigeria had applied for and been granted a super-agent licence by the CBN. A discussion on the framework for the licensing super agents is however not within the scope of this article.

[12]Such cards shall however not be eligible for foreign currency transactions.

[13]In line with the CBN’s Guidelines for the Regulation of Agent Banking and Agent Banking Relationships in Nigeria.

[14]Guidelines, article 3.

[15]Guidelines, article 4.1.

[16]Guidelines, article 4.2.

[17]Guidelines, article 5(2), and p 2.

[18]Guidelines, article 10.

[19]Guidelines, article 11.

[20]Guidelines, article 14.

[21]In announcing its intention, MTN had stated that it expects to commence services during the second quarter of 2019. There are also indications that the CBN may start granting licences by the end of Q1 2019.

Back to African Regional Forum Publications