Need to expand Nigeria’s fintech space

Despite the steady growth of the financial technology space in Nigeria, innovators and startups seem dissatisfied with existing collaborators and regulators. PELUMI BOLAWA writes on the advantages of more fintechs in the country

During his visit to Nigeria in September 2016, Chief Executive Officer of Facebook, Mark Zukerberg, said he was impressed by the potential he saw in Nigeria in the area of Information and Communications Technology.

When he visited the Co-creation Hub, Yaba, Lagos State, he said, “I was blown away by their talent and the level of energy that I saw. Nigeria has always been identified as a country with great potential for growth, especially with the youthful population, but now it is moving beyond the potential to reality.”


Digital economy as development driver

Nigeria boasts five fintech companies, namely Interswitch, Flutterwave, Chipper Cash, Opay and Andela, which have attained the unicorn status in Africa. With these companies, investment of over $1.5bn is at stake.

The Central Bank of Nigeria, in its bid to regulate the operation of fintechs, established the Ministry of Communications and Digital Economy, and later launched the E-naira to improve financial inclusion across the country.

A report by Enhancing Financial Innovation and Access revealed that only 64 per cent of Nigerians are financially included, leaving others behind.

During the launch of its financial inclusion strategy in 2012, the CBN said that by 2024, Nigeria should achieve 95 per cent financial inclusion status.

E-naira is the digital form of the country’s currency, issued in line with Section 19 of the CBN Act. It is a direct liability of the bank, a legal tender, forming part of the currency-in-circulation, and will be at par with the physical Naira.

In guarding against the risks associated with unregulated crypto-currencies, the bank stated that “e-Naira shall complement traditional Naira as a less costly, more efficient, generally acceptable, safe and trusted means of payment. It will also improve monetary policy effectiveness, enhance government’s capacity to deploy targeted social interventions and boost remittances through formal channels.”


Winning against all odds

The CBN, in August 2021, announced the freezing of banks’ accounts belonging to Rise Vest Technologies Limited, Bamboo Systems Technology Limited, Bamboo Systems Tech. Ltd OPNS, Chaka Technologies Limited, CTL/Business Expenses and Trove Technologies Limited for six months. The fintech companies allegedly used the foreign exchange sourced from the Nigerian market to purchase foreign bonds/shares in contravention of CBN’s directive issued in July 2015.

The CBN Framework defines the establishment, rules and operations of a Regulatory Sandbox for the Nigerian payments system to promote effective competition, embrace new technology, encourage financial inclusion and improve customer experience, with a view to engendering public confidence in the financial system.

The Governor of CBN, Godwin Emefiele, said that Nigeria’s payment system received around $500m in investments due to increased level of confidence between 2015 and 2020.


Innovators and startups as solution

In the wake of these numerous challenges, all eyes are on innovators and startups that need collaborators to attain the unicorn status.

Financial Services Innovators stated, “Though Nigeria’s fintech scene has been fraught with several challenges lately, opportunities abound for innovators and startups.”

Regulators are beginning to come together as support systems for startups and innovators within the digital economic space.

“Financial Institutions such as Sterling Bank, First City Monument Bank, Ecobank, Zenith Bank, Heritage Bank, Wema Bank, Fidelity Bank, Union Bank, StanbicIBTC, Fidelity Bank, AXA Mansard, Flutterwave, Capricorn Digital and Nigeria Inter-Bank Settlement System are tremendously supporting FSI’s growing community of over 4,674 members across the country,” the Executive Director of FSI, Mrs Aituaz Kola-Oladejo, stated. 

In its framework for regulatory sandbox operations, CBN said it deemed it pertinent to ensure new and more flexible ways of engaging with the industry.

“One of the options being the use of a regulatory sandbox, which is a formal process for firms to conduct live tests of new, innovative products, services, delivery channels or business models in a controlled environment, with regulatory oversight subject to appropriate conditions and safeguards,” the bank stated.

With the launch of its new Appstore on its sandbox, FSI is creating a network interface with partners and venture capitalist firms.


Growing tech innovation from schools

Attention is drawn to academic institutions as drivers of the new age of technological innovation, considering the level of unemployment and youth underemployment in the country.

Data by the National Bureau of Statistics shows that unemployment and youth unemployment rate in Nigeria stand at 33.3 per cent and 42.5 per cent respectively.

“Our key focus areas for 2022 include developing its Founders Community to raise unicorns in Nigeria and Africa, discovering tech talents that are employable, globally, and engaging others eager to embark on entrepreneurial journey and enhance collaboration in the ecosystem in the coming year,” the group added.

Pelumi Bolawa
Pelumi Bolawa
Pelumi Bolawa is a content developer, writer, researcher and photographer. An intern at Financial Street, Pelumi is also a development administrator.

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