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8/2/2019 Industry Insights-Issue 03
1/12
Major Economic Indicators:
Quarterly Outlook
Inflation:NegativeExchangeRates:StableGDP Growth:PositiveEquityMarkets:Stable
The Macro Economy
The Nigerian economy has continued to
growamidstpoliticalandeconomicuncer
tainties in the MiddleEast and North
African regions.Dataprovidedby theNa
tionalBureauofStatistics(NBS)estimated
GDP growth of 7.43% in Q1 2011. With
politicstaking
centre
stage
earlier
in
the
year, GDP growth in Q12011 was lower
than theQ42010 rateof8.49%; butwas
marginally higher than the corresponding
Q12010rateof7.4%. Theperformanceof
the nonoil sector continues to be the
majordriveroftheeconomy,withagricul
ture, telecoms, building & construction
andrealestate industriesbeingthemajor
contributors.
Increasedgeopolitical
unrest
in
the
Middle
East and NorthAfrica have elevated oil
prices sinceDecember2010.Theaverage
monthly price of bonny light crude oil in
June 2011 stood at a high $117.9, com
paredtothe$43.1recorded inDecember
2008. This will aid the Nigerian govern
ment in implementing the 2011 budget,
which is now basedon an oilbenchmark
of $75 per barrel, production output of
2.3mbpd,GDPgrowth rate of 7% and an
exchange rateof150/US$. Ouroutlook
for GDP in 2011 remains positive due to
stableoiloutput,reducedproductionfrom
Libya,continued
growth
of
the
non
oil
sectorsandastablepolity.
Inflation
Inflation remained a major concern for
monetaryauthorities inQ2,with inflation
rateshoveringbetween11.8%and12.8%
formostoftheyear. Surprisingly,inflation
figure for June 2011 declined to 10.2%
from the high of 12.4% recorded in May
2011.The
high
global
commodity
prices
and continued dependence on importa
tion,particularlyoffoodproducts,account
for our negative outlook on inflation for
thesecondhalfoftheyear. Itisreported
that Nigeria spent 98 trillion on food
importation inthelastfouryears. Inabid
to help stimulate lending to the agricul
ContentsThe Macro Economy P.1
Insurance P.5
Printing & Publishing P.7
Hotels P.9
Telecoms P.10
QUARTERLY REVIEW OF NIGERIAN INDUSTRIES
Industry Insights
Agusto & Co.RESEARCH, CREDIT RATINGS, CREDIT RISK MANAGEMENT
ISSUE 03, JULY 2011
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Inourview,the
MPCsinsistence
onusingonly
monetarypolicies
tomoderatein
flationis
unsus
tainable.
tural sector, the CBN has set aside75
billionunderanew scheme tagged The
Nigerian Incentivebased Risk Sharing
System
for
Agricultural
Lending
(NIRSAL).
This follows theCBNgovernorscallear
lierthisyearforbankstoincreaselending
totheagriculturalsectortobetween6%
and8%ofloanportfolios.The75billion
sumisexpectedtoboostbanklendingto
theagriculturalsector.Weanticipatethe
CBNwillcontinuetomakeinflationakey
policypriority,thoughwedoubtifmone
tarypoliciesalonewillhelpcurbinflation
tosingledigitterritory. Webelievegov
ernmentspending
should
be
targeted
at
infrastructural development in order to
addressthestructuralinflationpresentin
theeconomy.
Interestrates
BasedonprovisionaldatafromtheCBN,
average lending to the private sector in
the first five months of 2011 was 5%
lowerwhencomparedtothecorrespond
ingperiod
in
2010.
This
is
partly
associ
atedwith reducedborrowingdue to the
contractionary monetary policy em
barked upon by the Monetary Policy
Committee(MPC)inordertotackleinfla
tion. Citingexcessliquidityinthesystem,
economicchallengesintheUnitedStates
and euro zone countries and rising gov
ernment expenditure, the MPC further
raised the cash reserve requirement to
4% in May 2011, the monetary policy
rates(MPR)
to
8.75%
in
July
2011,
and
maintainedthesymmetriccorridorat+/
200 basis points (2%) around the MPR.
