Nigeria: Is Nigeria Going Cashless? Embracing Digital Transformation In Africa's Largest Economy – Firmus Advisory

Nigeria’s financial landscape has witnessed a remarkable
transformation driven by the rise of financial technology
(fintech). The concept of going cashless has gained significant
momentum, particularly steered by the government’s ambitious
pursuit of a cashless economy coupled with the increasing adoption
of digital payment solutions. Just a few years after the Central Bank of
(CBN) launched the country’s (and Africa’s)
first digital currency – eNaira1, the CBN has
launched a domestic card scheme, AfriGo,2 to fortify its
quest for a cashless economy spiraling many including small and
medium scale enterprises to brace up for change.

Download a copy of this full report in PDF here

Major Forces Driving the Cashless Movement

Firmus’ evaluation of Nigeria’s journey towards a
cashless society is rooted in four fundamental premises: (1) a
decrease in cash dependency, (2) growth in fintech infrastructure,
(2) a boost in financial inclusion, and (4) an increase in cost


  1. Decrease in cash dependency: Historically,
    Nigeria’s reliance on physical currency has led to security
    vulnerabilities, inefficiencies, and challenges in maintaining
    transparency in financial transactions. The majority of the
    government’s cash transactions for instance have crossed legal
    limits, with over $ 2.4 billion withdrawn from government accounts
    in the form of cash.[1] Also, a large percentage of adult Nigerians
    continue to use cash as the primary medium for completing
    transactions. Embracing digital payment solutions offers a way to
    reduce dependency on physical cash, mitigate risks associated with
    carrying large cash such as robbery, and enhance the overall
    efficiency of conducting transactions. As more individuals and
    businesses transition towards digital platforms, the advantages of
    conducting transactions without the constraints of physical cash
    become increasingly evident.

  2. Growth in fintech infrastructure:
    Nigeria’s fintech ecosystem has evolved from its nascent stages
    to a robust and dynamic landscape. With the proliferation of
    digital payment solutions, mobile apps, and online platforms,
    Nigeria’s fintech ecosystem is expanding at an unprecedented
    pace. This growing trend has not only revolutionized how Nigerians
    transact and conduct business but has also led to further
    diversified offerings including insurance technology,
    blockchain-based solutions, cryptocurrency adoption, and
    robo-advisors resulting in a growing number of Nigerians embracing
    digital assets for remittances and investments. Data from the
    Central Bank of Nigeria shows that the total volume of e-payment
    has increased significantly from about 5 billion in 2020 to about
    22 billion in 2022. In terms of value, total e-payment transactions
    shot up from about ₦‎783 trillion to ₦‎1,550
    trillion within the same period (See Table 1 on the breakdown of
    total e-payment transactions from 2020 to 2022).


Noticeable within the growing fintech space is the emergence of
Fintech startups as game-changers causing both innovations and
disruptions within the fintech ecosystem. Between 2015 and 2022
alone, the total value of fintech startup funding in Nigeria
increased more than twenty-fold (20x) shooting up from about
$21million to $507million (see figure 2). Adding on to these
figures, in the early quarter of 2023, Nigeria’s government
launched a $618 million fund under the Investment in Digital and
Creative Enterprises (iDICE)3 and jointly financed by
major developing partners such as African Development Bank, Agence
Francaise de Developpement and Islamic Development Bank, to support
young tech entrepreneurs who particularly find it difficult to
raise capital.4 The expanding fintech infrastructure
together with increased capital traction in the sector demonstrates
the adaptability of the Nigerian market and signifies the readiness
of consumers and businesses to embrace digital alternatives to
traditional cash transactions.


  1. Boost in financial inclusion: Although
    Nigeria’s evolved fintech ecosystem has led to a decrease in
    the unbanked population, there still remains a gap of about 64
    million5 people that are yet to be captured. Firmus
    recognizes that one of the most transformative outcomes of
    Nigeria’s cashless trajectory is the potential to promote
    financial inclusion on an unprecedented scale. With a significant
    portion of the population unbanked or underbanked, fintech
    companies are presented with a unique opportunity to bridge the
    financial divide. By providing accessible and user-friendly digital
    payment platforms, fintech firms are opening the doors to formal
    financial services for those who were previously excluded. With a
    cashless system in place, Firmus anticipates a potential faster
    rate of capturing the unbanked population, improving the
    socio-economic status of millions and propelling economic growth
    across various sectors.

