The revocation took effect on December 6, 2023. 

Cellulant is therefore leaving the consumer-facing mobile money market to focus on providing payment services to businesses. The company told TechCabal via email that it decided to exit the mobile money space and focus on providing solutions “as far back as 2021”. This informed its procurement of a Payment Solution Service Provider (PSSP) licence from the CBN, which has been issued and is now operational. 

“The regulator did not revoke the licence as a result of infractions or any breach. The CBN succeeded in gazetting this request in December 2023, occasioned by the time it took them to conclude the process of revoking the mobile money license as requested by Cellulant,” Cellulant said in the email.

The CBN in the aforementioned letter addressed to Cellulant said it was revoking Cellulant’s mobile money licence, “following [Cellulant’s] decision to discontinue operating the licence”.

The company, which raised $54.5 million in three funding rounds between 2014 and 2018 from investors like The Rise Fund, has hit a rough patch lately. After an out-of-court settlement of a long-drawn leadership tussle with its former co-founder, Bolaji Akinboro, Cellulant has struggled to stabilise its operations and raise new funding.

In 2023, Cellulant saw the need to restructure its business, including reducing the headcount by 20% in August. In December, the company’s CEO Akshay Grover, stepped down citing personal reasons. That exit also led to another round of layoffs in the company and the announcement of an acting CEO. 

The merger, subject to regulatory approval, will allow Interswitch to create accounts and hold customer deposits, making it the first time the fintech would offer non-payment services. This follows the fintech’s acquisition of a mobile virtual telecoms licence.

“The PSB use case for these companies (payment companies) is the same: to keep some float of their transaction volumes in-house and consolidate on their already established strengths,” an industry insider told TechCabal. 

“A PSB is the sensible consolidation for them (Interswitch) even if it means they bank themselves,” he added. 

Interswitch declined to comment on any part of this story.

With the PSB licence, Interswitch, which brought in $42 million in revenue for its 2023 fiscal year that ended March 31, will be able to receive foreign currencies for its customers and directly offer agency banking services.

Nevertheless, Interswitch has to offer innovative services to convince Nigerians, famous for user inertia, to use its remittance or agency banking services. Interswitch’s tenured presence in Nigeria, where it derives 94% of its revenue, would be useful.

The CBN introduced regulations for payment service banks in 2018 with a remit to increase financial inclusion in rural. Those license holders are to offer 25% of physical activity in “rural areas with a high unbanked population.”

Interswitch, which derives most of its revenue from offering services to its banking customers, will have to invest in a nationwide physical network of agents. 

Mobile money operators are also limited from participating in the revenue-driving segments of other banks, as they cannot directly give out loans, hold foreign currency deposits or participate in foreign exchange transactions except for receiving remittances. These restrictions severely affect the attractiveness of PSBs in Nigeria.

M-PESA, the ubiquitous mobile money platform used by 32.1 million Kenyans and over 60 million customers across eight African markets, is taking a pivotal step into payments. In a partnership with Visa, the global digital payments giant, M-PESA will debut tap-to-pay capabilities, marking a bold expansion beyond its virtual GlobalPay offering and setting its sights on the cash-reliant retail sector.

“SafaricomPLC has achieved PCI DSS compliance, which builds on our strategic partnership with Visa, expanding M-PESA’s payment capabilities to include card issuing and acquisition,” M-PESA Africa said in a statement on X.

Per Safaricom, this will be a tap-to-go solution for customers that will enable merchants to receive payments. Visitors with cards can pay through M-PESA and also extend card solutions to other fintechs.

M-PESA deepens partnership with Visa

Visa, meanwhile, gains a powerful partner in its quest to expand its footprint in Africa. M-PESA’s vast user base and deep integration into Kenyan life offer a unique platform for Visa to tap into the continent’s rapidly evolving digital payments landscape.

Customers can use the tap-to-pay product across the eight countries in which M-PESA operates. “FintTechs and financial institutions are equally set to leverage our card processing capabilities, empowering them to provide end-to-end mobile and card payment solutions,” M-PESA added in a statement on X.

Editor’s note: A previous version of this article stated that M-PESA would begin issuing physical cards after a partnership with Visa. M-PESA has now clarified that the partnership does not involve any physical cards. The article has now been updated.