Although the apex banks policy has a
potential to suppress economic growth
by furtherrestricting lending,webelieve
this is the rightdirection in theabsence
ofquality targeted spending by the fed
eral government. However, in our view,
theMPCsinsistenceonusingonlymone
tary
policies
to
moderate
inflation
is
un
sustainable in the long run without tar
geted spending in infrastructure. There
fore, we expect MPR to remain high in
theshortterm.
FinancialMarkets
InQ2of2011,theNigerianequitymarket
was challenged by factors beyond the
fundamentals. The polity was stable,
AMCONinjected
liquidity
via
tranche
II
purchaseoftoxicassets,whilebanksand
major companies declared moderate
profits. However,bankingstocks ledthe
decliners with a 7% down tick in the
quarter following the CBNs announce
ment that it will withdraw interbank
guarantees in September 2011 and
amidstinvestorconcernsonthefailureof
thebailedoutbankstorecapitalize.The
Nigerian Stock ExchangeAll Share Index
(ASI)was
supported
by
the
breweries
sectorwitha17%returnforthequarter.
Overall, the ASI gained 1.46% for the
quarter and was up 0.85% for the half
year.
FiscalPolicy
Acursorylookatthe2011appropriations
budgetpassedby theNationalAssembly
shows that the governments spending
spreeis
not
about
to
end,
even
though
pressure from the Executive has led to
the subsequent moderation of the total
budgetbill to4.4billion from4.9bil
lion. Though elevated oil prices should
provideadditionalincometogovernment
coffers, we believe efforts should be
2
8/2/2019 Industry Insights-Issue 03
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madetoboostcapitalexpenditureandimprovethebusinessenvironment.
Exchangerates
Thedomesticcurrencycontinuedtocomeunderpressureinthesecondquarterofthe
year.BasedonprovisionaldatafromtheCBN,theaverageWDASexchangerateinQ2
2011 rangedbetween151.02/US$ and153.09/US$ compared to147.8/US$ and
148/US$rangeinthesameperiodin2010. Nigeriasgrossexternalreservesstoodat
$31.9billiondollarsasat30June2011,remainingrelativelyflatfromitspositionatthe
beginningoftheyear.Weestimatethatthecurrentlevelofreservesremainsadequate
tofinancesixmonthsofimportsandpayments,whichisbetterthantheinternationally
recommendedminimumbenchmarkofthreemonths. TheNairaisexpectedtoremain
underpressureuntilstructuralissuesareaddressed. Thedependenceonimportation,
particularlyfoodandrefinedpetroleumproducts,coupledwithrisingworldcommodi
ties
prices
will
boost
demand
for
foreign
exchange.
However,
provided
oil
prices
re
mainhigh,theapexbankshouldbeabletomaintainitsdefenceoftheNaira.
BankingSector
Theongoing reforms in thebankingsectorcontinue tocreateuncertaintiesas tothe
eventualownershipof the bailedoutbanks.Asexpected, legalbattleshaveensued
withsomeshareholdersofdistressedbankschallengingtheactionsoftheCBNgover
nor. ThoughmuchoftheselegaldisputeshavebeenresolvedinfavouroftheCBN,we
believe the path to successful recapitalization before the 30 September deadline is
fraughtwithmorechallenges. Of theeightbanks rescued,thereare indicationsthat
threedeals
are
set
to
go
ahead:
Intercontinental,
Union
Bank
and
FinBank
have
all
signedaTransaction ImplementationAgreement(TIA)withAccessBank,AfricanCapi
tal Alliance Consortium and First City Monument Bank respectively, thus paving the
wayforareviewbyshareholders,regulatorsandthejudiciarybeforeagreementsare
finalized. Afribanks agreement with Vine Capital has been voided by the apexbank
followingconcernsabout theexperienceand technicalknowhowofVineCapitals
management.Theotherbanks(Oceanicbank,SpringBank,BankPHB)areyetto find
suitors. Some of these other banks are reported to be looking toward international
capitalmarkets to raisenecessary fundsbutweare scepticalon the successof such
strategyinlightofthecurrentglobaleconomicclimate.