  2. Increase in cost savings: The significant cost
    savings that the adoption of digital payment solutions and cashless
    transactions can yield cannot be overemphasized.Embracing digital
    payment solutions not only enhances convenience but also offers a
    cost-effective alternative to traditional cash transactions. The
    elimination of physical currency reduces the expenses associated
    with printing, transporting, and handling cash such as ATM fees and
    currency conversion costs. Businesses can streamline their
    operations by adopting digital payment methods, resulting in lower
    administrative costs and increased operational efficiency. By
    creating an environment where both businesses and consumers can
    enjoy the advantages of reduced transaction costs, Nigeria is
    incentivizing the adoption of digital payments, further driving the
    nation towards a cashless future. As the nation continues to
    navigate its path towards a cashless future, these driving forces
    provide a strategic framework for understanding potential impact,
    opportunities and challenges that lie ahead.

Current Fintech Solutions in Nigeria

Since the early 2000s when Nigeria began its journey towards a
financially techy economy with the rapid adoption of mobile phones
and growing need for innovative financial services, the country has
seen a widespread introduction of fintech solutions that have
significantly re-shaped the financial ecosystem. These solutions
span various segments, from mobile payments and digital wallets
that enable swift and convenient transactions, to peer-to-peer
lending platforms that enhance access to credit. Online banking
platforms or digital banking and neo-banks are also redefining
traditional banking experiences, while remittance services are
streamlining cross-border money transfers. In recent times, there
has been a rise of cryptocurrency platforms and blockchain
applications which are gradually gaining deep ground, introducing
new ways of conducting transactions and opening new doors to
financial activities. Below are key segments of fintech solutions
in Nigeria including major players dominating these segments.






Impact on Economy, Sectors, and Industries

For the past decade, Nigeria has reaped huge benefits due to
growth and transformations in the fintech sector. Since 2018, over
$1billion has been invested into the fintech sector fueling
economic growth and development.6 Additionally, the
proportion of unbanked has decreased with improved access to
payment services, credit and savings. For instance, an initiative
undertaken by the Central Bank of Nigeria in 2012, the National
Financial Inclusion Strategy in 2012, was set to see adult
Nigerians with access to payments service increase from 21.6% in
2010 to 70% in 2020 while those with access to savings increase
from 25% to 60. Additionally, those with credit access was to
increase from 2% to 40% over the same period.7

The transition towards a cashless society in Nigeria holds
significant potential to reshape the nation’s economy including
its sectors and industries across various dimensions as well as
reap in positive benefits. This transformation, driven by the
adoption of digital payment solutions and fintech innovations, has
far-reaching effects that span economic growth, consumer behavior,
operational efficiency, and overall market dynamics. We anticipate
that the pursuit for a cashless society will not only further
decrease the underbanked population but also enhance economic
growth and productivity in Nigeria. With businesses having their
operations streamlined and transaction times reduced following the
adoption of digital payments, we project enhanced productivity
across sectors, ultimately contributing to economic development.
From our assessment, we predict that the outcome of this movement
could see several million added to the economy. We also expect this
transition to shift human behavior to seek more online transaction
thereby boosting the need for e-commerce and online marketplaces.
This behavioral pattern could trigger innovations from businesses
to meet new demands, which could also stimulate cross-border trade
and commerce.

Industries and sectors will experience their fair share of
impact. While retail, e-commerce, and financial services will see
an exceptional boost in their sectors, other sectors will also be
hit with major transformations which present many opportunities
amid setbacks and challenges. Nevertheless, these strides present a
plethora of opportunities for potential investors.

Market Potential and Investment

The convergence of a burgeoning fintech ecosystem, a tech-savvy
population, and a government commitment to digital transformation
creates fertile ground for both local and international investors.
Firmus identifies six (6) major market potential and investment
opportunities that the cashless drive presents in Nigeria.

To view the article in full click here




3. Torsten Wezel ; Jack J Ree, IMF:
Nigeria—Fostering Financial Inclusion through Digital
Financial Services: Nigeria, March 2023



6. iDICE is a government initiative aimed at fueling
innovation and entrepreneurship within the digital tech and
creative industries.


The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

Leave a Comment