Nigeria’s fintech sector will sustain its rapid growth over the medium term at the very least. That’s a key takeaway from a report on the industry released by the Economist Intelligence Unit (EIU). It predicts that the combined revenues made by fintechs in the country will reach $543 million by 2022.
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That’s several times the $153 million recorded by the segment in 2017. It also hints at the expansion of the ecosystem, with a large number of new entrants emerging annually.
Financial technology has witnessed a boom over the past decade. More Nigerians are becoming comfortable with conducting their financial transactions via digital channels. The top companies serving this population are gaining from this enthusiasm.
There are over 200 financial technology firms in Nigeria. The majority of them have appeared within the past five years. This trend is mirrored elsewhere in Africa. Overall, the number of fintech companies on the continent has grown 24% every year between 2009 and 2019.
The EIU report notes two factors driving the growth of fintech revenues: an increase in the use of smartphones; and a large population of unbanked adults who can be instead be served by financial technology.
Unique mobile subscriber penetration for Nigeria was about 50%– approximately 100 million of them –by the end of 2019. It’s by far the largest number of unique subscribers on the continent and presents an obvious opportunity for mobile payment businesses.
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The market is made doubly attractive by the huge population of unbanked people. The Enhancing Financial Inclusion and Access (EFInA) group puts the number of financially excluded people in Nigeria at about 40.1 million. Fintechs believe they can provide financial services to these people.
Investors have also found these figures compelling. They see the potential for significant returns in serving this large market and are funding local fintech companies just to share in the earnings coming out of it.
According to WeeTracker, Nigerian fintechs (including those headquartered abroad) raised $679 million from investors. Most of that support has come from VCs in North America, Europe, and Asia.
However, the industry isn’t without its drawbacks. The security of payment platforms and channels continues to be a concern. Another potential problem has been the lack of a clear regulatory framework for the segment. Authorities are now taking steps to define regulations for the industry.
The CBN’s National Financial Inclusion Strategy is aiming to raise Nigeria’s financial inclusion rate to 95%. It’s also liberalizing the mobile payments space by issuing special operating licenses to banks and non-bank players alike. These steps should enable further growth in the country’s fintech industry in the years to come.
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