Tanzanians are using mobile services less often than two years ago when the government introduced new taxes on mobile money transactions. In July 2021, Tanzania introduced a levy ranging from TZS10 ($0.004) to TZS10,000 ($4) on mobile money transactions to fund development projects. This levy was in addition to an already existing 18% value-added tax and a 10% excise duty on mobile money transfer and withdrawal fees. After pushback from the public, the government reduced the levy by 30% in September 2021, and a further 43% reduction, ranging from TZS10 to TZS4,000 (US$1.6), was implemented in July 2022.

Read also: IROKOtv denies shutting down, says it is doubling down on dollar-paying users

Despite these reductions, mobile money revenues dropped from TZS 736 billion ($295.1 million) to 6.154 billion or $2.5 million between June and August, stabilising around TZS 6.555 billion ($2.6 million) in September 2021.  This price sensitivity in mobile money usage patterns was discussed during the staging of the Mobile World Congress (MWC) 2023 event, which concluded this week in Kigali, Rwanda. 

Mobile money is not affordable in Tanzania

As of 2023, 72% of Tanzanians use mobile money services, up from 60% in 2017,  while 22% of the population uses commercial banks. Amidst this, the Tanzanian government recognised mobile money as a driver of financial inclusion,  contributing to economic growth and social development, especially among women and rural populations. 

However, the number of person-to-person (P2P) and cash-out transactions dropped by 38% and 25%, respectively, from June to September 2021. The tax’s impact is estimated to be equivalent to a 30% reduction in P2P and 60% in cash-out transactions in March 2023 if it had not been introduced.

Lower-value P2P transactions have, to a small extent, recovered to levels above those before the tax, while mid and higher-value transactions are still 31% and 58% lower, respectively. This indicates users’ appreciation for lower transaction costs.

Per the GSMA report, “The reduction in affordability of MM therefore threatens to reverse the commendable financial inclusion gains as Tanzanians revert to cash, particularly amongst the vulnerable and the poorest segments of the population.”

These issues are, however, not limited to Tanzania. Kenya’s tax authority, KRA, has raised concerns over a rising trend among business owners who have discontinued their mobile merchant payment accounts to cash transactions following increased compliance checks by the tax authority. KRA observed that businesses, previously using Lipa Na M-PESA Buy Goods Till numbers for payments, are now requesting cash payments. This shift comes after KRA deployed revenue service assistants to boost tax compliance efforts, which also included facilitating online business registrations.

Mobile money services serve millions of Africans, and over the last ten years, mobile money in Sub-Saharan Africa grew, with 548 million registered accounts and 160 million active users in 2020, an 18% annual increase. These services facilitated 27.4 billion transactions with a total value of $490 billion. Unlike cash transactions, which are often hard to trace or register, mobile money improves transaction transparency. It offers a convenient method for tax payment and collection, improving collection efficiency and government revenue.

“Cash transactions are often unregistered which allows for the development of a shadow economy and the evasion of tax payments,” GSMA said in a report.

“I’ll pay you with eNaira” was my colleague’s way of teasing me about repaying a loan. If he were to pay into my eNaira wallet, I’d have virtually no way of spending the money. Most merchants in Nigeria don’t accept the country’s digital currency, and not many tech-savvy folks are convinced that this blockchain-based money has what it takes for mainstream adoption. Despite the investments of the central bank of Nigeria, Nigerians do not care much about the eNaira, Africa’s first central bank digital currency (CBDC). Mr Tobi Aremotobi, a Lagos-based digital finance expert, refers to the venture as “an exercise in futility”.

Launched in October 2021, the eNaira became the world’s second public CBDC, after the Bahamas’ Sand Dollar project. Two months away from a second anniversary, the digital currency is still struggling with adoption. A recent IMF report showed that the average number of eNaira transactions is about 14,000 per week—only 1.5% of the number of wallets. This suggests that 98.5% of wallets, for any given week, have not been used even once. These numbers reflect a “disappointingly low adoption”.

A use case, please?

Many Nigerians have stressed that the eNaira lacks a use case compelling enough for them. According to the CBN’s master plan, the low transfer fees should drive eNaira adoption among Nigerians, especially among the youth demography who have demonstrated market potential for startups offering digital-first financial services. However, as it turns out, low-cost transfers take less priority than the form in which the money gets moved. 

