Nigeria’s Agent Banking Association Proceeds with Price Hike Amidst Fintechs’ Contemplation of Legal Action

Despite facing resistance from the Central Bank of Nigeria, fintech companies, and customers, Point-of-Sale (PoS) operators in Nigeria are set to implement a price hike this week. The move has raised questions about the sustainability of their business model after the increase.

In Nigeria, where informal trade plays a significant role in the economy, cash remains a primary means of transaction. However, the country’s limited number of ATMs fails to meet the demand for cash access. To bridge this gap, over 1.5 million PoS agents have emerged, offering customers convenient access to cash withdrawal services, especially in areas with limited banking infrastructure.

Last month, the Association of Mobile Money and Bank Agents in Nigeria (AMMBAN) announced its decision to increase cash withdrawal charges. This impending increase would see charges double for withdrawals below ₦5,000 and rise to ₦800 for withdrawals between ₦18,000 and ₦20,000. Such charges exceed the Central Bank of Nigeria’s official recommended charge for PoS transactions (1%).

This move has elicited criticism from various quarters, including prominent fintech players like Moniepoint, OPay, and PalmPay. They argue that the price hike contradicts the essence of PoS operators, which have been promoting ease of withdrawals and low charges. By leveraging their wide customer base, these fintech companies have been able to offer competitive transaction fees to attract more users and agents. However, the proposed price increase may challenge this approach.

The Federal Competition and Consumer Protection Commission (FCCPC) intervened by prohibiting PoS operators from increasing charges and threatening sanctions. Such sanctions could negatively impact Nigeria’s financial inclusion goals, as the agency banking model has proven successful in reaching the unbanked population.

While some customers like Martin in Lagos may opt to use ATMs to avoid the extra charges, those in remote areas, like Moji in Akure, have limited options due to the scarcity of bank branches. For them, PoS agents remain a crucial service.

This is not the first instance of PoS agents increasing their prices. In the first quarter of 2023, during a cash scarcity, some PoS operators raised their charges due to a shortage of Naira, resulting in unconventional methods to obtain cash, including buying it from fuel stations.

Interestingly, not all PoS agents support the new rates. Some consider the charges a secondary source of income and are reluctant to increase them. The AMMBAN’s enforcement of the new prices may face challenges, as operators like Mrs. Adetunji, Hafeez, and Mariam* refuse to raise their charges, while others might comply. This could lead customers to seek out cheaper alternatives.

Despite initial pushback from customers, the agency banking model is expected to endure. Nigerians have numerous PoS agents available, and the supply of such services surpasses the demand. The outcome of this price increase will ultimately depend on how PoS operators navigate this complex scenario.