There are about 25 ATM terminals in Badore, Langbasa and Addo, three main roads less than 5km located in Ajah community in Eti Osa Local Government Area of Lagos State, which is more than ATMs automatic that over 20 local governments in Kano State to have. The three roads also have more banking presence (nine bank branches) than the entire stretch from Abraham Adesanya, Ibeju Lekki, Lekki Free Trade Zone, to Epe, a distance covering 135.9 km .
Five days a week a week, most of the 25 ATMs are empty because the machines are out of service, out of network or out of cash. This is the same experience faced by many customers of banks with around 22,600 ATMs, Inlaks data shows, spread across the country.
Nigeria needs about 60,000 ATMs to meet its growing population of 216 million and a banking population of 106 million adults, according to Tope Dare, executive director of Inlaks, the largest ATM operator. vending machines in the country, which controls more than 40% of the market. walk.
In 2010, Nigeria had about 7,100 ATMs and this number increased to over 11,000 in 2011 as the CBN mandated the removal of off-site deployment by banks. This meant that banks would no longer invest in ATMs outside their branches. The CBN outsourced the deployment to independent ATM deployers who were unable to execute the project due to cost. The ban was eventually lifted, allowing banks to invest more in ATMs. The number of vending machines then increased from 11,000 in 2011 to 16,000 around 2016 and 21,000 in 2019. It increased to 22,600 in 2021, a level where it will remain until December 2023, a sign of a reduction in investments in the market.
Seventy-six percent of the total ATMs in Nigeria are deployed by eight banks. Access Bank has over 4,000 ATMs, First Bank has around 3,300, UBA has 2,150, Zenith has 2,100, GTBank has 1,800, FCMB has 1,350, Polaris has 1,300 and Union in has 1,200. In total, 17,200 securities belong to these eight banks.
Therefore, there must be more ATMs in Nigeria to serve customers. needs of the banking populationand this has always been the case in Nigerian banking.
The estimated number of branches of the 24 commercial banks is around 4,500, which is not enough for an estimated banking population of 106 million according to EFInA. BVN accounts currently stand at 60.1 million and active bank account holders number around 135 million. The annual growth rate of ATMs in Nigeria is around 3-4%, but it has fallen below 1% over the past two years, Inlaks data shows.
The number of ATMs per capita in Nigeria (number of ATMs per 100,000 adults) has also fallen from 16.92 ATMs in 2018 to around 16.15 in 2021. The global standard should be 1,000 ATMs per 100,000 bankable adults. Therefore, Nigeria is expected to have about 60,000 ATMs when comparing the unique number of banking customers to 60.1 million. Taking into account the 22,600 active ATMs, there is a deficit of approximately 37,400 ATMs. As the number of bankable adults continues to increase and more cards are issued, the number of ATMs is expected to decrease over time, since banks are not deploying more ATMs.
Growth Factors for Vending Machines
In the past, some of the factors that have contributed to the growth of ATM deployment in the country include the profitability of banks. When banks are profitable, they undertake branch expansion and capital expenditure. Banks also deploy more ATMs when their customer base increases, as this means more cards will be issued and additional cash and ATMs will need to be provided to customers. Banks undertaking digitalization initiatives often need to deploy more ATMs. Financial inclusion initiatives also have a positive impact on ATM growth. Banks will also deploy ATMs in areas where power generation is improved, as the cost of electricity poses a major burden for ATM deployment.
Why investors are looking away from ATMs
Dare says the ATM industry in Nigeria is facing its toughest times due to high cost of maintenance, increasing adoption of other banking channels, foreign exchange crisis, soaring inflation, insecurity and uncertainty in the ATM policy environment, all of which are determining factors. investors far from the market.
In 2016, the dollar exchange rate was ₦250. It rose to ₦325 in 2017 and stabilized between ₦330 and ₦360 in 2019. Dare says purchases at a rate of ₦380 in 2020 and ₦455 before the departure of the Muhammadu Buhari administration have had a significant impact on the unit cost of vending machines. However, the situation went from bad to worse when the new government of Bola Ahmed Tinubu dramatically announced the unification of the exchange rate, which pushed the official rate to ₦750. The price of the dollar on the black market is currently above ₦1,500.
“A machine that we were selling at ‘x’ million naira this time last year, we are now selling it at 3.5x today. This affects the rental-purchase cost due to foreign exchange. FX also depends on tariffs and OPEX. The cost of maintaining ATMs has increased due to inflation, transportation cost and cost of spare parts as one has to import spare parts from abroad,” Dare said.
ATMs are also seeing less investment as most investors are paying more attention to other growing electronic channels, such as PoS terminals, mobile app transfers, USSD and other alternative channels that consumers use to make payments faster and more conveniently.
“The rapid adoption of digital payment methods is influencing consumer behavior, leading them to abandon traditional ATMs in favor of more convenient digital alternatives,” said Olaoluwa Awoojodu, CEO of Electronic Settlement Limited.
The unprofitability of vending machines is also an important factor for investors. Interchange fees, also known as surcharges, are one of the lowest in the world. Today, when a customer goes to an ATM, they are charged 35 naira after the third transaction. The fee is set by the CBN; banks cannot therefore modify it without the approval of the regulator. For investors, setting these fees makes no sense given that the unit cost of processing banknotes in Nigeria is one of the highest in the world. Today, it takes a minimum of 150 notes to process the equivalent of $100, said a bank CEO who wished to remain anonymous.
According to Dare, to revive the ATM industry, the government should consider offering tax relief. Currently, customs duties on vending machines exceed 25%, while those on solar products are 5%. Vending machine policymakers should also place less emphasis on cash availability in vending machines and promote upgrading machines to offer cardless payment innovations such as near-field communication ( NFC). NFC is a short-range wireless communications technology that allows devices to exchange data without a physical connection. Users can initiate a transaction by placing their NFC-enabled smartphone in front of the ATM’s contactless reader. This connection facilitates the secure transfer of data between the user’s mobile banking app and the ATM, eliminating the need for a physical card.
“You can also converge your mobile to the ATM where you can initiate a transaction on your phone, and you can go to the ATM to complete it. Vending machines are expected to go beyond the usual cash dispensing functions and offer more advanced and innovative solutions and contactless payment at minimal costs. ATMs will not die in any country as long as cash is king,” Dare said.
