Nigeria, S/A lead as Africa’s BNPL market to explode to $85.4bn by 2028

BY MADUABUCHI EFEGADI

Nigeria and South Africa, the continent’s two largest economies, with a combined gross domestic product (GDP) value of some $805.38 billion (nearly $1 trillion) are in frontline positions to lead a growth projection as Africa and the Middle East (MEA) region prepare to explode in the growing financial space known as Buy Now, Pay Later (BNPL) loan market, touching $85.4 billion by 2028, according to a BNPL index report just released by LAFFERTY Group, the London-based global financial industry research and advisory services firm in retail banking, card issuing and payments.

“Nigeria and South Africa (…) both are garnering the bulk of investments in FinTechs to place them in pole position, and it is FinTechs that appear to be leading the way on BNPL,” the Lafferty Group’s report, seen exclusively by Business A.M. and which is available from Lafferty.com for a fee of €595, said.

Also, the BNPL market would see a cumulative annual growth rate (CAGR) of 47 percent over a nine-year period (2021–2028), the Laferty index report said.

Over the same period, Nigeria, Africa’s behemoth, would record a BNPL loan CAGR of 62 percent against South Africa’s 57 percent, and the rest of Africa’s 35 percent.

Easybuy, Credpal, CDCareNG, Altmall, CreditClan, and Carbon Zero are some of the BNPL merchants in Nigeria who are coming up with locally relevant financing models for Nigerians, according to Laferty’s BNPL index report.

The BNPL loan exploded in popularity globally during the Covid-19 pandemic as more people shifted to online shopping. During the pandemic era, BNPL usage by region grew 72 percent for North America versus Europe’s 86 percent and Middle East’s whopping 120 percent, which has shown that it has a much larger appetite for BNPL than the two advanced saturated regions.

BNPL is a type of instalment loan. It divides a buyer’s purchase into multiple equal payments, with the first due at checkout. The remaining payments are billed to the buyer’s debit or credit card until the purchase is paid in full. It lets the buyer make a purchase and receive it immediately, but pay for it at a later time, usually over a series of instalments.

As the global digital native population opts for electronic payment channels, it is adopting BNPL as the faster and more convenient mode of consumer credit.

BNPL loans are usually of six months to 24 months tenure. The key challenge, for all the players, according to the Lafferty index, is to keep the growth of the book going. Customers can easily switch to alternate providers for better terms. The customer experience will also matter significantly.

Lafferty says the MEA region will prove an important staging ground for BNPL growth on account of one of its attractions, which is that it can fit well with Islamic banking, with its zero-interest charge; and is often considered to belong to payments more than credit and lending.

The report found that BNPL in the MEA region is largely driven by: profit aspirations of mobile wallet companies; the sluggish growth of credit cards; and lateral flows from the microfinance industry.

Over the nine-year period (2021–2028), Laferty indicates that the projected estimates of the total size of BNPL market in Africa is $49.175 billion; with Nigeria taking a huge chunk that rises from $950 million in 2021 to some $28.1 billion by 2028. South Africa follows with $5.591 billion by 2028. The rest of the continent would account for $825 million over the period.

Speaking with Business A.M. in London over the weekend, Michael Lafferty, chairman of the London-based LAFFERTY financial industry research firm, said the findings of the index on BNPL is showing the changing pattern of how Africa is responding by its people’s transactional behaviour.

“Increasingly, Africa is becoming a consumer society – and banks and Fintechs are responding with increased consumer lending. Some lending takes the form of mortgages, some is car finance, and more and more will be BNPL. Before long, American-type revolving credit cards will start to take-off,” Lafferty said.

He particularly noted that “Africa is full of potential and is increasingly attracting more and more attention from the rest of the world. Just look at CNN’s coverage,” he enthused.

On the specific dynamics of the Nigerian market that is fuelling this development, he described Nigerians as “world citizens” and “highly educated.

Lafferty said: “A significant and growing segment of Nigerians are highly-educated ‘world citizens’. They are affluent and rightly aspire to lifestyles similar to their counterparts in Europe and America.”