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Foreign investors target Nigerian mobile money business

Foreign investors are showing interest in the emerging mobile money business in Nigeria and may soon bring the needed funds to airlift the system, our correspondent has gathered.

The Central Bank of Nigeria had granted approval in principle to 16 operators in 2010 to roll out mobile money networks across the country. Through the networks, customers will be able to use their mobile devices to send and receive monetary value.

Those granted the approvals include Stanbic IBTC Plc, Ecobank Plc, Fortis Micro Finance Bank, United Bank for Africa Plc/Afripay, Guaranty Trust Bank Plc/MTN and First Bank of Nigeria Plc.

Others are Pagatech, Paycom, M-Kudi, Chams, Eartholeum, e-Tranzact, Parkway, Monitise, FET and Corporeti

The CBN, according to its Director, Banking and Payments Systems Department, Mr. Abayomi Atoloye, also gave the 16 licence holders four months (January –April) to prove their capacities for the mobile money system.

They were expected to have put in place technological infrastructure and wide agent networks to actualise the mobile money system in the country.

However, the four-month pilot period lapsed on April 30, but no mobile money network has gone life since the expiration of the trial period.

While a number of the licence holders have shown signs of being ready to roll out services, others are battling with a number of issues ranging from their inability to sign commercial and network access agreements with the mobile network operators and lack of agents to achieve financial inclusion for the underserved in the country.

Our correspondent also gathered that funding had been a major issue hampering the take off of mobile money networks across the country.

Though, some of the 16 licence holders appeared financially capable, others may require external investment to roll out their networks.

In view of that, an expert, who is in the know of happenings in the fledgling mobile money industry, said four institutional investors would be meeting some of the 16 mobile money licence holders in July, 2011.

The source, who did not want his name in print because he was not authorised to speak officially on the matter, said, “As regards funding, many Nigerians do not know about the opportunities in mobile money business, as we speak, but efforts are on going to bring some foreign investors to bridge the gap. Funding is still a major challenge as most potential venture and angel capitalist are still not favourably disposed to investing significant resources into these relatively unknown start ups for early stage funding.

“The political risk rating of the nation at this election year had not been favourable to the start ups, but efforts are on going to bring international investors to meet with the independent providers in the month of July to enable them compete favourably in the emerging mobile financial landscape in Nigeria.”

A renowned United States venture capitalist, Mr. Tim Draper, had recently completed investment in Pagatech, one of the 16 mobile money start-ups in the country.

Draper, who is the founder and Managing Director, Draper Fisher Jurvetson, is known for investing in early-stage companies and emerging markets.

Speaking on his investment in the Nigerian company, the US investor was quoted as saying, “My decision to make this personal investment is premised on the simple fact that I believe in the bold vision of the Paga team and I trust their ability to execute. Paga is a great innovation, which will simplify life for millions of people in Nigeria and beyond. I look forward to the company being a major African success story that serves as an example for many more to come.”

The Chief Executive Officer, Pagatech, Mr. Tayo Oviosu, whose statement underscored the increasing foreign investor interest in the country’s mobile money business said, “We are receiving significant attention from investors, both local and international. I must say that we are fortunate to have Mr. Draper as an investor in Paga.

“His support and advice had been invaluable towards getting us to where we are today, and we continue to enjoy the access he provides to an extensive network of business partners around the world.”

The Principal Associate, Mobile Money Africa, Mr. Emmanuel Okoegwale, who spoke with our correspondent on several developments in the country’s mobile money landscape, argued that with an average roll out budget for technology, marketing and agency network of close to $3m in the first year, there was the need for concerted efforts from the regulator, government and international development agencies to provide the much needed support for the mobile payment service providers.

This, he said, was necessary bearing in mind that the ultimate purpose of mobile financial services was to reach the under-banked and underserved communities that were currently not served by formal financial services.

He said the licence holders should channel their energies into increasing transaction volumes, adding that a medium sized provider should aim to sign up at least 100,000 active subscribers in the first year with strong compelling services that could drive three to five transactions on the average monthly.

Speaking further on the relevance of the mobile money system in a country of over 150 million people with a little over 22 million bank accounts, Okoegwale, said, “Mobile money will make sense in communities where formal financial services are lacking.”

He added that local remittances might also be the magic wand for the mobile money providers considering the volume of transaction currently going through the informal transfer channels such as airtime exchange of cash, sending money through transport hubs and other unsecured channels.


He reiterated that for the mobile payment system to be successful there was the need for robust agency network where the transactions would be conducted.


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