Why are Nigerians not making the shift to mobile payments?

Authorities must invest in infrastructure, education and awareness campaigns if the recently introduced Lagos Cash-Less Policy is to succeed, according to Nigerians who spoke to VC4Africa in Nigeria’s commercial capital about the question why mobile payment services are not yet adopted.

The Lagos Cash-Less Policy seeks to promote the use of electronic payments and ultimately make Nigeria a cashless economy through use of payments instruments like checks, Internet banking systems, payment cards, Point of Sale (POS) stations and mobile payments.

The Central Bank of Nigeria (CBN) says the cost of cash to Nigeria’s financial system is too high and it is increasing. According to the bank, direct cost of cash is estimated to reach N192 billion ($1,2M) in 2012 and the ‘Lagos Cash-less’ policy aims to reduce these expenses. The policy also aims to reduce the volume of cash outside the banking system, encourage bank savings in the process and make banked funds available to drive economic growth. Proponents of the cashless economy add that a traceable e-payment system will reduce corruption while it enhances security associated with carrying less cash.

‘Cash is still king’

According to the Nigerian Inter-Bank Settlement System, the Nigerian payment industry presents substantial development opportunities, but presently ‘cash is still king’. In January of this year, the Central Bank of Nigeria CBN launched the Lagos Cash-Less Policy, which took effect at the beginning of April with penalties for defaulters. The policymakers plan to take this national in January 2013.

To enforce compliance, the CBN fixed cash withdrawal and lodgment limits, saying any cumulative withdrawal above N500, 000 ($3, 200) in a day will attract 3 percent service charge for the account holder while corporate bodies is charged 5% on a cumulative withdrawal above N3million ($19, 230). For cash lodgments, individuals and corporate organizations will be charged a service fee of 2% and 3% respectively for amounts above the cumulative limits.

However, without the personal will, the penalties may still not force many people to go cashless. A large percentage of Nigerians living on one or two dollars a day means many individuals and small business owners operate far below the stipulated daily cash limits. But even at that, “how many people can operate those electronic payment channels?” Francis Ekhaise, a Land and property agent asks in a chat with VC4Africa. “It should be operated among the elites first,” he adds.

Cash driven economy

Acheme Jack (video below), a Lagos based financial journalist commended the policy but said “for the fact that we are cash driven economy, it will not be easy for the adjustment to be instant. The culture of banking in Nigeria is not that much. The use of ATM, the use of Point of Sale services, even the use of checks are elements of the cashless economy, but people don’t use them much. We depend more on cash in our transactions and it’s mostly because our system is quite informal. Most of the businesses we transact are informal. They are not in an organized form where you trust people and begin to draw a cheque.”

Time wasting

Francis Ekhiaese laments that certain challenges within the system make it hard for people to embrace the e-payment system.  He narrates an incident: “Somebody paid me the other day electronically and the thing bounced back and he came home to tell me that he paid certain amount, and I told him I didn’t see any money in my account. He had to resend it through the electronic system. How many people can bear that kind of time wasting, because I wanted to use the money for something?”

Francis says the cashless policy should be gradually introduced rather than forced on Nigerians. He explains: “It’s just like the Master Card, people have been using it. But now you want to make it compulsory. A lot of education needs to be done before you impose it on them.”

Francis Ekhaise on the Lagos Cash-Less policy by VC4Africa

Jack suggests the Central Bank engages the public through educational campaigns that highlight the advantages of going cashless. He says “while carrying out the education it should be done in such a way that it will be explained in a language people will understand.

For Sam Idika, a newly employed public servant, the cashless policy education should be taken to the grassroots, schools and religious houses. In his words: “The churches should announce it. The mosques should do the same. They should go into the markets because even the woman in the market should know about it and adverts should be put in local languages.”

Sam Idika on the Lagos Cash-Less policy by VC4Africa


Over 43 million Nigerians have access to the Internet; a window that should drive Internet banking. But while regulators seek to encourage online banking, IT consultant Idigu Sunday says security experts must be trained and deployed to handle issues of fraud. He adds that government must also build the infrastructure that guarantees reliable broadband for Nigerians. He explains: “If the internet is down, there is no way you will do a transaction. So they need to have an internet facility that will really work. There should be more broadband penetration and the wireless service should be efficient.”

Idigu Sunday on the Lagos Cash-Less policy by VC4Africa

Mobile factor

Mobile money appears critical to realizing a cashless Nigeria. Kenya, with around 26 million mobile subscribers, is doing well in that regard with mobile payment solutions like M-Pesa. According to a World Bank infographic on banking culture 68% of adults in Kenya report using a phone for financial transactions, the highest in Sub-Saharan Africa. That infographic did not produce a figure on Nigeria, indicating a poor and maybe insignificant record in the mobile money space in Africa’s most populous country with over 90 million subscriber lines.


In Nigeria, Paga, PocketMoni and other mobile payment solutions need to do more to convince people to trust, join their platforms and embrace the e-payment culture. “I am scared of doing that thing, a public servant Anwulika Menanya said of ‘Paga’ after she visited the site to download the programme on her phone, raising again the issue of trust and security. “There are just so many requirements and personal details. I felt I was being scammed.”

The most popular element in Nigeria’s drive for a cashless society appears to be the ATM, but a majority of Nigerians use it for cash withdrawals and not for payments. With the huge number of mobile phone users in Nigeria and many using it to access the web in a country of over 150 million, mobile payment solutions might just be the magic  needed to realize a Cash-Less Nigeria with all the potential benefits that will come with it.
What’s the e-payment culture in your country? Have you used your mobile phone or any other electronic device to pay or receive money? Share your experiences in the comment section below.