Portrait image of Tayo Oviosu

“It took us 99 months to hit our first two trillion milestone, 22 months for the second two trillion, and just eight months for the third.”

Tayo Oviosu, founder of payments provider Paga, on the further development of digital financial services in Nigeria, the challenges and opportunities in Ethiopia, and the impact of the global economic slowdown on funding opportunities for African fintech companies. John Everington asks the questions.

Payments and financial services provider Paga was founded in Nigeria in 2009 by Tayo Oviosu, a former vice-president of west African private equity fund Travant Capital Partners. Having built a customer base of more than 20 million in Nigeria, the company has been awarded a licence to operate in Ethiopia and is targeting further expansion elsewhere in Africa.

Q: How would you characterise the status of digital financial services in Nigeria as of early 2023?

A: Digital finance is still very much in its infancy in Nigeria, given that smartphone penetration is still quite low. To cater to this, Paga uses a hybrid cash in, cash out approach that lets customers deal in physical currency via our 140,000-strong agent network. About 17 million of our 21 million-strong customer base use our services this way; our remaining customers transact via digital wallets on both smartphones and via USSD on feature phones. 

Digital transaction growth has been accelerating since the start of the Covid-19 pandemic. 2022 was the third year in a row where we experienced triple digit growth, with active users of our consumer direct product growing by 230%. In September 2022, we passed N6tn ($13bn) of total transactions processed since our inception in 2009. It took us 99 months to hit our first two trillion milestone, 22 months for the second two trillion, and just eight months for the third. We know that banks are experiencing similar growth volumes.

At the same time, we still very much see this as day one for Nigeria. This is a large country and there’s still plenty of room for further growth. 

Q: What will drive the next wave of digital growth in Nigeria? Will it resemble other African states such as Kenya? 

A: I think, going forward, that Nigeria’s digital trajectory will be a lot closer to India’s than Kenya’s or that of other African countries. India shares key characteristics with Nigeria, including a large population with a similar urban-rural split and federal government structure, with key similarities in commercial business structures.

Nigeria’s digital trajectory will be a lot closer to India’s than Kenya’s or that of other African countries

We were part of a delegation led by the Central Bank of Nigeria (CBN) that recently visited India to learn about their digital and financial inclusion strategies and how they can be replicated in Nigeria. 

One of the key things the CBN can do is to work closely with the federal government to develop a social cash transfer scheme similar to India’s Direct Benefit Transfer programme, one that is only available via digital wallets. Implemented properly, this would significantly boost financial inclusion in the country. 

Q: What are Paga’s main priorities for 2023? Are you looking to raise further funding? 

A: We’re going to continue to scale up our consumer business in Nigeria in the most efficient way that we can. We’ve got our microfinance banking licence from the CBN so this year we will begin offering loans on our platform.

We’ll also be launching a physical Visa card ⁠— available in both Naira and US dollars ⁠— to complement our existing virtual card product, and are going to be launching some new products in the remittance space as well. 

Beyond Nigeria, we’ll be launching services in Ethiopia in partnership with Bank Abyssinia, and hope to make announcements about one or two other new markets as well. 

On the funding front, we had a strong year in 2022 and are therefore looking to go back to the market. While it’s a bit of an uncertain outlook globally, we’ve had some inbound interest from African funds, which makes us think this is a good time to back to raise further funding. 

Q: What are the attractions of Ethiopia? 

A: Paga’s overall vision is to make it simple for a billion people to access and use digital money services. Ethiopia has a population of over 100 million people that remain underserved when it comes to banking and payments. The population is very dispersed around the country, which has made delivery of last-mile services for large swathes of the country very challenging. With the liberalisation of both telecoms and banking sectors underway, there’s an opportunity for digital service providers to come in and leapfrog traditional physical players. 

We’ve been clear to our investors that Ethiopia is a longer-term play in terms of significant revenue generation, but that it’s still an important market in which to be present. We’ve been on the ground for several years in Ethiopia already, with much of our software development driven by our team in Addis Ababa, so we’ve already developed a good understanding of the local market. 

Q: African fintechs ⁠— particularly those in Nigeria ⁠— have attracted significant funding in the past years at very high valuations. Can such a trend continue as the global economy slows? 

A: Over the past two years there was a lot of funding activity in Africa by cross-over hedge funds investing significant capital into local startups. Almost all of those big names have pulled back. Nevertheless we’re starting to see venture capital funds created with a specific focus on Africa. 

A lot of the challenges the West is facing don’t impact African economies as much, so it’s a good time to invest in the continent. Nevertheless, there’s going to be a more disciplined focus on valuations and well-run companies, with fewer of the flashy numbers we’ve seen in the past.

 

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