“It may feel as if everything has gone online, but 90% of purchases still happen in person” – Stripe (2022). That is from Stripe, one of the world’s largest payment companies, valued at least $70 billion. Add this – “According to research done by The Fletcher School and Mastercard, of the […] billion of [Naira] funds flow from consumers to businesses in Nigeria, 98 percent is still based on cash” (2018). Let us assume that number is now 75% and for all transactions.
In addition, the Nigeria Inter-Bank Settlement System (NIBSS) noted that the total value of instant payments (i.e. electronic payment) in 2023 was N600. 36 trillion ( i.e. $1 trillion). If we model that all payments from cheque, cash and electronic payments are worth $2 trillion, we can have a conversation on the state of fintech and digital banking in Nigeria.
So, Nigeria’s budget is about $30 billion but transactions in value are $2 trillion. Largely, the citizens have the funds even though the government does not have access to the funds as the economy is inherently informal in nature. The implication is this: Nigeria’s government could be “poor” but that does not mean the SMEs and the citizens are all since the value of transactions show a dynamic economy.
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Let us do some comparison. I posit that South Africa, which has a budget of $112 billion (it has a more formalized economy) does not have as many transactions as we do in Nigeria. So, in South Africa, the government has the money for the budget while in Nigeria, the citizens keep their funds. That explains the disparity in the national budgets! Also, in South Africa, one bank can buy all the banks in Nigeria’s stock exchange with space to spare which implies that if Nigeria formalizes its enterprises, our banks and fintechs will capture more value; more room to grow.
Then add that in this age of AfCFTA and PAPSS, a cross-border, financial market infrastructure enabling payment transactions across Africa, Nigeria will likely capture more value as being the most mobile African country, convergence can happen in Naira optimally.
Good People, Nigerian’s fintech sector has a lot of growth ahead.
“It may feel as if everything has gone online, but 90% of purchases still happen in person” – Stripe (2022). That is from Stripe, one of the world’s largest payment companies, valued at least $70 billion. Add this – “According to research done by The Fletcher School and… pic.twitter.com/47R6LTg9t1
— Ndubuisi Ekekwe (@ndekekwe) March 3, 2024
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Do Nigerians even want the economy to be formalized? Our chaotic nature favours a lot of people, so would rather want the economy to remain predominantly informal. Fintechs will keep scraping off portion of the total transaction value, at least for another decade, except there is enforceable policy regime that can accelerate mass adoption.