Withrising
interest
rates
and
the
heightened
risk
consciousness
remaining
among
banks,weexpect lendingtoremainsubdued intheshortterm.AlthoughAMCONhas
helpedimprovebankingsectorliquidity,withphaseIIpurchaseoftoxicassets,theim
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pactoncredittotheprivatesector lookssettobeminimal. Nonetheless,weexpect
thebankingsectortoremainstableintheshorttermascredittotopandmidtierre
mainsafocusforbanks.
PoliticalDevelopmentsandOutlook
Followingmonthsofpoliticalcampaign,PresidentGoodluckJonathanemergedvictori
ous for the rulingPeoplesDemocraticParty (PDP) in theAprilPresidentialelections.
TheApril2011electionsweredeemedby internationalobserverstobegenerallyfree
andfair. Wemaintaintheviewthatthisshouldhelpimproveforeigndirectinvestment
(FDI)inflowstoNigeriainthemediumterm,astheglobaleconomyrecovers. However,
we firmly believe that this is contingent on the governments ability to improve the
businessenvironment.
A major consideration in the achievement of the economys short term goals is the
stabilityof thepolity.Thecabinet isbeginning to takeshape. TheMinisterofPetro
leumisretainingherpost,whilethegovernmenthasrecalledMrs.NgoziOkonjoIweala
backasMinisterofFinance.Mrs.OkonjoIwealahadbeenresponsiblefornegotiating
thecancellationofNigerias foreigndebtsunderPresidentObasonjosadministration.
Herpredecessor,Mr.SegunAgangahasbeenmovedtotheMinistryofTradeand In
vestment anewlycreatedministryresponsiblefortradeandemploymentinthecoun
try. InhisoneyearasFinanceMinister,Mr.Agangawasresponsible forthedevelop
mentoftheSovereignWealthFundforNigeria,and itwas largelyexpectedhewould
betaskedwithmanagingthefund. WebelieveOkonjoIwealasinclusioninthecabinet
and the creation of the Trade and Investment ministry lends credibility to President
Jonathansreform
ambitions.
Onthebasisoftheforegoing,weattachastableoutlooktotheNigeriaeconomy.
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Insurance Long life and prosperityTomostpeople inNigeria, life insurance is synonymouswithdeath insurance. Why
shouldIpaysomeonefordying?isatypicalattitudemostpeoplehave,evenamongst
theeducated
in
society.
This
has
been
agrowing
concern
among
life
insurers
in
the
country,whocontinuallycollect lowerthanexpectedpremiumsasaresultofthepre
vailingattitudes. However,thefightbackseemstobeon,asmanylifeinsurancecompa
niesare lookingatwaystogrowincomebefore itbecomesalifeordeathsituationfor
thissegmentof the insurancesubsector.Wenowseemany life insurancecompanies
are expanding their product offerings to include health insurance, investmentlinked
products, retirement benefits & annuities and educationlinked policies. With these
products,policyholderscanenjoybenefitssuchassubsidisedmedicaltreatments,have
their mortgages paid during times of financial difficulties and receive regular income
uponretirement.
TheNigerian
insurance
industry
(the
Industry)
is
estimated
to
have
generated
gross
premium income(GPI)of200billion in2010.Toputthis inperspective, itrepresents
lessthan1%(0.75%)ofthecountrysgrossdomesticproduct. Ofthistotalpremium,life
insuranceaccounted forapproximately20%of the Industrys totalGPI,whilenonlife
accountedfor80%. GPIinthe life insurancesegmenthasgrownatacompoundedan
nualgrowthrate(CAGR)of44%(20062009). However,thisgrowthhasbeenaidedby
thePensionReformAct,whichmadeitmandatoryforemployerstoprovidealifeinsur
ancepolicyforemployees.Thisappliestoallcurrentemployeesinthepublicserviceand
privateorganizationswithmorethanfiveemployees.