Money can be either cash or digital. And when it’s digital, it can be either centralised fiat or decentralised cryptocurrency. The eNaira—like all CBDCs—doesn’t fit into either category. It introduces a new class of digital money that most Nigerians are only just discovering, right as they are being urged to adopt. The corollary effect, therefore, is hesitation. 

“I still can’t wrap my head around why we need another digital means of keeping money that takes away some banking perks,“ Aremotobi said. “If the eNaira remains a means to transfer value or pay my bills online, it is welcome to queue behind the one thousand options I already have.” Aremotobi’s point highlights a conversation crypto evangelists are familiar with: a monetary asset must have compelling use cases beyond being a value store. 

Perhaps, the CBN’s response to this line of thought would be in its three-point motivation for the eNaira. Through the digital currency, the apex bank wants to increase financial inclusion, reduce informality, and tap into Nigeria’s expanding remittance markets. The remittance play remains in the works, but the CBN has doubled down on its eNaira-powered financial inclusion agenda. That, however, is yet to demonstrate reasonable traction. 

ENaira versus mobile money

According to the IMF report on the eNaira, “Nigeria has a large informal economy….Once the eNaira becomes more widespread and embedded into the economy, it may bring greater transparency to informal payments.” This position highlights the ambitions of the eNaira to simultaneously penetrate the informal market as it strives to power financial inclusion nationwide. Essentially, the eNaira wants to operate with established mobile money frameworks.

To do this, the CBN can take either of two routes: leverage established mobile money networks to onboard CBDC users, or go all out to construct a retail access network. The former model will prevent the apex bank from providing retail banking services, and will require users to route their monies through their mobile money accounts to their eNaira wallets—a model that will come at an extra service cost. The bright side to this model, according to the IMF, is that it de-risks users’ mobile money balances—as the cash typically leaves the accounts of the financial institutions powering the mobile money services.

This strategy, despite being the eNaira’s best shot at bagging some financial inclusion laurels, shows a lack of understanding of Nigeria’s mobile money market. Unlike Kenya’s MPESA or Senegal’s Wave, mobile money in Nigeria is not primarily used to hold balances. The country’s leading players—Paga and Opay—are extensively adopted for cash-in cash-out transactions. Payments and transfers come second, and are mostly completed by cash-full customers. Even the option to convert from cash to CBDC wallets is likely to face hesitation as such behaviour is not in line with prevalent consumer trends.   

So far, the CBN’s drive to put eNaira on the streets has churned out initiatives like USSD-powered eNaira operations and account tiers for the unbanked. As an added incentive to proselytise the digital currency adoption, thousands of CBN’s staff receive stipends into their eNaira wallets. The apex bank also claims that it has encouraged major supermarkets to adopt payments in eNaira, but big names like Shoprite, Spar, and Addide are yet to demonstrate nationwide adoption. From a financial inclusion lens, these moves by the CBN seem laudable, but the struggling adoption suggests that there’s something still amiss in the strategy mix. 

Nosa Oyegun, who leads the product team at Kuda, describes the eNaira’s mission to capture informal markets as an uphill struggle. “Given how it [the eNaira] was rolled out, it’s tall order now. it’ll be hard because of how it stumbled out the blocks. [The rollout] should have been USSD-driven if that was the goal. 

From a product perspective, Oyegun believes the eNaira has all the elements needed to be dominant. ”The government is behind the eNaira, there’s hardly any bigger moat than any competitor could ever have,” he said.

Is trust the missing piece? 

The CBN and its eNaira have a trust deficit they must overcome. Actions such as the ban on crypto, closure of crypto-linked bank accounts, forex manipulations, and more recently, the naira redesign, have left a negative impression of the apex bank and its policies on most Nigerians. Tech and blockchain enthusiasts who were affected by the crypto crackdown scoff at the idea of a CBN-controlled blockchain currency, and decidedly avoid it. “I am not going to put my money under the full watch of the CBN, not after everything they’ve done to us. I can wake up and realise my money is all gone,” says Tage Okogu, a crypto enthusiast based in Lagos.

As Abraham Augustine argues in this piece, banking in its simplest form is the aggregation of trust transactions. The risk-averse saver trusts in the ability of the bank to keep the money while the bank trusts in its ability to keep the money safe and grow it by taking on risks. When the trust piece is missing on either side, banking collapses. Or—like is the case for the eNaira—fails to go beyond “a wave of limited adoption”.

