Apr 28, 2022
Nigeria has more than 206 million inhabitants, equivalent to 2.6% of the world population. The country's economic crisis that the population has been facing for some time explains why 38 million inhabitants lack banking services. High poverty rates, mistrust of financial service providers, and the cost of maintaining an account are some of the exclusion drivers. In recent years, the Nigerian fintech activity has expanded, becoming the third African country with the most progress in the sector after South Africa and Kenya.
Nigerian millennials are becoming a major force in the economy. In fact, the median age of the Nigerian population is 18 years, so tapping into this digitally friendly consumer group may hold the key to a new generation of economic opportunity.
Nigeria's internet penetration rate stood at 51% of the total population at the start of 2022. These user figures reveal that 104.9 million people in Nigeria did not use the internet at the start of 2022. Nevertheless, around 90% of the total population has mobile phones and the average daily time that Nigerians spend on mobile Internet is 4 hours 55 minutes. Following successful trials in the cities of Lagos, Abuja and Calabar, a 5G network is expected to be rolled out across the country, facilitating nationwide digitisation.
As in the rest of the world, COVID 19 has affected the country's economy, making it even more difficult for the Nigerian population to participate in the financial circuit.
The National Strategy for Financial Inclusion expected to reduce the proportion of adult Nigerians financially excluded to 20% by 2020 from its baseline figure of 46.3% in 2010. Still, the current situation is far from attaining this goal. Today, 38 million adults in the country remain completely financially excluded: women, northern Nigerians and those living in rural areas are the most affected. According to the World Bank's Global Findex Report 2017, 3.4% of Nigerians were among the world's 1.7 billion financially excluded adults.
In October 2021, thanks to an improved digitalisation, the State, supported by the Central Bank of Nigeria (CBN), created a digital currency to complement the traditional currency as a less expensive and more efficient means of payment. This way, Nigeria became the first country in Africa - and one of the first in the world - to launch a digital currency for citizens.
Due to the high cost and difficulties in obtaining credit, Nigerians are dissatisfied with traditional markets. They are migrating to fintech solutions that offer a similar service but are more accessible, cheaper and faster. Thanks to digitisation, today, fintech proposals are designed for the entire payment and lending value chain (online payments, virtual wallets, fast loans, insurance and flexible investments), making access easier for the general public, whether banked or not unbanked.
Some of the major players in the industry include Interswitch, Paystack, Cowrywise, Flutterwave, Kuda, Fairmoney, Piggybank, Paga, Alat, KongaPay. Interswitch, for example, is a leading integrated payment and digital commerce platform in Africa.
Another important player in the sector is Carbon, a fintech company that began offering loan services. Today, it is already a digital bank through which you can pay, make transfers, and access instant loans such as BNPL through alternative data for credit scoring.
According to PWC, between 2011 and 2018, more than 200 million dollars in Fintech investments were registered, and it is expected to increase to 543 million in 2022, driven by the expansion of payment services and e-commerce. Techpoint, for its part, assured that Nigerian fintechs raised more than 800 million in 2021, 120% more than in the last three years. This is due to the boom in the digital market during the COVID 19 pandemic.
Nigeria already has more than 170 fintech companies, and the sector continues to grow by providing new financial solutions. The industry presents a diverse ecosystem comprising companies in 13 different segments that include payments, insurtech, savings, wealthtech, cryptocurrency, infrastructure, online lending, and business solutions.
In addition, 32% of Nigerians own cryptocurrencies as they see it as a way of preserving their money in an unstable economy. Furthermore, thanks to the development of crypto lending platforms, many can access immediate loans by demonstrating cryptocurrency funds as collateral without presenting a credit history.
Why credolab is the best solution
Nigeria is a country full of opportunities to improve social inclusion in the upcoming years. The primarily young demographic paired with growing digital penetration and the advancement of the fintech ecosystem are all factors that contribute to this progress.
Credolab offers a solution that can help assess the creditworthiness of those outside the traditional financial circuit. Based on alternative data and machine learning, credolab’s platform can understand people's behaviour, thus providing lenders with a credit score to minimise risk and make the best decisions without the need for credit history.
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