ThePensionReformAct2004hasbeenthemostsignificantlegislationtopositivelyim
pactthe
life
insurance
segment
in
recent
times.
Although
the
introduction
of
the
law
transferredpremiumsmanagedbyinsurancecompaniestopensionfundadministrators
(PFAs), italsocreatedacompulsory life insurance(group life insurance) foremployees
working inestablishmentsof fivepeopleormore. Consequently,group life insurance
becamethebedrockofthelifeinsurancesegment,accountingforasignificantportionof
premiumgenerated in this segment. However,premiumgenerated is constrainedby
poorcompliancetoregulation. Webelievetherearemanyorganizations,includinggov
ernmentdepartments,thatareyettocomplywiththelegislation;andthusdenyingthe
Industrymuchneededpremiums. Webelievecompliancecouldbe improved if there
was a stricter enforcement of the law. In general, insurance premiums collected are
curtailedbyweakenforcement. However,webelievetheNational InsuranceCommis
sion(NAICOM)
is
taking
great
strides
to
address
the
issue.
The
World
Bank
in
July
2011
announceda220million (US$1.5million) fund forNAICOMtostrengthen itsregula
toryframework,whichwebelievewillgosomewayintougheningenforcementofexist
inglegislation.
Webelievethatthecountrysvastpopulationandthenonexistenceofanyformofso
cialsecuritysystemcreategrowthopportunitiesfortheindividuallifeinsurancebusiness
inthecountry. However,thisisdependentontheinsurersabilitytocommunicatethe
benefitstoalargelyuninformedpublic. Lifeinsurersseemtoberespondingtothischal
lengethroughincreasinguseofbancassurance,microfinancebanksandretailkiosksto
5
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reachoutto individuals. Thedriveseemstobetoshiftfocusawayfromcorporatecli
entsand focuson individuals,whomaynotnecessarilyworkwithinthe formalsector.
For thistobesuccessful,weexpect Industryoperatorstoexpandon flexiblepremium
paymentstoencourageaffordability,particularlyforlowincomeearnersandinperiods
ofeconomicslowdown.
AIICOInsurancePlchasconsistentlybeentheleadingprovideroflifeinsuranceinNige
ria.Theinsurersmarketshareisestimatedtohavegrownto16%in2009(2008:12%).
Althoughmostinsurers2010resultsareyettobepublished,indicationsarethatcom
petitionisgrowinginthisareaasmoreoperatorsmovetothehealthinsurancebusiness.
Inour recentlypublished2011 Insurancereport,we reviewed theperformanceof the
insuranceindustrylifeandnonlife incomparisontoothersinemergingmarkets. We
alsoexaminedthecompetitivenessofthevariousinsuranceclassesandrankedindustry
operatorsbased
on
certain
key
market
indicators.
We
also
highlighted
the
key
success
factors for Industryoperators,examined thechallengesexperiencedbyoperatorsand
assignedanindustryriskrating.
Formoreinformationon2011Insurancereport,clickhere.
6
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TheNigerianPrinting&Publishingindustry
(the Industry) faces several challengesranging
from
infrastructural
inadequacies
to lack of local inputs. However, the ab
sence of protection for intellectual prop
ertyremainsthegreatestchallengetothe
revenue generating capacity of Industry
operators. Poorenforcementofcopyright
lawsandpoorbordercontrolallowspiracy
to thriveunbridled inNigeria.Considering
thateducationalbooksarethemainstayof
many publishing houses, the Industry op
erators engaged in this market are the
mostsusceptibletothethreatofpiracy.
