1. Title: CONSOLIDATION OF THE MOBILE PAYMENT INDUSTRY IN NIGERIA: AN
APPRAISAL OF THE REGULATIONS AND REGULATORY BODIES
Name: Abiola Jimoh
Key words: Mobile; payments; banking; regulations; and Nigeria.
Abstract:
This is an attempt to examine one of the emerging industries all over the world
looking at the basis, development and limits of the legislation on mobile
financial services in Nigeria. The paper analyses the challenges the industry
drivers are facing one from the customer’s perspectives; owing to very low
adoption level of mobile payments and the confusions exhibited by the
regulators due to their lack of full grasp of the industry dynamics being an
emerging market.
This is an attempt to offer a simple and workable solution to ensure a simple
people oriented and industry wise practicable legislations to drive the mobile
payments industry in Nigeria.

2. CONSOLIDATION OF THE MOBILE PAYMENT INDUSTRY IN NIGERIA: AN APPRAISAL
OF THE REGULATIONS AND REGULATORY BODIES
FINANCIAL SERVICES IN NIGERIA:
Financial services in Nigeria has evolved in many phases based on the
development and advancement all over the world and the pushy need to
move with time on the demands for financial development.
Nigeria being the case at hand is moving from hall banking1 to the recent
development in the financial services sector which is electronic payment (all
meant for the literate people in the society).
It is worthy of mention that the Central Bank of Nigeria (CBN) is the key
regulatory body in the financial services sector while Securities and Exchange
Commission (SEC), Nigeria Interbank Settlement System (NIBSS), Central Securities
Clearing System (CSCS) , Consumer Protection Council (CPC) among others also
play germane and complementary roles in this regard.
It is noted that as one of the many phases of development in the financial
services sector in Nigeria, CBN is now moving to what is regarded as the
cashless or cash lite society, using Lagos State of Nigeria as a starting point; and
it is believed that this will ease transactions and also reduce the carriage of cash
which expose customers to risks2. The cashless society has introduced the use
of Point of Sale (POS) medium of payment for services through the use of
Automated Teller Machine (ATM) cards which are customarily issued by banks in
to their customers for ease of transactions.
As one of the strategies of the CBN to ensure financial inclusion of the rural
people who constitute the majority3, to ensure an extended access to financial
services by a good number of the populace, the CBN in 2007 adopted the
1
Banking model which requires customers going in to the bank through the use of their Banking Passbook to make
withdrawals and deposits of funds
2
3
Risks like armed robbery; unnecessary spending due to poor saving culture
About 76% of Nigerians are excluded from the use of financial services due to high level know your customer
procedures in former banking. http://www.efina.org.ng/about-us/financial-inclusion/

3. global and trendy industry called mobile money. With mobile money mode of
payment, customers are enabled to pay for services and as well do financial
transactions, money transfers, cash in and cash outs through agency networks
representing the banking outlets from which money transferred to
customers can be cashed out from such agent outlets in their various
communities.4
DEFINITION OF MOBILE PAYMENT:
Mobile money can be described as payment for services with the use of mobile
phones enabled to access such services. It has also been defined to mean the
use of a mobile phone in order to transfer funds between banks or accounts,
deposit or withdraw funds, or pay bills. In layman’s terms, one can define mobile
money as a medium through which a customer pays for services or transfers
funds with the use of an enabled mobile phone.
HISTORY OF MOBILE PAYMENT:
Mobile payment as a payment mode was introduced in the year 1997 when
mobile phones were enabled to be used as a payment medium on CocaCola
vending machines in the Helsinki area in Finland. This culminated in the launch of
the first mobile phone-based banking service by Merita Bank of Finland in the
same year. With the ease of transactions payments, as well as the fast and
stress-free nature of payments observed via the use of mobile phones, mobile
payment as a payment medium were developed and built upon by several
corporate bodies and telecommunications companies. Research and
developments on mobile payment exposed the fact that this payment medium
will be more useful and ready to use in the developing countries and this fact
has been substantiated over the years as the acceptance of the use of mobile
payment has taken a giant turn in the developing countries.
In Africa, mobile payment has become a very acceptable payment medium
because of the nature of the economy which has majority being the rural
dwellers who are largely illiterate. This group of people sees Hall Banking as
being too sophisticated. Further noted is the fact that among those who are
literates and who have bank accounts, many still find it hard to make use of
internet banking or electronic payments mode or POS technology and as
such, a number of them relate more with the mobile payment mode
because it seems easier to understand and does not require having internet
facilities (especially for those who do not have reliable internet access).
4
http://www.vanguardngr.com/2013/12/financial-inclusion-hopes-challenges-34-million-nigerians/

