Mobile money firms eye Nigeria

By Ben Simon, AFP

LAGOS–It would seem to be a sure thing for firms offering mobile money transfers: the most populated country in Africa, a growing economy and a nation where just about everyone has a mobile phone. But as with many things that seem to be a sure bet, particularly in Nigeria, there’s a catch.

Mobile companies have been thirsting to mimic the success of other African markets and tap into the potential for money transfers by phone in Nigeria, but a number of factors have slowed the service’s development. “Nigeria might be a bit late … and there has not been a lot of good news yet,” said Emmanuel Okoegwale of the Mobile Money Africa consultancy group.

“I think the central bank saw mobile money as a bit of a risk,” he added.

Nigeria’s central bank has been cautious so far, blocking mobile companies from running their own cash transfer services and forcing them to partner with banks.

Telecos like South Africa’s MTN, the continental giant, say they should be able to run their own services, given their proven success in other markets, but in Nigeria they are positioned as junior partners. Four years ago, Nigeria’s banking sector was plunged into crisis due to massive corruption and mismanagement which led to huge amounts of bad loans and forced a US$4 billion bailout. Bank executives were sacked in the process. The central bank’s efforts in leading the sector to recovery have been widely lauded, and it has been reluctant to relax control in a country considered one of the world’s most graft-ridden. Some in the mobile industry say that by withholding licenses from phone companies, the central bank is simply seeking to protect a lucrative market for Nigeria’s banks. “The network operators said, ‘if you are not allowing me to claim the market, why should I help you?’” according to Okoegwale.

Central bank spokesman Ugo Okoroafor said the rule was designed simply to protect Africa’s largest oil producer and warned that if not properly regulated mobile money could cause inflation.

Analysts further noted that a broad mobile money scheme could pose systemic risks to Nigeria’s economy if it goes sour. In Uganda, MTN’s MobileMoney has seen massive success since its launch three years ago, registering more than two million users who pay at least 33 cents per transfer. But earlier this year, the company revealed that more than US$3 million was stolen through a fraudulent MobileMoney scheme in which some of its employees were implicated.

“Look at what happened to MTN in Uganda (and) now imagine if that leads to a contagion effect,” in Nigeria, said Okoegwale.