MasterCard to Issue ID and Payment Cards in Nigeria

By Patrick McGroarty and Drew Hinshaw

Wall Street Journal, May 8, 2013

CAPE TOWN, South Africa--MasterCard Inc. (MA) and the Nigerian government on Wednesday said the payments giant would issue dual identity and bank cards for 120 million residents of the West African nation.

Eventually, the government wants to issue a biometric identity card to every resident in the country of 160 million people over 16 years of age, said Nigeria's Finance Minister Ngozi Okonjo-Iweala.

A pilot program of 13 million cards distributed over the next year will allow cardholders to make deposits or spend funds at thousands of merchants and automatic teller machines that already accept MasterCard across the country, said Michael Miebach, president for the Middle East and Africa of the Purchase, New York-based company. The prepaid cards will be linked to bank accounts at Nigeria's Access Bank PLC (ACCESS.LA). "Large-scale issuance through the government, driving change of behavior around the use of payments, growing the pie, gets you into a virtuous circle," Mr. Miebach said. "We are convinced government is the correct partner for working to bank the unbanked."

Mastercard's partnership with Nigeria follows a similar contract in South Africa, where the company has issued more than 10 million cards to welfare grant recipients. But those cards do not have a dual identification purpose. And in Nigeria, previous efforts to issue national ID's have met with controversy. Issuing national ID cards would force Nigeria to reckon with whether there are more Muslims than Christians in the country, how many people live in Nigeria's oil-rich areas and how big its megacities really are. Answering those questions could effect Nigeria's complicated electoral calculus, and how the country divides its oil wealth.

"The reason why you would not have a national identity card...is because once you do that, it becomes very easy to establish the actual number of Nigerians," said Bismark Rewane, managing director of Lagos-based Financial Derivatives Co. "And once you do that, you can establish an accurate voters' register, and once you have that, you will have credible elections, and that will totally change the political dynamic in Nigeria."

But now the government is merging a renewed national ID drive with a parallel plan to move more of Nigeria's cash-fueled economy into electronic payments. In recent years a program to reduce cash transaction in favor of card swipes has met small triumphs in Lagos, the commercial capital. Card swipes now account for 17% of the city's supermarket purchases, and could reach 25 % in coming months--up from essentially nothing a decade ago, according to Mr. Rewane.

In June Nigeria's central bank plans to extend to five more of Nigeria's 36 states the cashless policy that limits ATM withdrawals and sanctions banks that allow customers to pull out thousands of dollars at a time.

Ms. Okonjo-Iweala said leveraging MasterCard's global brand recognition and technological experience would help the government overcome the controversy of its past efforts to introduce national ID's. "MasterCard wouldn't enter an agreement that doesn't meet the smell test, and neither would I," she said.

Write to Patrick McGroarty at patrick.mcgroarty@dowjones.com