According to a financial statement published on the Nigerian Exchange Group (NGX), Airtel Africa has reported a 5% decline in their profit for the year ended 2022. 

Airtel’s profit after tax (PAT) for the period under review dropped by 0.6% to $750m, compared to $755m during the same period in 2021. Conversely, the telco’s revenue grew by 11.5% to $5.25m in 2022, compared to $4.71m in the same period in 2021. 

Commenting on the financial performance, Airtel Africa’s chief executive officer (CEO), Olusegun Ogunsanya, stated that the operating environment of the company has been challenging in many ways and expressed hopes of improvement over the numerous challenges. 

“The resilience of our underlying EBITDA margins has shown the effectiveness of our operating model, despite significant inflationary and foreign exchange pressures. Strong customer and ARPU growth over the year demonstrates that demand for our services remains very strong and gives us the confidence to continue investing to support our future growth potential,” Ogunsanya said.

Ogunsanya also noted that the local currencies of its operating countries have been under pressure. He admitted that currency devaluation is beyond the telco’s control, but plans have been put in place to mitigate its impact by ensuring its revenues outpaces devaluation. 

Airtel Africa also revealed that its revenue growth for the quarter was impacted by clampdown on Nigerian subscribers who had not submitted their National Identification Number (NIN). The telco noted that as of March 2023, 6.4 million customers had submitted their NINs while 3.5 million customers had been fully verified and unbarred. According to the financial statement, the clampdown caused a revenue loss of $110m in the reviewed period, leading to a lag in revenue growth of almost 2.4% at Group level, and 6% in Nigeria.

The telco’s financial statement also reported that its mobile services revenue grew by 16.2% across its regions. Mobile services revenue was up by 20.3% in Nigeria , in east Africa by 13.4% and in francophone Africa by 11.9%. 

“Mobile services revenue growth was driven by both voice and data services, voice revenue grew by 11.8% and data revenue by 23.8%. Mobile money revenue grew by 29.6%, driven by 32.6% growth in east Africa and 20.3% in francophone Africa,” the report read.

Having played in the remittance industry for years alongside gritty competitors like NALA, Pesapeer, and Afriex, MFS Africa might glean some more competitive advantage from partnering with the global money transfer behemoth Western Union. Yet, the question remains: why pilot with Madagascar?

Madagascar is bullish on mobile money 

Like its East African neighbours Kenya and Tanzania, Madagascar is riding a mobile money wave that has seen traditional banking lag behind in the region. Between 2013 and 2016, mobile money subscriptions doubled to reach over 4.6 million users, a fifth of the population at the time. Within the same period, less than a million Madagascans operated bank accounts. This reflects the state-wide preference for mobile banking solutions. 

Madagascar, a largely rural country with a prime focus on agriculture, is sparsely populated. The country averages only about 36 inhabitants per square metre, making it difficult for traditional banks to set up branches near users as that would hardly be cost-effective. This disadvantage, however, proved to be a boon for telcos—like Telma, Orange, and Airtel—who began to power financial services in the region. Soon after, banks started playing catchup with agency banking solutions. 

According to the International Finance Corporation (IFC), Madagascar now has over ten million mobile money users, representing over a third of its population. That number is set to grow as more Madagascans get comfortable with the suite of solutions mobile money has evolved to offer in the region—including payments, savings, wallet management, and paperless credit facilities. 

To make this happen, mobile money operators have had to partner with financial institutions and innovate financial inclusion projects that impact grassroots communities. Airtel and Bank of Africa teamed up to provide financial services to farmers, the traditional bank clientele, while Orange partnered with Première Agence de Micro-Finance (PAMF) to provide microloans. 

Speaking to the success of mobile money credit products in Madagascar, Mathieu Berthelot, CEO of Orange Money Madagascar, said, “Madagascar is among the African and Indian Ocean countries where digital credit products, going from just a few dollars to several hundred dollars, have been the most successful.” 

“Mobile money has already become the main tool for financial inclusion in Madagascar and it has been a game changer for so many people,” he added,

Madagascar demands, France supplies

Madagascar might be a relatively smaller African market, but its historical connection to France, its coloniser and major investor, makes it a hotspot for remittances from France. Also, Western Union, though an American company, operates a huge market in France, thereby creating a wide-enough pool of potential users for the pilot phase in Madagascar. 

