₦airaland Forum

Mobile Payment: Open letter to Mallam Sanusi Lamido (Central Bank Governor, Nigeria)
in CONTRIBUTIONS WEST AFRICA by Editor — October 17, 2010 at 5:11 pm | 2 comments



Taiwo Olaoye
taiwo.golaoye@yahoo.com
NY, USA

Dear Sir,

There is Mobile payment in war torn Afghanistan and Somaliland. Why not in Nigeria?

With all due respect to you sir, we are aware of the inherited banking troubles and your numerous efforts to help the economy grow, the long delay in issuing mobile payment approval is uncharacteristic of your enviable resume and record of effectiveness.

In many parts of Afghanistan, you have to keep in mind the possibility of stray bullets when going about your daily business, but there is mobile payment there!

Mobile Payment is now a rapidly growing alternative payment method already largely adopted in Asia, Europe and gaining significant momentum in many parts of Africa such as Kenya, Ghana, Sierra-Leone, Congo, Zambia, Rwanda, South Africa, Senegal, Tanzania. This revolutionary method of payment is especially beneficial to the unbanked and people at the bottom of the pyramid in many parts of Africa.

In many respects, the banks are better-off in the sense that mobile payment services have a direct effect on the volume of deposits lodged in the banks.

The Central Bank of Nigeria (CBN) indicated that mobile payment will take off in the country by the middle of 2010. For those who are not familiar with CBN’s stand on this, there has been quite a few announcements and effort to get the public to show interest since 2008. The most recent serious effort to license interested operators started in March 2010.

Those who have shown interest lately are beginning to be wary of the slow progress even though they have committed significant amount of money and effort needed to make background preparations. Some have acquired equipments and signed agreements with partners.

The acting Director, Banking Operations, My Abayomi Atoloye noted at the EFInA Mobile Payments Regulatory Framework Dissemination Workshop in January 25, 2010 in Lagos that mobile payment will take off by the middle of 2010. He stated “One of the initiatives of the Payments System Vision 2020 is the development of “Mobile Payment System in Nigeria” and CBN is particularly interested in the mobile payments service in view of its capacity to drive financial inclusion, especially among rural dwellers as well as the un-banked in urban localities.
According to a recent article in the Punch news paper ” m-Payment market: Slow penetration in Nigeria worries experts” 10/10/2010 and report by some applicants and promoters, over 40 applicants have applied, and have gone through all the rigorous tests, documentations and presentations, then the wait began, then total silence.

As of the time of writing this article, no one knows when CBN will begin to license the operators. One of the operators (Moneyboxafrica) who was issued regulatory approval in 2008 is yet to commence operations.

This should be a wakeup call and lesson for CBN that even when the licenses are issued, it takes sustained effort, time and monetary investment to commence operations. On the investment front, even with a license in hand, savvy investors are skeptical of anything that has to do with Nigeria in a technology dependent business like mobile payment.

Most licensed operators are not likely to rollout anytime soon. Any operator who can rollout within 1 year of receiving the approval must have been doing some serious ground work for years. Thus the capabilities of the operators cannot be measured on paper but rather in the field and that is why CBN must keep an open mind by allowing all operators who can meet the basic criteria to prove themselves further in the field.

The argument that CBN may be slow in issuing the approvals because CBN wants to get it right is almost equal to a student spending 3 years writing a JAMB exam because he wants to get it right. That is a sure recipe for failure and if CBN ‘s strategy is not in line with the entrepreneurs, the vision 2020 will continue to be a dream.

I consider the information that CBN is planning to select just a few a rumor. If true, the method of selecting only a few of the applicants could be counterproductive. No regulators can accurately predict who is capable on paper where such service is yet to be tested in Nigeria. Some applicants have adequate liquidity, but lack in other areas, some have the technology but need to improve in other areas, some are good at marketing the product but lack many in other major components. Most of these applicants will find out what they lack in the field and self correct the short comings by market forces.

Selecting a few is not the way to go as this will surely eliminate the key components of a successful mobile payment industry.

With CBN’s guidelines, operators should be encouraged to start while CBN monitors their progress.

In the developed economy, and as we’ve seen in many parts of Africa such as Kenya, Ghana, Sierra-Leone, Congo, Zambia, Rwanda, South Africa, Senegal, Tanzania, early adoption has a direct correlation with how well the regulatory authorities respect the role of entrepreneurs in the scheme of things. A friend once said to me that entrepreneurs will make the vision 2020 a reality for CBN and not the other way round. Understanding this dynamic is very important.

Time is of essence. It took just months to curtail the potential epidemic of avian flu viruses in Asia and 2009 H1N1 virus that emerged in 2008 to cause the first global pandemic in more than 40 years .

Somaliland, an unrecognized state located in the horn of Africa, has a thriving mobile payment helping the poor. Even in war torn Afghanistan as mentioned earlier, there is a thriving mobile payment helping the poor. Why not Nigeria? .

If Nigeria is to be competitive globally, then it should not take years to evaluate applicants and allow mobile payment operators to start gaining the experience they need to service the poor in the most populated country of Africa. CBN should be encouraging applicants rather than discouraging them.

While the process is taking longer than anticipated, it is important to conclude that CBN has impressed many in comparison to other government run processes, but the fact remain that Nigeria is losing the capability to compete on a global scale every day, not because of lack of talent or brilliant entrepreneurs in Nigeria!

Mr. Olaoye works with a non governmental organization specializing in the financial inclusion for the poor in developing countries of Africa and Asia.