- The value of digital transactions increased 47.4 times between 2013 and 2023
- The payment landscape features the Nigeria Inter-Bank Settlement System (NIBSS) Instant Payment (NIP) platform, ATM, mobile agents and Point of Sale (PoS) operators
- The growth is driven by Nigeria’s young demographic, fintech innovations and the policies of the Central Bank of Nigeria
The amount represents an average monthly figure of N54 trillion over the last 10 years.
The growth in the adoption of digital payment in the country is attributable to a range of factors, chief among which are Nigeria’s youth demographic, innovations by fintech, and the Central Bank of Nigeria (CBN) 's cashless policy, which aims to drive financial inclusion and curb excess cash in circulation.
In analysing the payment landscape in Nigeria, analysts at Stears say electronic transfers, covering Nigeria Inter-Bank Settlement System (NIBSS) Instant Payment (NIP) transactions enabled through web, mobile, USSD, etc., have an 88.20 per cent market share. Mobile agents follow this with 6.89 per cent of the market share, Automated Teller Machine (ATM) with 3.36 per cent and Point of Sale (PoS) with 1.55 per cent.
According to the NIBSS, electronic payment transactions increased by 55 per cent in 2023 to N600 trillion from N387 trillion in 2022, setting an all-time high since the introduction and adoption of electronic payment in the country.
It further stated that the highest volume of e-payment transactions in 2023 was recorded in March, with 1.17 billion transactions, followed by December, with 968 million transactions, while the third-highest volume of transactions, 828.17 million, was recorded in November 2023.
Monthly e-payment transactions by volume in 2023
The volume of e-payment transactions in January 2023 was 541 million, which increased to 787.9 million in February. In March, 1.17 billion transactions, the highest recorded in a month for the year, were recorded.
In April, the figures decreased to 813.9 million. It further decreased to 771.8 million in May and recorded a marginal increase to 729.06 million in June. The upward streak was sustained in July at 743.15 million, further increasing to 755.94 million in August.
In September 2023, the transaction figures declined to 745 million and increased by 62.69 million to 807.69 million in October. The increase in the volume of transactions was sustained to 828.17 million in November, while December recorded the second-highest volume of transactions of 2023 with 968.59 million.
Value of e-payment transactions in 2023 was highest in December
As measured by value, e-payment transactions across various platforms in Nigeria were N38.8 trillion in January 2023 and N36.8 trillion in February. Owing to the cash crunch occasioned by the Central Bank of Nigeria’s (CBN) naira redesign policy, the value of e-payment transactions surged to N48.3 trillion in March and declined marginally to N41.3 trillion in April.
The figures increased to N45.9 trillion in May and decreased by N6 billion to N45.3 in June. Transactions increased to N47.4 trillion in July and further increased to N50.9 trillion in August.
Transactions valued at N51 trillion were recorded in September, N59 trillion worth of transactions were carried out in October, and N63.6 trillion in November, while the highest electronic payment transaction by value of N71.9 trillion was recorded in December.
There are indications that the volume and value of electronic transactions will increase further in 2024 given that the first quarter (Q1) of the year has seen transactions valued at N234 trillion, which is 89 per cent higher than the N123.9 trillion recorded in Q1 2023.
Transactions via PoS are not slowing down
Since its introduction in 2013, the adoption of PoS as a payment option has not weaned. With a 1.55 per cent market share, the value of PoS transactions rose by 27.85 per cent from N8.39 trillion in 2022 to N10.73 trillion in 2023, according to NIBSS.
In January 2023, transactions via PoS stood at N807.16 billion, increased to N883.45 billion in February and surged further to N1.15 trillion in March, no thanks to the cash crunch experienced in the country at the time.
In April, the figures declined to N1.04 trillion and slightly declined to N1.03 trillion in May. PoS transactions valued at N943.38 billion was recorded in June, N923.37 billion was recorded in July while a decline to N864.62 billion was recorded in August.
Transactions via PoS decreased to N728.66 billion in September and increased to N779.33 billion in October. The lowest figure by value of N712.57 billion was recorded in November, while an increase to N862 billion was recorded in December 2023.
Nigeria’s youth a big driver of digital payment adoption
Analysts at Stears noted that the youth demographic of the country drives the market as 77.5 per cent of the population are younger than 35, digitally savvy and experiencing significant urban growth.
The analysts said they expect steady growth in the market over the next decade, adding that “Nigeria’s population is predominantly young, digitally savvy and experiencing significant urban growth. With 77 per cent of the population aged between 0 and 35 and 93 per cent of adults (18 years and above) having access to mobile phones, Nigeria is in a prime position for the growth of online transactions, which is driving the expansion of digital payments and stimulating economic growth.”
Innovative fintech landscape is another contributor
The growth in the adoption of digital payment in Nigeria is also due largely to the emergence and innovation in the fintech space.
Since the emergence of fintechs like Interswitch in 2002, Remita by SystemSpecs in 2005 and Paga in 2009, the innovations in the sector have seen improvements. Also worthy of mention is the launch of the NIBBS NIP platform in 2011 to allow for real-time interbank transfers.
With the innovative features of fintechs like lightning-speed, mobile, real-time, boundless transactions and cheaper or fewer charges, it is not surprising to see how widely accepted such fintechs as Flutterwave, Opay, PalmPay, Moniepoint, Kuda, etc., are and their contribution to the growth of digital payments in Nigeria.
CBN cashless policy played a role
When the CBN, in 2012, toed the cashless policy path, it appeared unattainable given the popular notion that cash is king. However, a few years later, the adoption of digital payment has proven its attainability.
The cashless policy, the National Financial Inclusion Strategy (NFIS) and CBN’s mandate that allowed mobile money operators and Payment Service Banks (PSBs) to operate in rural areas gave impetus to the successes recorded in the financial inclusion drive.
The strides recorded in the drive for financial inclusion in Nigeria increased to 74 per cent in 2023 from 68 per cent recorded in 2020.
According to a survey by Enhancing Financial Innovation & Access (EFInA), the increase was driven by uptick in the use of non-banking channels, which grew from five per cent in 2020 to 12 per cent in 2023.
This is further buttressed in the recent informal economy report by Moniepoint, which highlighted that informal businesses have embraced digital payment options as most informal business owners prefer card payment (80.2 per cent) as a means of receiving in-person payments to transfers (19.8 per cent).
Also, the report noted that digital payment methods like cards and transfers accounted for the bulk of how businesses in the informal economy were paid.
It said, “The preference for cash was connected to safety and ease of doing business. For businesses that needed to use cash to pay for the goods and services they sold, cash was their preferred means of receiving payments. Still, digital payments accounted for 46.2 per cent, split between card payments and transfers.”
5 reasons Nigerian youths prefer fintechs to commercial banks
Meanwhile, TheRadar reported that fintechs are redefining banking with their innovation and technology, thereby outsmarting their traditional counterparts.
TheRadar highlighted five reasons Nigerian youths prefer fintechs to commercial banks.