“[Madagascar is] also a big receiver of remittances from France – traditionally a strong market for Western Union,” MFS Africa’s Managing Director, MTOs, Kumar Shourav, said to TechCabal. “Eventually we will roll out this partnership to cover all countries in Africa through MFS Africa’s strong and direct connection with mobile wallet players in all these markets,” Shourav added.

In addition, Shourav confirmed to TechCabal that before this partnership, Western Union did not have an existing connection with the mega mobile money operators in Madagascar, such as Airtel Money and Orange Money. But now, by connecting to MFS Africa’s ever-expanding API suite, the global money transfer behemoth can facilitate instant remittances into Malagasy wallets. 

Over the past 5 years, MFS Africa has doubled down on its vision to solve the fragmentation in Africa’s money transfer market and “provide an API that makes Africa look like one country.” Global names including MoneyGram, WorldRemit, and Xoom, Paypal’s money remittance service, have plugged into MFS Africa’s vast interoperable network of money transfer companies.

Presently, MFS Africa reportedly connects over 400 million mobile money wallets and 200 million bank accounts across 35 African countries, with a vision to cover the whole of  Africa in years to come. 

“We want to make sure there is always a digital pathway for a phone number to receive money in Africa,” Dare Okoudjou, MFS Africa’s CEO, said to TechCabal. 

In reality, however, this growth appears to be driven by the lack of options that Nigerians are faced with due to the nation’s current cash crises. According to NIBSS, registered mobile users in Nigeria did transactions worth ₦2.37 trillion ($5.17 billion) in January 2023, recording a 125% volume increase from the previous year. In addition, the value of POS transactions surged to ₦807.16bn ($1.76 billion) in January 2023, a 40.69% increase from the ₦573.72bn ($1.25 billion) the nation recorded in January 2022. 

As impressive as this growth may seem, it has not been without costs; Nigerians are having to buy the naira at charges of up to 20% fees at POS terminals nationwide. 

Nigeria’s cash crises comes as a consequence of mopping up the old higher-denomination notes without an adequate release of the newly designed ones. Initially, Nigeria’s central bank set January 31, 2023 as the deadline for returning the older 200-, 500-, and 1000-naira notes, forcing Nigerians to visit the banks en-masse as they tried to rid themselves of the outgoing legal tender. 

The deadline was again extended to February 10, allowing more people to deposit their older notes as the banks reported almost ₦2 trillion (4.36) in returned cash since the start of the exercise. Last week, the Supreme Court halted the exercise; the case is set to be heard tomorrow, February 15. 

A bigger picture 

While it is true that instant payments and mobile money usage have surged since the CBN launched its exercise, the full picture is that the surge is costing Nigerians much more than fancy growth metrics can tell.

“What is there to celebrate about POS transactions increasing when there’s really no other option for Nigerians to access cash?” Bola Omogunloye, a POS operator in Lagos, complained to TechCabal.

“Queues at ATMs are frightening and inflammable. Yet, ₦20,000 remains the limit per person. People need cash for their businesses. Informal workers need cash too, but I don’t think the government considered this category of people,” Omogunloye added.

Amid the cash scarcity, Nigerians continue to complain about the increasing failure rate of digital transactions. In recent times, most commercial banks in Nigeria have come under fire from angry Nigerians who are unable to complete their transactions digitally. This situation is also common to mobile money transactions. 

The reason for this is not far-fetched: financial institutions are playing catchup with their internal infrastructure, most of which is meant to power cashless transactions. 

“Nigeria’s move to outlaw high-value notes is the best thing that’s happened to mobile-money operators in Africa’s biggest economy,” is how Bloomberg opened a recent piece that highlights the role of the cash crises in spurring mobile money growth in Nigeria. But in reality, how possible is it for a crisis to permanently change consumer behaviour toward cashless transactions? 

If mobile money and cashless transactions will characterise the transactions landscape in Africa’s most populous nation, then such a shift must be accompanied by increased trust in financial institutions, optimised payment systems, low-cost mobile money fees, and a general robust infrastructure that supports the traffic in a market of over 200 million people. 

A cash crisis won’t do the job. At least, not permanently.