Nigeria is one of the most underestimated destinations for global investors. With its young tech-savvy population and a new wave of reforms, Nigeria presents plenty of opportunities in mobile banking, data usage and consumer goods segments.

For the last few years, Nigeria has been experiencing significant growth in the mobile banking sector, driven by the increasing adoption of smartphones and a growing tech-savvy population.?

Growing Smartphone and Mobile Internet Penetration

Over 60% of the country’s population is under the age of 35, and a large share of these individuals are tech-savvy. The population of Nigeria is expected to more than double in the next 50 years to 485 million, adding more youth to the equation.?

A Jan. 2023 Statista study reveals that the internet penetration rate in Nigeria reached 55.4%, giving consumers a chance to engage with brands and other entities digitally. Moreover, the share of the country’s internet users is expected to grow to 60% by 2026.

The population share with mobile internet access in Nigeria has grown from 27.27% in 2019 to almost 40% in 2023. It is forecast to continuously increase between 2024 and 2028 by a total of 9.8 percentage points.

With the increasing affordability of smartphones and a growing cohort of confident internet users, more Nigerians have gained access to smart mobile technologies. This has created a vast market for mobile banking services in the country.

Governmental Financial Inclusion Initiatives?

The Nigerian government in cooperation with local financial institutions as well as fintech players have been continuously working towards improving financial inclusion nationwide. In addition, local authorities have shown support for initiatives aimed at digitising the economy. Policies and regulations have been established to encourage the growth of mobile banking and fintech.

At the same time, the overall financial exclusion rates continue to exceed official targets. Uptake of digital financial services, notably mobile money, is still lower than in peer African countries. Mobile banking plays a crucial role in bringing affordable and accessible banking services to unbanked and underbanked populations and it is expected to rapidly develop in the near future.

Since the May 2023 election of new president Bola Tinubu, Nigeria has seen a few important economic reforms. New policies, including the removal of fuel subsidies and the unification of the naira’s exchange rates, could potentially fuel economic growth in the country, boosting the income of the average Nigerian and changing consumer patterns. To meet the growing demand for formal banking services, mobile banking operators should accelerate their efforts.

Partnerships between Banks and Telecom Operators

Collaborations between traditional banks and telecom operators in Nigeria have facilitated the growth of mobile banking services. Such partnerships leverage the extensive reach of telecom networks and the financial expertise of banks to deliver the best financial inclusion results.

Here are some of the prominent joint initiatives between telecom operators and local banks:

• GTBank and 9mobile. Guaranty Trust Bank (GTBank) collaborated with 9mobile (formerly Etisalat) to introduce the 9Pay mobile wallet. This partnership enables customers to open a GTbank account from the convenience of their mobile devices, paving the way for various financial transactions, including funds transfer, bill payments, and airtime purchase.
• UBA and MTN. United Bank for Africa (UBA) jointly with MTN launched a mobile banking service called “Mobile Money.” Besides money transfers, bill payments, and airtime top-ups via mobile phones, the service offers push-and-pull functionality as well as a virtual card chat in select locations.?
• FirstBank, Equity Bank and Airtel. FirstBank of Nigeria, Equity Bank in Kenya and Airtel collaborated to offer a mobile banking service known as Firstmonie. This service allows Airtel customers to perform various mobile banking transactions, including deposits, withdrawals, and funds transfers. In Kenya, Airtel services customers can also perform agency cash transactions at Equity Bank branches and withdraw money at any Equity Bank countrywide.?
• Stanbic IBTC and MTN. Stanbic IBTC is a member of Standard Bank Group and offers corporate, investment, business and personal banking products and solutions. The institution has partnered with MTN, the largest telecom operator in Nigeria with over 90 million mobile subscriptions, to launch a mobile banking platform called MobileMoney supporting basic financial transactions.?
• Globacome and Africa’s biggest banks. Globacom rolled out Glo Xchange super agents’ network to drive mobile money implementation across Nigeria in partnership with four leading deposit money banks, Zenith Bank, Stanbic IBTC, First Bank and Ecobank Bank. Within the partnership, Zenith Bank also offers Eazy Money Account that allows one to make transactions with their mobile number.

Moreover, Nigerian telecom operators have vast opportunities for growth in mobile data services, as the country still has average mobile data penetration and usage levels. Due to recent regulatory changes, telecommunications operators can receive banking licences in Nigeria to enable a growing mobile money market.?

Potentially, mobile money penetration levels in Nigeria can climb to 75% – 95% levels as seen in fellow countries such as Senegal, Ghana and Kenya. It presents an attractive investment opportunity, in financial services-oriented telecom operators.

