20151102 Changes to mobile money regulations 370x298The Coffey managed GEMS4 project has successfully lobbied the Central Bank of Nigeria to increase transaction ceilings for mobile money payments. The change is estimated to benefit about 750,000 mobile money users.

Poor traders in Nigeria often do not have bank accounts. They rely on informal, cash-based systems of exchanging money for their goods and supplies. These systems are unreliable, unsafe and costly. For those traders who do use banks, travelling back and forth to deposit money means time away from the shop and therefore less sales. The lack of accessible and efficient payment solutions affects millions of micro enterprises and exacerbates poverty.

Mobile money offers a solution. Users of mobile money services can transfer funds, pay bills, and deposit and receive cash, without the need to visit a bank and at a lower transaction costs. Mobile money helps those who can’t travel to a bank and even those who don’t have bank accounts. It also reduces the cost and risks in carrying and transporting cash.

In December 2013 GEMS4 began consultations with representatives of trader groups and mobile money service providers to understand why uptake of mobile money services in Nigeria has remained low. Through the consultations, mobile money transaction limits – how much and how often money could be sent by a user – were identified as a major drawback that limited usage.

A regulation introduced by the Central Bank of Nigeria had restricted mobile money users to conducting transactions of up to a certain value, depending on whether they had a bank account, and if so, on the type of bank account they had. Those without bank accounts could only make transactions of 3,000 Nigerian Naira (about 15 USD). Although introduced to make mobile money transactions safe and efficient, these limits effectively discouraged the use of mobile money, especially for business transactions which are often in excess of these limits.

Once this drawback was identified, GEMS4 consulted with the Central Bank of Nigeria, mobile money operators and agents, and retailers to discuss solutions. The project then prepared evidence as to why the banks should remove or increase the transactions ceilings. GEMS4 met directly with the governor of the central bank to present its business case.

In February 2015, the central bank announced that it was removing transaction limits for all mobile bank accounts. The abolished transaction limits allow larger transactions that are now only subject to a daily total limit. A transfer that would previously have required ten separate transactions can now be conducted in one. This saves time and reduces transaction fees by 90%.

The regulatory change will impact on an estimated 750,000 mobile money users, including many low-income traders. Higher transaction ceilings allow more small business owners to use mobile money instead of cash when doing business and reduce their risk of losing money and payment delays. The greater efficiency and security of mobile payments leads to savings for traders and greater liquidity for suppliers.

The change has already increased interest in mobile money transactions.

Lagos’ Mile 12 Market Trader Mrs Ugochukwu said that since the changes were implemented her business to business transactions have increased and she has become more efficient in managing her business.

“I am stocking and selling more because my stock never runs out as a result of inability to send money for my goods,” Mrs Ugochukwu said.

Similarly, business owner Mr Auwalu from Kaduna State explained that before the transaction limits were removed he would travel from Zaria to Kaduna regularly to make withdrawals, transfer monies to various accounts or make deposits into his suppliers’ account.

“This travel was very stressful and time consuming. But with the mobile money service, all my transactions are done in minutes – without the hassle of movement to and from banks,” Mr Auwalu said.

GEMS4 will continue to support the Central Bank of Nigeria and other market players to increase the adoption of mobile money services and create a forum for constant review of mobile money policies.  

GEMS4 is a UK Government funded project managed by Coffey.