Africa is home to some of the world’s fastest-growing cities, with an urban population projected to grow by 3.5% annually. Under ideal economic circumstances and with the right mix of public investments in transportation infrastructure, population growth is expected to translate to positive economic outcomes, trade facilitation and opportunities for poverty alleviation and job creation.
However, Africa’s population growth has historically placed significant pressure and access barriers on the continent’s transportation systems and infrastructure. In response, African governments, supported by development and private sector partnerships, have adopted holistic policy approaches that continue to evolve and record significant advancements at the intersection of technology, payments, and transit.
Today, at least five African countries, including Nigeria, Ghana, South Africa, Tanzania, and Morocco, have deployed the Bus Rapid System (BRT) to ease commuter transit and provide a cost-effective transport solution. Light rail networks have also emerged across some of the continent’s largest cities. Recently, a 13-kilometer metro rail service, the Blue Line, was launched in Lagos State, Nigeria’s commercial hub and most populous city to enhance travel connectivity. These solutions have made significant differences in the daily lives of people, helping to cut travel time and curb regular traffic gridlock. This move is expected to herald the deployment of similar infrastructure and transport systems across the country.
The role of digital microtransactions
Public transportation has heavily relied on cash payments throughout its history. While cash remains prevalent in Nigeria, digital microtransactions have emerged as a transformative force in revolutionizing payment methods within the transportation sector. This innovation promotes financial inclusion and offers a cost-effective, convenient, and inclusive solution to address accessibility and affordability issues.
Digital microtransactions have introduced an innovative approach to revolutionizing payment systems in Nigeria’s transportation industry, even serving to subsidize transportation expenses for the average citizen. Amidst the push for a cashless society and greater financial inclusion, solutions like the Cowry Card (which enables people to top up from as little as 10 cents) have played a pivotal role in ensuring affordable, accessible, and convenient transportation access.
Digital microtransactions involve the electronic exchange of small sums of money. Despite their apparent simplicity, this concept carries significant potential, particularly in a diverse and dynamic country like Nigeria. It can democratize access to financial services, granting millions the capacity to save, invest, and participate in the modern economy.
To fully harness the potential of digital microtransactions within Nigeria’s transportation sector, stakeholders must embrace and support their implementation. In doing so, we address the pressing issue of excessive transportation costs and unlock new economic opportunities for individuals and businesses.
The role of cross-sectoral partnerships to aid affordability and access
Amidst Nigeria’s transportation system’s steady transformation, access and affordability are equally important factors. These play an essential role in how people and society can translate the benefits of the ongoing restructuring of the transportation system.
Unfortunately, current economic challenges have initiated rising inflation rates, a foreign exchange crisis, and increasing end-user oil prices. These trends have further been exacerbated by recent fiscal restructuring policies that resulted in removing fuel subsidies in Nigeria and, in turn, raising transportation costs.
Abrupt price hikes in transportation costs has threatened Nigerians’ access and purchasing power across the formal and informal sectors, threatening to exclude a critical mass of people. This development has further imposed significant burdens on individuals and businesses, hindering their ability to access socioeconomic opportunities and do business.
For the average Nigerian, it erodes their hard-earned income, leaving them with less funds for essential needs such as education, healthcare, and savings. Hence signaling an urgent need for cross-sectoral action to alleviate the burdens on Nigerians.
The convergence of transportation, payment, and technology has proven to be a versatile solution for addressing affordability and accessibility challenges through cross-sectoral partnerships.
These collaborations can harness diverse expertise, resources, and perspectives by uniting government and private sector stakeholders. The government provides policy support, infrastructure development, and regulatory frameworks, while private sector players can invest in innovative transportation solutions and technology-driven initiatives. The result is an existing framework through which the government and private sector players can deliver initiatives to improve economic outcomes. Today, TAP’s microtransaction payment model has positioned it as a key player in this regard.
Recognising the far-reaching impact of rising transportation costs, the Cowry Card provided a means through which the Lagos state government and local governments can subsidize transportation costs. To date, partners have delivered ₦1.9 billion in transportation subsidies to citizens and employees across Lagos. Making it easier to navigate the challenges of rising transportation costs.
Additionally, TAP is using technology, microtransactions, and data to provide financing for public transportation entrepreneurs to ease the affordability burden amid rising operational costs. This has been achieved by leveraging available transportation data gathered for more than 3 years to build credit profiles.
This partnership structure has not only enhanced accessibility and affordability but also bolstered transparency, accountability, and profitability within the state’s transportation sector. TAP has enabled micropayments for more than 4 million people valued at over $50M.
A Brighter Transportation Future
Africa’s burgeoning urbanization presents both opportunities and challenges for its transportation systems. While rapid population growth has historically strained infrastructure, African governments have responded with innovative solutions and cross-sectoral partnerships to improve accessibility and affordability.
The digital revolution, which extends far beyond the realm of banking, has found most promising applications in Nigeria’s transportation sector, a sector of paramount importance that connects people, facilitates trade, and drives economic growth. Nevertheless, the persistently high cost of transportation has remained a significant challenge.
Cross-sectoral collaborations between government and private sector stakeholders have enabled discounted transportation costs and greater transparency, benefiting millions of Nigerians. As Africa continues to urbanize, these initiatives demonstrate the potential for technology and partnerships to address the pressing issues of transportation costs and unlock new economic opportunities for individuals and businesses across the continent. As demonstrated by our Cowry Card, digital microtransactions have the potential to significantly impact the way in which payment methods are executed, thus improving the affordability and inclusiveness of transportation.
Olamide Afolabi is the Co-Founder and Chief Growth Officer (CGO), TAP