Fintech Innovation Drives Mobile Banking Growth

The fintech sector in Nigeria is booming, introducing valuable innovations to local mobile banking services. Nigerian startups are actively developing user-friendly apps, payment solutions, and other financial services that cater to the needs of the local consumers.

Despite recent scandals regarding its financial activities and the misconduct of the company’s management, Flutterwave remains one of the most successful African fintech players up to date. The fintech unicorn provides a range of financial services, including payment processing, card issuance, and mobile banking solutions.?

Paystack is another notable fintech company in Nigeria that focuses on online payment processing. Being one of the best payment gateway providers in Nigeria, the company offers solutions for businesses and individuals to securely make and receive payments using various channels, including mobile.?

Other important industry players include PiggyVest, Carbon, Renmoney, Lidya, OPay, Interswitch, Kuda, Eyowo, TradeDepot, and more.?

Investable Opportunities in Consumer Segments

Consumer spending is a key driver of economic growth, serving as an important measure of overall economic activity and citizens’ economic well-being. In Nigeria, consumer spending per capita on the household has been steadily growing with some exceptions, when the positive trends reversed due to market impacts of the pandemic and the Russia-Ukraine war.

Nevertheless, experts predict consumer spending growth levels in Nigeria will remain subdued only in 2024, being fully restored to pre-pandemic levels by 2028.?

Historically in emerging markets, as GDP per capita rises, households get enough income to not only cover essential needs, but also gradually afford more discretionary purchases. These include, among others, packaged food and beverages, fashion items, household and personal care products, education services, healthcare and sports goods, appliances and vehicles. Besides, more money at hand calls for supplementary financial services such as investing, savings, long-term loans, etc.?

Understanding and adapting to changing consumer preferences is crucial for companies in the consumer goods market of Nigeria. Not only the potentially growing purchase capability, but also preferences for certain brands, ethical considerations, and sustainable practices can influence purchasing decisions.

Consumer Segments to Pay Attention to in Nigeria

Consumer market in Nigeria can be segmented into the following categories:

• Youth Demographic:

Nigeria has a large share of the young population under 35. Young consumers are more likely to adopt new technologies, making them a significant target market for mobile banking services. Since, in many cases, mobile banking adoption is hindered by low financial literacy, financial education services would also find responses among this consumer category.?

• Urban Population:

The urban population, with greater access to technology and higher income levels, is a key consumer segment for mobile banking products and fintech services.?

• Rural and Underserved Areas:

Mobile banking presents an opportunity to reach the rural and underserved areas, providing financial services to those 40% of adult Nigerians in remote areas, who may not have easy access to traditional banking infrastructure.

• Small and Medium-sized Enterprises (SMEs):

SMEs are the backbone of Nigeria’s economy. Mobile banking services can cater to the financial needs of these businesses, offering convenient and efficient solutions for transactions, loans, invoicing and payments.

• Tech-Savvy Consumers:

Consumers who are comfortable using technology in various spheres of their lives are likely to embrace mobile banking as well as digital commerce channels. This category includes individuals who already use smartphones and engage in online activities such as social media.?

• Crypto-Keen Population:

The findings from the global Web3 perception survey showed that 99% of adult Nigerians are more aware of Web3 and crypto concepts than people in major Western economies. This paves the way for added value services in local mobile money applications, such as crypto trading, fiat-to-crypto exchange or offline crypto payments.?

After almost two years of a comprehensive ban prohibiting local banks from engaging with digital currencies, the Central Bank of Nigeria (CBN) lifted the given restrictions in December 2023, allowing lenders to open accounts for crypto firms. With more market opportunities, local crypto industry players should become more attractive to global investors.?

Mobile Banking and Consumer Segments of Nigeria in a Nutshell

Nigeria is one of the most underestimated destinations for global fintech investors, experiencing significant growth in the mobile banking sector, driven by the increasing adoption of smartphones and a growing tech-savvy population. With the increasing affordability of smartphones, a growing cohort of confident internet users, and governmental financial inclusion reforms, more Nigerians have gained access to smart mobile technologies lately. Mobile banking plays a crucial role in bringing affordable and accessible banking services to unbanked and underbanked populations and it is expected to rapidly develop in the near future.

Booming fintech sector and robust collaboration between local banks and telecom operators provide unique opportunities to serve the increasing financial needs of the Nigerian population. With a large share of young, urban, tech-savvy and crypto-keen citizens, the financial services and consumer markets in Nigeria are expected to rapidly develop. Besides, there’s a vast untapped potential in about 40% of adult Nigerians in remote rural or underserved areas, who may not have easy access to traditional banking infrastructure and remain unbanked or underbanked.