Olaniwun Ajayi LP, a tier-1 law firm in Nigeria has released its 2022 “wrap-up report” on the Fintech ecosystem in Nigeria, Fintech Forward Look 2023. According to the report, Fintechs in Africa raised $913 million in investments in the first nine months of 2022.
The report also tracks the electronic payment transactions in Nigeria which hit N204.5 trillion in H1 2022.
The report gave a breakdown of some of the key events that took place in the Nigerian Fintech ecosystem in 2022. The year started with President Buhari approving the establishment of the Nigerian Data Protection Bureau (NDPB) in February. NDPB is undertaking the responsibility of being the data protection czar in Nigeria. Also in February, Flutterwave set a new record for the highest funding raised by an African startup when it secured $250 million in a Series D funding round. The funding grew its valuation to $3 billion, making it one of Nigeria’s largest companies based on valuation.
In March 2022, Moove, a vehicle financing startup domiciled in Lagos, secured $105 million through a combination of debt and equity to support its expansion into Asia, Europe, and the Middle East and North Africa (MENA) region. In April, the Central Bank of Nigeria (CBN) granted licenses to both MTN and Airtel for their Payment Service Banks (PSBs). In June 2022, the Central Bank of Nigeria (CBN) granted Abeg Technologies, the owner of Pocket by Piggyvest, its approval in principle for a Mobile Money Operators license.
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August 2022 saw Bluechip Technologies, a Nigerian management software solutions company move into Europe. And in September, Flutterwave obtained a switching and processing license from the CBN, the highest license to be obtained by a Fintech in Nigeria. This enables Flutterwave to facilitate transactions between banks, fintech companies, and other financial institutions.
In October 2022, the President assented to the Startup Act which is expected to enhance the startup ecosystem in Nigeria through improved funding access and better regulation of the ecosystem. The Startup Act is a huge boost to the Startup albeit Fintech ecosystem in Nigeria. The act is envisioned to establish a framework for improved innovation and collaboration in the sector.
In 2022, MTN and Airtel were granted licenses to operate their PSBs in Nigeria, bringing Mobile Network Operators (MNOs) into the Fintech ecosystem. Since MoMo PSB of MTN received its license, it has registered 2 million active wallets. SmartCash PSB of Airtel Africa is also becoming a force in the ecosystem.
Mobile money providers are another force in the Nigerian Fintech ecosystem. According to the report, mobile money transactions in Nigeria rose by 3000% from NGN136.85 billion in Q1 2019 to NGN4.86 trillion in Q1 2022. The report also mentioned the release of draft operational guidelines for Open Banking in Nigeria in 2022 by the Central Bank of Nigeria (CBN).
The government launched a severe crackdown on digital lending apps as a result of unethical practices by some of these apps in 2022. It was led by the Federal Competition and Consumer Protection Commission (FCCPC). The actions included conducting investigations on digital lenders engaged in unfair practices, obtaining court orders to freeze the bank accounts of the implicated lenders, and ban on the provision of payment and telecommunication services to digital lenders under investigation.
In 2022, some African startups explored the option of debt financing. About $115 million was raised through debt financing by Moove, Yellow, and MFS Africa.
Outlook for 2023
The report also included an outlook for 2023 for the Nigerian fintech ecosystem. The report forecasted growth in the e-commerce sector in Nigeria, driven by the anticipated launch of operations by Amazon Inc. in Nigeria in 2023. It is expected that the presence of Amazon will create competition for the existing E-commerce platforms and also drive innovation in the sector.
The report also predicted an increase in mergers and acquisitions (M&A) activity and consolidation, as companies will employ this strategy to enter new markets and bypass the challenging foreign licensing and regulatory requirements.
The world has been experiencing a decline in venture capital investments as global VC funding dropped from $191.9 billion in Q4 2021 to $81 billion in Q3 2022. This trend is expected to continue into 2023.
Payment services solutions are now being implemented by traditional banks to compete with Fintechs. For example, HabariPay by GTCO Plc and Hydrogen Payment by Access Holdings. It is anticipated that more banks will join this initiative, which could significantly impact the ecosystem.