Nigeria’s Emerging Digital Economy (2)

Our new series examines the many facets of Nigeria’s digital economy, the efforts of the Nigerian government to propel it and its relationship with governance and prosperity. Last week, we took on Nigeria’s digital infrastructure and the state of financial inclusion. Today, we’re onto digital inclusion, financial technology and technology in government. 

Last week, we concluded by noting how mobile phone usage offers the most realistic means of improving financial and digital inclusion… 

Mobile phones 

Indeed, mobile phone usage offers the most realistic means of improving financial and digital inclusion. While internet penetration is a little over 40%, Nigeria already has a mobile phone penetration rate of 87%. Meanwhile, the adult literacy rate is 62%. This reinforces the belief that persons only need a basic education to use phones. Do they need to be wealthy either? No. Recycled phones dominate the Nigerian market. Also, mobile phone brands like TECNO, Infinix and Itel that are made specifically for the low budgets of Nigerian users. 

For Nigeria to reap the dividends of mobile connectivity, 4G-enabled mobile phones must be made even more attainable for the entry-level market. One way policy makers can achieve this is by reducing the tax burdens on mobile phones and services. They must begin to perceive these as a necessity, instead of a luxury. Indeed, the use of mobile phones impacts significantly on the Nigerian economy. Besides affording small businesses the means to participate in e-commerce, it has become the fulcrum for another emerging sector – fintech. 


The Nigerian financial system has been quite receptive to the introduction of technology. Mobile banking solutions are driving the banking sector. Alat by Wema Bank and 737 by GTBank are some of the digital banking platforms that offer financial services 100% online. Platforms like Flutterwave and Paystack are enabling online payments for businesses. Piggybank helps Nigerians save, PayLater and QuickCheck allow users access quick loans.

Nigeria’s fintech thrives on the back of rapid technological advancement, foreign investment and a young population. Frost and Sullivan expects Nigeria’s fintech revenue to reach US$543.3 million in 2022 from US$153.1 million in 2017. According to Weetracker, Nigerian startups attracted $663.24 million in venture capital last year, by far the largest share in Africa. Interswitch ($200 million) and Opay ($170 million), two payment platforms, accounted for almost half that number. And we all know about Paystack’s recent deal…

However, the greatest challenge the fintech sector faces is regulation. Regulators must decide on how to regulate innovation without killing it. Within the past year, federal and state governments have enacted regulations and imposed fees with reckless abandon. It is perhaps wiser to allow innovation to grow without hindrance. This way, there will be plenty to tax later. 

Governance and Sustainability

It is useful to add that digitization is not only enabled by governance, it can also contribute to it. The adoption of digital technologies can improve public service delivery and public accountability. Kenya is Africa’s leader in terms of digitization. Its digital economy contributed 87% to GDP in the third quarter of 2019 (while Nigeria’s contributed 14%). Attention should also be drawn to how digitisation has improved public revenue collection and saved $290 million in efficiency gains over four years. Digitisation will reduce costs of service delivery while also improving their quality and coverage. For instance, quality of service can be improved by creating feedback flows from citizens to public service providers. This feedback can be used to improve government agencies, ministries and other institutions for public service.  

Digitisation projects are notoriously likely to run over budget, experience delays and eventually fail to deliver results. The foundation must therefore be laid, one that entails ready infrastructure, capacity building within government institutions and digital literacy amongst citizens. Ultimately, political will. 

To leverage digitization and automation for transparency and accountability, political will is key. It will reap evident rewards. In June 2020, the Head of the Civil Service of the Federation explained how a platform, IPPIS (Integrated Payroll and Personnel Information System) had determined the actual number of serving public servants. By cleaning Human Resource data, it had saved the government at least 60 billion naira. Experts say that if Nigeria digitally transforms and integrates the information and communications systems of its public sector, it can save $5.6 billion annually. 

Finally, in adopting digitization, the government must also engage and orient stakeholders. The current ASUU (Academic Staff Union of Universities) strike was ignited by the insistence of the federal government to pay university lecturers through IPPIS. Perhaps a little more chill next time?