Indecades
past,
Industry
operators
had
to
deal with local pirates who simply pro
ducedcounterfeit substandardversionsof
their books within Nigeria. However in
recent times, piracy has taken on a new
dimensionasNigerianbooksarenow ille
gally produced overseas for Nigerian con
sumption. The two sets of pirates, local
and international, operate in the same
way. They simply purchase a publishers
original and take it to their respective
printinghouses tomake illegalduplicates.
Thepirates
that
operate
on
an
interna
tional scale however, have to import the
books into Nigeria prior to being able to
distribute them. The key differentiating
factors between local and internationally
pirated copiesare the typeofpaperused
andprintjobquality.
Several factors contribute to local and
internationalpiracy,includinglaxcopyright
law enforcement and porous borders. Pi
racyhassinceevolvedintoorganizedcrime
with numerous players located in various
regions, and sometimes aided by unscru
pulouslaw
enforcement
agents.
Conven
tions such as the United Nations Educa
tionalScientificandCulturalOrganizations
(UNESCO)UniversalCopyrightConvention,
whichprohibitstheillegalcopyingofintel
lectualpropertyisyettobeadoptedbyall
countries. Countries such as Taiwan and
China have loose copyright laws and are
yet to formallyjoin the crusade to elimi
natepiracy,therebycontributingtoit.
7
Book Pirates Piracy
CausesofBookPiracy
8/2/2019 Industry Insights-Issue 03
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TheIndustryinNigeriahasbeenbucklingundertheweightoforganizedbookcounterfeiters.
Piracyaccountsforanestimated25percentloss(6billion)ofrevenuetoprintingandpub
lishingfirmsannually.Industrysourcesestimatethatoneoutofeveryfourbookssoldonthe
Nigerianmarket
is
pirated.
Unlike
publishers,
pirates
are
not
saddled
with
the
cost
of
re
sourcesandhumancapitalinvolvedinthedevelopmentofabookfrominceptiontoprint.In
addition,piratesareoftennotburdenedwithtaxationandimportdutiesasmajorityofthe
booksareeithersmuggled inorbrought inundertheUnitedNationsEducationalScientific
andCulturalOrganizations (UNESCO)agreementonthe ImportationofEducational,Scien
tificandCulturalMaterials.Theagreementprohibits theapplicationofcustomsdutieson
importededucationalmaterials.Inlinewiththis,officialsoftenspendlesstimescrutinizing
book importsand failing to identifyviolationsofcopyright laws,unintentionallyaidingthe
importationofinternationallypiratedbooks.
Thecostofproductionforpiratesisrelativelylowincomparisontothatofpublishers,mak
ingit
avery
profitable
business
to
engage
in.
Books
pirated
overseas
are
often
sold
for
ap
proximatelythesamepriceasthepublishersoriginal,whilelocallypiratedonesaresoldat
about50%ofthecostoforiginalcopies.Itisestimatedthatbookpiratesmakeupwardsof
50% inprofitdependingon thequalityof thepiratedbooks,while the industryoperators
haverecordedanaverageoperatingprofitmarginof18%overthelastthreeyears.
Thecruxoftheproblemwithbookspiratedoverseasisthatitbecomesmoredifficulttocurb
ifitisnotdetectedatthepointwhenitisbroughtintothecountry.Thisisbecausethecon
sumersabilitytodiscernbetweenanoriginalandillegalcopyofsuchbookisalmostimpos
sible.Ontheotherhandlocallyproducedillegalcopiesareofteneasiertospotandthedis
cerningconsumer isableto identifythem.Oncetheproduct isallowedentry intothelocal
market,it
is
often
undetectable
as
the
Nigerian
Publishers
Association
(NPA),
Nigerian
Copy
rightCommission(NCC)andtheNigerianPoliceForce(NPF)areunabletocountertheprob
lemduetocapacityconstraints.DespiteadditionalfinancialhelpfromtheNPA,therearent
adequateresourcestoeffectivelycombattheproblemofpiratedbooksontheopenmarket.
