NIGERIA A CASHLESS SOCIETY –A MULT IMILLION CHANCE F OR NIGERIA AND EUROPEAN IT COMP ANIES

1,208,000,000 € ‐ That is the estimated amount ofmoney Nigeria will invest in PoS terminals, ATMs and

payment solutions though 2015 due to the “Cash‐lessLagos project”. This will result in various prospects for

the country on one hand and huge businessopportunities for solution companies on the other hand.

“For all the challengesof the Nigerian market,

if companies do nothave a Nigeria strategythey do not really have

an Africa strategy.”(CEO, SAB Miller, 2009)

Africa in a nutshellWhen talking about future business,Africa is one of the fastest growingmarkets. The annual average GDPgrowth since 2000 counts is 4,9%and the population is set to doublein the next fourty years from 1billion to 2 billion people. Due to thehigh birth rate the median age inAfrica is twenty years. The number ofsmart phones increased by 1280%from 2010 to 2011, enabling thepopulation for mobile payments andbanking. The growing middle classhas already started to revolutionizethe banking industry.

Banking in AfricaCompared to European countries,banking in Africa is different. InSub‐Saharan Africa, with over 400million bankable people, four out offive adults do not have a bankaccount yet. However, there aregrowing trends using cell phones tomake payments. This group ofunbanked people will have to beaddressed by the local bankingsector and offers huge opportunitiesfor banks and IT organizations.Banking in NigeriaDue to a survey by EnhancingFinancial Innovation and Access inNigeria 65% of the adult males, 77%of adult females and 80% of thecountry’s rural population areunbanked. As a result, currently 85%of all payment transactions inNigeria are done with physical cash.

“I must say my bank is awesome,” Osoba says. “I havebeen using their internet banking for over a year, andI’m more comfortable with it than having to go to thebank. I do so much from my phone/laptop than I ever

thought I could. I only go into the banking hall to makedeposits.”

(Wale Osoba, a young entrepreneur, Lagos)

Cashless LagosThe “Cash‐Less Lagos Project” is one

of the regulations the Central Bankof Nigeria established. It wasplanned originally to be started onJanuary, 1st 2012 as a case scenarioin Lagos and later expandedthroughout in the country. Due tosome necessary amendments theimplementation has been postponedtill the 1st of January 2013. The goalof this project is to reduce theamount of physical money (coinsand notes) but not eliminate it. Thereasons for this target aremultilateral and to create multiplefavorable circumstances:Huge business opportunities forIT ‐ companiesFirst, cash entails high costs for allparties of the value chain, especiallythe banks. Furthermore, moneywhich is outside the formal economylimits the effectiveness of managinginflation, encouraging economicgrowth or other monetary policy. Onthe consumer side there are alsohigh risks, due to cash‐related

crimes such as robberies. High cash‐usage also contributes to fraudulentactivities including corruption,leakages and money laundering. Inaddition, fire and floods alsoincrease the danger of losing notes.By reducing the amount ofcirculating money Nigeria canreduce costs and benefit from theinvestments.Content of this project is amongother rules that only CIT licensedcompanies are allowed to providecash pick‐up services. If others do sothey will be sanctioned. Furthermore3rd party cheques above N150,000are not eligible over the counter, butinstead only through a clearinghouse. Aside from that, there will bea ‘cash handling charge’ on dailycash withdrawals and deposits,which occurs when thesetransactions exceed N500.000 forindividuals and N3.000.000 forcorporate bodies.Nevertheless this new regulationoffers great opportunities for(European) companies, who offer

Reasons for introducing the newcash policy in Nigeria:1. Development andmodernization of the Nigerianpayment system2. Reduction of costs e.g.banking services and to pushfinancial inclusion3. Improvment of theeffectiveness of monetarypolicy (managing inflation,driving economic growth)

solutions which meet the needs ofthe new Nigerian standards.Companies with a focus on POS‐terminals, ATMs, payment terminals,software for electronic payments ormobile payment solutions shouldnot miss this chance for business.With 10% cheque growth annually inNigeria, cheque solutions forelectronic cheque truncations areneeded. The importance of chequesis rising as well and thereby so is thedemand for cheque scanningmethods, software and signaturesolutions. These facts and figuresshow the huge potential for theindustry as a result of theregulations.The numbers are tremendous:According to the Central Bank ofNigeria it is planned to installadditional 45.000 PoS terminals by2012 and another 350.000 by 2015.The targeted deployment rate of2.247 machines per 100.000 peoplewould lead to more than 3,5 millionmachines based on the currentpopulation of Nigeria stated with160 million people. Moreover, the

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number of ATMs is expected to growto 75,000 by 2015, a dramaticincrease of 65,000 over the 10,000currently in place.Executive TakeawayOverall the banking system is in animportant phase of change. Thistrend should be taken intoconsideration by every Europeancompany when thinking aboutexpanding into other countries andcontinents. Africa, with its growingpopulation and importance forfuture business, is a key market forall banking solutions, focusedtowards cashless solutions. Nigeriawill especially have a significantdemand for PoS, ATMs and manyother banking‐related products, likesoftware or other electronicpayment solutions.

SourceCentral Bank of Nigeria (2012)EFInA (2012), www.cbn.gov.ngALLAfrica.com, Punchng.comGlobal Press Institute

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