4. A practical instance of the scenario painted above is the acceptance of MPESA by Safaricom being a very successful mobile payment services story in
Kenya as well as the MTN mobile money in Uganda.
In Nigeria, mobile payment as an industry evolved in the year 2007 and it is now
being given more attention with the cashless society policy of the CBN.
Consequently about sixteen (16) mobile money solution providing companies
have been licensed in Nigeria to carry out mobile money services.
In Nigeria which is our focus, the set of entities that could be licensed to operate
as a mobile money operator is known as the bank-led model operators as well
as the non-bank led model operators.
According to the CBN framework on mobile payment licenses, which is the only
regulation on mobile payment in Nigeria, bank-led model are entities who are
players in the banking sector, specifically licensed banks, and who are also
licensed to carry out mobile payment services while the non-bank led model
operators are entities who are not banks and are involved in mobile payment
services provision.
CHALLENGES IN THE MOBILE MONEY BUSINESS IN NIGERIA:
For us to properly attempt a detailed appraisal of the mobile payment
regulations and regulatory bodies, It is crucial to give a brief understanding of
the mobile payment industry in Nigeria as well as few challenges it has being
facing since its emergence in Nigeria. According to researchers in the mobile
payment industry in Nigeria, it is noted that a number of the operators are yet to
understand the market penetration strategy for the mobile payment industry
and are also faced with the lack of adequate funding and technology which is
hindering the full-fledged take-off of the mobile money industry in Nigeria.
As stated earlier, mobile payment entails delivery of financial services on mobile
phones, as such the industry require a lot of money to finance as this will enable
the mobile money solution providing companies to acquire the best technology
needed to deliver such services.
Mobile payment being a new market in Nigeria is still battling with acceptance
as numerous Nigerians seem skeptical about the effectiveness of this medium to
do financial transactions. The reason is because the customers are not aware of
the advantages and the easiness of transactions which will be enabled via the
mobile money channel. This issue is being addressed numerously as some mobile
money operators are now engaging in proactive marketing to ensure that the

5. players in the industry being an agency business with regards to payment for
services as well as doing cash in and cash out transactions understand the
details of the industry as well as the dynamics to enable them create the
needed awareness and adequately guide and guard the customers on the use
of mobile payment as a medium of payment.
A serious challenge to the mobile payment is the direct engagement of
telecommunication companies in mobile payment. The CBN guidelines only
allow telecommunication companies to collaborate with the licensed mobile
money operators be it the bank led or the non-bank led operators by opening
their network or platform to enable the licensed operators provide services to
the customers. However, the experience so far in the industry show that Telecos
discriminate who and who they open their networks or platforms to and
seemingly seen as wanting to do the business themselves. One is convinced to
state that multi activities involvement of many companies that are licensed to
do other nature of businesses in Nigeria will affect the growth of the focus
industry and as well limit the growth of the economy by affecting the quality of
services rendered to consumers. A company that is licensed to provide
telecoms services is expected to channel all resources to achieve to the best,
however in Nigeria such companies are seen to be interested in other industries
which will always the quality of services and turn same to jack of all trades and
master of none.
APPRAISAL OF THE REGULATIONS AND THE REGULATORY BODIES:
A company that intends to do business in Nigeria must be registered at the
Corporate Affairs Commission (CAC) and this has consequently made it
necessary that all entities that intend to offer mobile payment services in Nigeria
must be registered at the CAC.
However, the regulators in the mobile payment industry are divided in to the
direct regulator and the indirect regulators. The direct regulator is just one which
is the CBN while the indirect regulator is the Nigerian Communications
Commission (NCC) and the CAC as mentioned above.
The CBN is responsible for the licensing of mobile payment operators. A
company upon certified assessment will first be issued an “Approval in Principle”
(AIP) to do mobile payment services for a period called the “Pilot Period” usually
stated to be six (6) months and upon the conclusion of the pilot stage the
company will then be fully audited for license approval. The licensing procedure
is a very rigorous one which requires a detailed audit by a team from CBN as
well as foreign consultants as the case may be.

6. Upon successful conduct at the audit, the company will be issued a license to
operate a mobile payment company, the license being subject to annual
renewal. It is expected that such company will be sending report of activities to
CBN and the CBN licensing framework also empowers the CBN to check the trail
of transactions conducted by the mobile money operators.
As part of the licensing procedure the mobile money operator is expected to
obtain certain permits and secure certain approvals from the NCC. Such
include application for “Short Code “which will be used for connectivity to the
platform of Mobile Network Operators as well as interoperability enabling
companies to enable the customers have access to the use of their services
without any hitch.
Aside the “Short Code” application the company is also expected to obtain a
certification of their equipment by the NCC which is called “Type-Approval”. It is
stated by the CBN that license cannot be issued without the “Type-Approval”.
One may opine based on practical terms that the regulatory bodies have a lot
of work to do first in joining hands with the operators in ensuring that a proper
awareness is created among the customers.
It is noted that the industry being a new one the regulators are still trying to find
their actual stand on how best to regulate the industry, as such it is important
that the regulators engage the players in the industry from time to time through
a consultative forum to enable the development of the industry.
CONCLUSION:
Based on the foregoing, one may conclude that mobile payment is a very new
and world class payment medium which will ensure financial inclusion of the
unbanked in the society. It is not in doubt that statistics have shown that
majority of Nigerians even the literate are unbanked and with mobile
payment such issue will be tackled and the cashless or cash lite society as
aimed by the Federal Government will be meaningfully achieved.
It is opined that the government and all stakeholders will need to review the
legal framework for mobile payment to ensure the security and protection of the
customers who are the end user of the services especially in Nigeria where the
technical know-how is still in the developing stage.

7. REFERENCES:
1. "comScore: 38 Percent Of Smartphone Owners Have Used A Mobile
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2. "iStethoscope in Medical Journal". Retrieved November 23, 2010.
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80&cHash=3b8621d394
4. "Increasing Trend of Mobile Marketing". Youpark. Youpark ApS. Retrieved
August 23, 2010.
5. Schejter, A., Serenko, A., Turel, O., and Zahaf, M. (2010) "Policy implications
of market segmentation as a determinant of fixed-mobile service
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6. The history of mobile payments – How and where it started?
http://electronicbankingoptions.com/?p=190
7. Regulatory Framework For Mobile Payments Services In Nigeria