It comesasno surprise that someof thesepirated copiesarehard todetectas theyare
clonedinthelikenessoftheoriginal,withonlyindustryplayersbeingabletodetectpirated
books.Operatorshavelimitedgeographicreachandarethereforeoftenunabletodiscover
theextentofpiracyinthemarket;beitlocallyproducedorinternationallyproducedillegal
copies.
Inordertocurtailtherapidgrowthof illicitbookpiracywhichproduceshighqualitymate
rial,theNigerianCustomsServices (NCS),theNCC,NPAandtheNPFmustworkcollabora
tivelytostop thebooks fromcoming intothecountrycompletely.Additionally it is impor
tantforawaragainstpiracytobedeclaredfullythroughtheraidsofsuspectedmarketsto
detect locally pirated copies and internationally produced ones after they have passed
throughtheborders.Inaddition,theIndustryoperatorsmustbewillingtoeducatethegen
eralpubliconhow todistinguishbetweenoriginaland illegalcopiesof theirbooks. If left
unchecked,theestimatedannualcostofbookpiratesof6billion isjustthebeginningof
thingstocome,aspiracymayspiraloutofcontrolandbecomeanevenbiggerthreattothe
Industry.
8
Piracysingle
handedlyac
counts
for
an
esti
mated25percent
loss(6billion)
ofrevenuefor
publishingfirms
annually.
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...thelargesthall
inLagosstate,
hasaseatingca
pacityofover
5,000persons
withan
esti
mateddailyhire
priceof6mil
lion.
Inthelastthreeyears,theNigerianhotelindus
tryhaswitnessedconsiderablegrowth,asnew
hoteloperatorscontinue tospringup indiffer
entparts
of
the
country,
particularly
in
Lagos,
the commercial capital of Nigeria. Lagos has
seen the influx of both local and international
brandssuchastheRadissonBlu,Park Inn,Pro
tea, Sheraton, Travel House Hotels, the Inter
continentalHotelsGroupandIbisHotels.
Theprimaryimportanceofthehotel industryis
reflected in the temporary accommodation
offered tobusinessand leisure travellers.Nev
ertheless,ancillary services suchas restaurants
and the provision of conferencing facilities
(event halls and meeting rooms) continue to
gain significant ground on the hotel landscape
and are partly responsible for the stable per
formanceof theNigerianhotel industry. Indus
tryplayersare thus reducing focuson revenue
per available room (RevPar) to generating in
come from the use of these facilities
(particularly conferencing facilities), thus diver
sifying their income base. Demand for confer
encingfacilitiesislargelyfromcorporateorgani
zations.
A typical hotel in the 3star category in Lagos,
has over 3 conference rooms; which can be
arranged inaselectionofmultifunctionalstyles
and various sizes to accommodate a range of
functions such as wedding receptions, annual
general meetings and board meetings among
others.Forinstance,oneoftheoldestplayersin
theNigerianhotel industry, FederalPalaceHo
tel, has 9 conference facilities. The smallest
meeting
room
has
a
capacity
of
10
persons
and
ispricedat114,000perday,whilethelargest
meeting room, seating about 500 persons is
pegged at750, 000 per day. A comparative
analysisofdailyrental income fromroomsand
conferencing shows that room revenues still
accounts for thebulkofaveragedaily revenue
(ADR),whileconferencingaccountsforapproxi
mately 10% of ADR. Another key player cur
rentlyundergoingexpansion,EkoHotel&Suites
hasover10conferencingfacilities,withseating
capacityrangingbetween505,400persons.
