Nigeria Had Mobile Money Before Kenya’s M-Pesa

MTN mobile money

MTN mobile money

Contrary to what you might believe, mobile money isn’t new in Nigeria. In fact, Nigeria has had mobile money before Kenya’s M-Pesa launched in 2007. It’s been around since the early 2000s, way back when the telcos were gaining traction and ATM machines hadn’t proliferated all over the country.

Back then, accessing cash meant you had to make the trip to the nearest branch of your bank, no matter how far away. This proved troublesome for a lot of people, especially the ones who had accounts with some obscure banks (before the Soludo led reforms and the consolidation of the banking industry, we had a lot of those). Never mind the ones who didn’t even have bank accounts.

To get around this problem, people devised an interesting stratagem that took advantage of the mobile telecommunications boom, which was happening at the time, to transfer money. It quickly became widely popular, especially among students and other dependants who rely on monies from parents and benefactors who live far away.

The device was very simple. When people needed money, they would call home or whoever was in a position to provide, to ask for “credit” — credit here being airtime for mobile networks. When the credit was sent (the recharge string, via SMS), they would take it to the nearest mobile call center/airtime vendor, which by then could be found at virtually every street corner with their unmistakable branded umbrellas, and “sell it” in exchange it for its money value. The call center would however charge a small commission agreeable to the seller for accepting the credit.

Here’s what a typical transaction looked like. The sender goes out and buys credit from an airtime vendor — say MTN airtime worth NGN1,500. He doesn’t load it though, he sends the recharge string to the receiver via SMS. The receiver takes the recharge string to the nearest call center/airtime vendor who accepts the credit and gives them its money’s worth. Instead of giving them NGN1,500 however, the vendor might give them NGN1,350 cash and pocket NGN150 as commission. Everybody is happy, and none of them had to go to the bank. This device was so useful that it’s gotten people I know out of sticky situations on many occasions. Say for instance, if you found yourself stranded somewhere without funds to take you back home — all you had to do was send an SMS asking for credit from your friends/family, locate a call center and exchange the credit for the money you needed — no problem!

If you agree that the money transfer strategem which I have related above is indeed consistent with the essence of mobile money, then you’re impliedly agreeing that mobile money in Nigeria predates Kenya’s M-Pesa. The call centers/airtime vendors were the agent network, SMS was the channel, and it solved a pressing need — the need to transfer money over long distances with relative ease. The only element missing is probably an electronic wallet, but that didn’t hinder people from doing what they needed to do. During that period, airtime had virtually become legal tender.

All of these took place in an informal context however, and now that Automatic Teller Machines that work with almost any bank and debit card are now abundant, the use of this method has declined, except among the un-banked population.

So Nigerians were able devise such a useful solution, sans a formal framework — but it appears that the government and corporate stakeholders are finding it difficult to bottle and mass produce this product in a refined package that works, at least so far. For an initiative whose processes have been set in motion since last year, the levels of public awareness fall far short of where I expected it to be at this point in time.

I intend to address the question of why mobile money is having trouble taking off in Nigeria in my next post. For now, your ideas on the subject are welcome in the comments.

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  • Danile Isa

    The reason why Nigerian MMO (Mobile Money Operators) are having trouble kicking off is that they are all in a rush to deliver a copycat model of MPESA without doing extensive research into what it is the Nigerian populace can actually benefit from mobile based money/payment services. 

    What the Nigerian MMO’s need to do is look at the origins of MPESA and other successful mobile payments platforms such as the i-Mode in Japan, and learn from them. 

    MPESA was launched in 2007 and within two years had over 9 million users, the same cannot be said for the Nigerian MMO’s. Paga, who I would say is the current vanguard of mobile payments in Nigeria,  launched in Sept 2010 and have only just crossed 100,000 users. So something is seriously wrong somewhere.

    The Nigerian MMO’s need to look at how mobile payment services can be tailored to fit around the needs of the Nigerian populace instead of the other way round in which the users have to adapt towards the services offered by these MMO’s. 

    If at all the likes of Paga intend on deploying an MPESA based model which is primarily based on AGENTS, then I think they need to really go back to the drawing board and re-examine their agent roll out strategy. For example, I recently visited a Paga Agent in Gwarinpa, Abuja in order to enquire about cash withdrawal and to my surprise no one at the shop really knew what I was talking about, even though they Paga posters being displayed in their shop and a sign outside their shop saying they were an accredited Agent. It seems that their ‘oga’ who knows about it wasn’t in town.

    When MPESA was rolling out it pilot programme, they found out that agent training and management was very essential to the success of the programme. Even though they refined the training module and conducted numerous visits to the agents in order to make sure they understood their role in providing the service, MPESA realized that their in house training team of 4 was insufficient in the training and management of the agents. So they outsourced the training and management to a local firm and that turned out to be one of their key success factors.

    All in all , I think the Nigerian MMO’s need to seriously rethink their operational and roll out strategies because there are even other areas apart from ‘AGENTS’ that they need to really address. They should look into creating new products that leverage’s their current mobile payment infrastructure such as mobile/web payments for goods and services, mortgage payments, insurance payments and  micro-finance schemes.


  • Bankole

    Very astute observations Danile, not everything that worked in Kenya’s M-Pesa model will work in Nigeria’s unique context. My next post will expatiate on that and more.

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  • magnum

    etranzact to me is at the forefront of mobile payments in the country.
    the likes of paga came about 10years after eTranzact set the ball rolling, even interswitch just recently joined the race of recent.
    PocketMoni which is an etranzact brand is gaining momentum with the mobile money system.

  • fredmboma

    What you have described here (airtime for money) is a rudimentary system far from M-Pesa. It was around other African countries apart from Nigeria as well. If you wrote this just for pride you better swallow it.

    The key to success is simple:

    1. Come and learn from M-Pesa, and other popular equivalents in East Africa
    2. Let the biggest mobile companies run the service. So in Nigeria MTN should lead the way. If it’s left in the hands of small guys it won’t explode.

    I am from Tanzania. M-Pesa came in 2009. Before that there was a similar system from a very small mobile operator called Zantel. It tanked.

    M-Pesa was brought by the largest mobile company in each market – Safaricom for Kenya and Vodacom for Tanzania. Other companies followed suite and now – a mere 4 years later – Tanzania boasts of more than 12 million users of mobile money transfers.