The Future of Payments: What's Changing in Nigeria in 2024?
In 2023, Nigeria experienced notable shifts in economic policy including a currency design policy, removal of fuel subsidies and the unification of the naira’s exchange rate. In 2024, experts predict that the payment landscape of Nigeria will witness substantial transformations as a result of these economic policies, particularly within the fintech and payment sectors. The rise of Buy Now, Pay Later (BNPL) apps, the accelerating push towards a cashless economy, and the intricate dynamics surrounding the lift of crypto ban collectively form an influential triad shaping financial interactions across the nation.
This article explores three key trends shaping the payment industry in Nigeria that businesses should keep a close eye on.
The Rise of Buy Now Pay Later Apps
Declining purchasing power triggered by inflation and low credit card penetration has influenced the meteoric rise of Buy Now Pay Later (BNPL) apps in the country. This approach is changing how Nigerians make purchases online and in physical stores as more startups continue to partner with retailers to offer short-term lending with flexible repayment for purchases such as electronic devices, household appliances, cars and rent.
According to a report from Rest of World, “only 2% of the 106 million adult population have access to bank credit, credit cards are also conspicuously absent, as banks shy away from consumer lending. BNPL is becoming a rising alternative and is set for further growth, as Nigerians embrace digital credit.’
The Nigerian market presents a significant opportunity for providers of BNPL services as report show that adoption is projected to grow steadily recording a CAGR of 12.7% during a forecast period of 2023-2028. The BNPL Gross Merchandise Value in Nigeria is also projected to increase from US$2.3 billion in 2022 to reach US$5.1 billion by 2028.
Cashless Payment Gains Momentum
Nigeria's journey towards a digital 'cashless' economy, as initiated in 2012, saw remarkable progress in 2023. Data from the Nigeria Interbank Settlement System (NIBSS) revealed a notable 55% surge in electronic transactions in January 2023. This spike was largely influenced by the impact of the CBN's naira redesign policy, which temporarily reduced the availability of cash in circulation. Consequently, this prompted a sharp uptick in the adoption of alternative payment methods, including POS payments, USSD channels, bank transfers, and internet banking. While cash has since returned to circulation, the policy's residual effect has expedited the nation's transition towards digital payments, aligning with citizens' evolving preferences.
Notably, Nigerian banks have benefitted from this digital revolution with revenue from electronic transactions for the first nine months of 2023 totalling N279.85 billion, showcasing a remarkable 29.89% surge compared to the N215.44 billion earned during the same period in 2022.
Banks are responding proactively to the growing appetite for cashless transactions by enhancing their services to meet the growing demand for digital financial solutions, thereby contributing to the broader goal of fostering financial inclusion across the nation.
Expand to new markets. One account, limitless possibilities.
Get startedCrypto Surge?
In a circular issued on December 22, 2023, the Central Bank of Nigeria (CBN) made an announcement, signalling the lift of the ban on cryptocurrency transactions within the country. This decision marks a departure from the 2021 directive that restricted banks and financial institutions (FIs) from engaging in or facilitating transactions involving crypto assets, citing concerns related to money laundering and terrorism financing.
The CBN's updated stance reflects the acknowledgment of global trends, highlighting the necessity to regulate the activities of Virtual Asset Service Providers (VASPs), which include cryptocurrencies and crypto assets. While banks remain prohibited from actively trading, holding, or transacting in cryptocurrencies, the new guidelines outline the specific procedures for opening accounts and providing settlement services for entities engaged in crypto asset transactions.
Experts predict that the lift on the cryptocurrency ban will trigger a significant surge in cryptocurrency usage within Nigeria in 2024.
Despite the earlier ban on crypto trading, Nigeria’s cryptocurrency usage remains the highest in Africa thanks to a tech-savvy youth population who adopted peer-to-peer (P2P) trading via crypto exchanges as a workaround to the ban. According to Chainalysis, Nigeria's crypto transaction volume experienced a 9% year-over-year increase, reaching $56.7 billion between July 2022 and June 2023. The Chainalysis 2023 Global Crypto Adoption Index report further underscores Nigeria's prominence, ranking first in P2P exchange trade volumes and second in overall adoption globally.
Following the issuance of the circular by the Central Bank of Nigeria, a collaborative effort has been initiated among Nigerian banks, fintechs, and blockchain companies. This consortium is actively developing a Naira stablecoin named cNGN, scheduled for launch in 2024. Key partners in this initiative include leading Nigerian tier-1 banks such as First Bank, Access Bank, Sterling Bank, and Providus Bank, alongside payments companies like Budpay, Kora and Interswitch and blockchain consultants Convexity and Interstellar. The cNGN is designed to be pegged 1:1 with the Nigerian Naira, and will be held by Nigerian banks, differentiating it from previous attempts at NGN stablecoins.
Nigeria's financial landscape is set for a dynamic evolution in 2024, shaped by the new trends in the payment industry. With the surge of BNPL platforms, Nigerians are embracing a credit system facilitated by BNPL apps, diverging from the conventional channels offered by traditional banks, government and credit bureaus that have remained largely unchanged over the years. Concurrently, as more Nigerians become accustomed to digital payments, there will be a noticeable decline in the use of cash for transactions. Furthermore, the potential applications of cryptocurrency in Nigeria, following the lifting of the ban, presents interesting possibilities, and it remains to be seen how Nigerians will leverage this newfound freedom. These shifts are anticipated to pave the way for the emergence of novel fintech products, new regulatory frameworks and various implications for the financial industry at large.
Explore Verto’s Solutions today to see how we can help your business grow and overcome common market challenges in 2024.
Speak to our sales team directly at sales@vertofx.com.