A trend in the Nigerian hotel industry is the
provision
of
large
sized
event
halls
and
medium
to small sized meeting rooms, which cater for
different purposes. The incorporation of this
trend intohoteliersbusinessmodelwould see
the players achieve stronger market relevance
and record increased revenue.Demand forho
tel conference facilities have intensified over
the last five years and some operators are ex
pandingtheirexistingstructurestoincludeaddi
tionaleventhallsandmeetingroomsinorderto
catertothegrowingdemand.Forexample,Eko
hotelrecently
completed
the
construction
of
a
newexpocentre,which isperceived tobe the
largesthallinLagosstate,hasaseatingcapacity
of over 5,000 persons with an estimated daily
rentalfeeof6million($39,735).Furthermore,
new investors in the Nigerian hotel industry
haveidentifiedtheprovisionofmultisizedcon
ference facilities as imperative to creating a
niche inthemarket.FourPointsbySheraton,a
new entrant into the Industry, has 8 meeting
rooms, with sitting capacities ranging between
of15
250
persons.
Consequently, Industry sources estimate that
income from ancillary services contributes ap
proximately40% of ahotelsprofit,while con
ferencing accounts for approximately 60% of
thisamount. Although the Industry faces com
petition from stand alone event centres and
halls,hotelsoffersomecomplementaryandfee
based services such as event catering, accom
modation for attendees, administrative assis
tance
(business
centre
facilities),
audiovisual
equipment, adequate parking and security, in
ordertostayaheadofcompetitioninthisarea.
Goingforward,weareoftheviewthat income
from this source would be stable in the near
term. Therefore, industry players with well
structured and designed facilities can benefit
immenselyfromthisopportunity.
9
Hotels The New Venue
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Avenues to transfer money are limited,
particularlyforthepoorestpeopleinrural
Nigeriawherethebankingsectorisunder
represented and transactions are largely
cashbased.LikeeconomiessuchasKenya
andGhana,MobileMoneyTransfer(MMT)
is now being considered as a means to
givepoorer residentsaccesstoaffordable
money transfer services via their tele
phones. Sincemobile phonesnow signifi
cantly outnumber Automated Teller Ma
chinesandbankbranches in the country,
telecoms operators (Telcos) are consid
ered
to
have
a
reach
far
in
excess
of
banks
andmoneytransferoperators.
Agusto&Co.estimates thatonlyabout30
millionNigerianshavebankaccounts.With
the number of active mobile lines in the
countrynowapproaching90million,MMT
hasbeen identifiedbytheCBNasapracti
cal strategy for financial inclusion of the
unbanked in Nigeria. Toward introducing
MMT, the apex bank granted provisional
licenses
to
16
mobile
money
transfer
opera
torsduring the lastquarterof2010 to roll
out mobile transfer services across the
country.TheoperatorsselectedbytheCBN
to implement the mobile money directive
areStanbicIBTCBankPlc,EcobankPlc,For
tis MFB, UBA/Afripay, GTBank/MTN, First
Bank, Pagatech, Paycom, MKudi, Chams,
Eartholeum, ETranzact, Parkway, Monitiz,
FETandCorporeti.Theselectedfirmswere
initiallygivenuptill31March2011tobuild
necessary infrastructure and conclude a
test runof the scheme. Subsequently, this
deadline was extended by two months to
allowadequatepreparationsforthelaunch
of the service. However, as at the end of
the revised 31 May deadline date, only a
few of the operators had made notable
efforts to build the infrastructure required
for toeffectively rollout theMMTservice.
Based on our findings, the delay in imple
mentationispartlylinkedtotheinabilityof
someoftheprospectiveinvestorstosecure
the
financial
investment
required
to
jump
start operations. We understand that the
CBN is currently conducting due diligence
on the16 selected firms toascertain their
readinessforMMToperationsAlthoughthe
apexbankremainscommittedtothe intro
duction of MMT in Nigeria, we do not ex
pect the scheme to commence before the
last quarter of 2011 in view of the chal
lenges being faced by some of the opera
tors.
