B2B Payments Suffer as Nigeria Promotes Cashless Economy

The move to ban cash withdrawals from government accounts in Nigeria in an attempt to digitize its economy has been a “massive hindrance” to the growth of business-to-business (B2B) payments in the country, says Yele Oyekola, CEO and co-founder at Lagos-based B2B FinTech firm Duplo.

“[The government and central bank] didn’t take their time — we just went from zero to a hundred. They didn’t give citizens enough time to adjust to the sudden change, which has now had a negative effect on payments entirely,” Oyekola told PYMNTS in an interview.

The hard line on cash transactions, which includes strict limits on cash withdrawals at ATMs, came on the heels of a Central Bank of Nigeria (CBN) currency redesign policy launched earlier this year to control inflation and preventing people from hoarding cash — including over 23 trillion naira (about $50 million) in circulation that was not captured by the banks, per Oyekola — for illicit purposes.

Related: Nigeria’s Cash Crackdown Stands in Contrast to EU’s Pro-Cash Agenda

But as he noted, industries like the fast-moving consumer goods (FMCG), logistics and manufacturing sectors where cash is still king have seen a massive effect on business transactions, with some firms unable to pay their cash-loving suppliers, and in turn, procure goods to sell.

Moreover, the lack of a strong banking system in Nigeria has also meant that the financial services infrastructure wasn’t equipped for this uptake in digital payments, he added, resulting in fewer online transactions. “We’ve seen businesses die over the last few months because they can’t transact, they can’t get customers and they can’t continue to grow their businesses.”

Finally, although agency banking has gained popularity in the West African nation and played a significant role in closing the financial inclusion gap, especially in remote areas where banking activities are nonexistent, Oyekola said that the scarcity of cash has led to an increase in agent banking fees, further crippling the B2B market and economy at large.

These challenges are why Duplo — which launched in January 2022 — exists today, he noted, pointing to the more than $100 million worth of payments they’ve processed so far as they help streamline and digitize payment flows for merchants, aggregators and distributors operating in the cash-heavy emerging market.

And although it usually takes businesses a while to embrace digital technologies and innovations, he said the CBN ruling can fast-track digital payment adoption in the B2B space, similar to how the pandemic forced businesses to adopt new digital habits much quicker than they would normally have.

The firm’s buy now, pay later (BNPL) solution, which Oyekola discussed in a previous interview, has also seen a significant uptake, helping to bridge the working capital gap for small and medium-sized businesses (SMBs) in the country.

In fact, he explained that the product “has been the most effective way to drive an increase in digital payment, because many businesses in Nigeria operate on credit,” signaling a promising growth outlook in that space.

And as it strives to become the premier B2B company in Nigeria moving forward, he said Duplo will need to boost awareness and education to win over businesses and get them to be more comfortable with digital payments technology. “Trust is a big thing for B2B payments to ensure that systems are scalable, stable, and that payments go through and don’t fail.”

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