UD #04: Nigeria's Mobile Money Moment

In ‘The Chicken or The Exit’ co-authored with Osarumen Osamuyi, I wrote this:

However, even the most optimistic estimates would put Africa firmly in the experimentation stage or the beginnings of the scaling stage. The continent only just had its first unicorn. China had its first unicorn in 2010, and it took five years for it to get to five unicorns; the year after that, it had twenty. Ecosystems develop very slowly, and then all at once.

When I wrote this earlier in the year, Africa had one unicorn - Interswitch1. Today, we have 3 unicorns, with Flutterwave and Opay joining the stables2.

I was recently a guest on the Africa Tech Round Up podcast’s Unajua series where I tried to answer the question ‘Is the African technology ecosystem at an inflection point?’ (spoiler alert: it is).

In the first episode, embedded below, I talk about how looking at the number of unicorns always undersold the opportunity for digital financial services in Africa. There are four billion-dollar financial services businesses in Africa hidden inside telcos. MTN MoMo, Airtel Money, Mpesa, and Orange Money all generate between $1B-$400M in yearly revenues. Even the most conservative multiple would value all of them at more than $1B.

The mobile money revolution that has taken over the continent has largely skipped Nigeria. This has primarily been due to regulatory and market structure reasons which I won’t go through in this post (mostly because I don’t completely understand it myself, lol).

The relative failure of mobile money to take hold in Nigeria has left the country lagging behind other African countries in financial inclusion levels. Bank penetration is not as high as in South Africa or Namibia. While mobile money penetration is not as high as in places like Kenya or Tanzania. This leaves Nigeria stuck in the middle of nowhere, with ~50% of the country excluded from formal financial services.

This is starting to change. The CBN finally granted telcos the license to independently operate in financial services about a year ago. Banks are increasingly investing in their agency networks. Pure play agency banking players are also experiencing rapid growth. Opay processed $2B in transaction volumes last December. Paga processed ₦1T over the past 15 months, after processing ₦2T in its first ~7 years. TeamApt processed ~$4B in transactions in 2020, growing