Beyond funding considerations, a further
headwindformostoperatorshasbeenthe
needtosecureoperatinglicensesfromthe
Nigerian Communications Commission
(NCC),aswellasreachcommercialagree
mentswithmobilenetworkoperators.We
believe thesuccessofMMT isdependent
onaccessto,aswellasthequalityofnet
work infrastructure available provided by
10
Telecoms Mobile money
...asattheend
oftherevised31
Maydeadline
date,onlyafew
oftheoperators
hadmadenota
bleeffortsto
buildtheinfra
structurere
quired...
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telecoms sector.According to some financial sector stakeholders,up to 99.99%
uptimeonmobilenetworksisrequiredforMMTtobeeffective.However,guaran
teeingthislevelofserviceremainsanuphilltaskfortheNigeriantelecomsindus
tryin
its
current
state
given
that
the
telecoms
market
is
still
plagued
by
perennial
issuesofnetworkcongestionandpoorservicequality.Onthebasisoftheforego
ing,weexpecttheintroductionofMMTtobefraughtwithtechnicalchallengesin
theearlierstages.Nevertheless,ensuringsufficientnetworkuptimeisimperative
inordertoboostpublicconfidenceintheintegrityofthemobilepaymentssystem
andenhanceusagebycustomers.Itisthereforeourviewthattelecomsoperators
shouldbeencouragedtoupgradetheirnetworkinfrastructureinordertoaccom
modate the expected growth information flows, if the scheme is to succeed in
Nigeria
Lookingbeyondcurrentchallengesofimplementation,Agusto&Co.believesthat
MMTpresents
win
win
opportunities
for
stakeholders
in
the
mobile
money
mar
ket.Ontheonehand,Telcoswillearnfeesfortheuseoftheirnetworkresources
creatinganavenuetogrowrevenues,whileMMToperatorsandagentswillearn
commissionsfortheirtransferservices.MMTcanalsobeintegratedbybanksasa
valueaddtotraditionalaccountholders,whichwillbeusefulinsettlingutilitybills
andmakingpurchases.Therefore,onabroaderscale,MMTcanservenotonlythe
pooratthebaseofthecommercialpyramid,butcouldalsopotentiallypermeate
theentirespectrumoftheNigerianpopulace.
11
8/2/2019 Industry Insights-Issue 03
12/12
12
Agusto & Co. Limited
Agusto&Co. istheforemostcredit
ratingagency
in
Nigeria,
specializing
in financial institutions, corporate
and bond ratings. We are also a
research organization providing
businessinformationforourvarious
clients.
As business information service
providers, we publish industry
reports containing unbiased expert
analysisofvarious industries in the
NigerianEconomy.Wegatherinfor
mation about the market size and
potential of an industry, its key
players, competitors, products and
financial conditionamongstothers.
Inprovidingabroadoverviewofthe
industry and its key players, our
analysts interpret data collected
and assign each industry a risk
rating, taking intocognisanceNige
riasriskprofile.
Thecopyright
of
this
document
is
reserved
by
Agusto
&
Co.
Limited.
No
matter
contained
herein
may
be
reproduced,duplicatedorcopiedbyanymeanswhatsoeverwithoutthepriorwrittenconsentofAgusto
&Co.Limited. Actionwillbetakenagainstcompaniesorindividualswhoignorethiswarning.Theinfor
mationcontained inthisdocumenthasbeenobtainedfrom sourceswhichweconsidertobereliable
butdonotguaranteeassuch. Theopinionsexpressedinthisdocumentdonotrepresentinvestmentor
otheradviceandshouldthereforenotbeconstruedassuch.
Thecirculationofthisdocumentisrestrictedtowhomithasbeenaddressed.Anyunauthorizeddisclo
sureoruseoftheinformationcontainedhereinisprohibited.
Disclaimer
Agusto & Co. Limited
UBAHouse(5thFloor),57Marina
Lagos
P.O. Box56136,Ikoyi
Tel:(234)126435715
Fax:(234)12643576
E-mail:info@agusto.com
Website:www.agusto.com
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