T h e G o o d, and T h e N o t - S o - U g l y.
ONYEKA AKPAIDA 28th April 2020
No one envisioned the world would be at a standstill for 6 weeks, much less experiencing a global pandemic; in an unprecedented manner, COVID-19 decided to show up regardless.
The economic disruption of this pandemic will largely come from ‘’aversion posture” taken by people to avoid contracting the virus. These include government-imposed lockdowns, business closures, and reduction in activities by people which will inadvertently affect all sectors of the economy and translate into reduced income for suppliers, lower wages, unemployment, and a lower standard of living.
Bringing it home, our 2020 fiscal budget revenue assumptions were made with a $57 per barrel benchmark; however, the crude oil price dipped as low as $20 this month.
This is worrisome to me as we have been unable to sufficiently set aside buffers against these daunting economic challenges.
It is my hope that coming out of this pandemic, Nigeria is able to commence a dogged economic diversification
The estimated number of financially excluded adult Nigerians as of 2018 was 36.6m and given the lockdown situation following the pandemic, many financial services providers are unable to implement planned projects in terms of onboarding customers. It is obvious that Nigeria will not be achieving her 2020 financial inclusion goal of reducing exclusion by 20% from 36.6m to 19.9m adult Nigerians.
Statistics from Global Findex also show that a lack of regular income is the major reason for financial exclusion and it is inevitable that the economic impact of the pandemic which includes loss of income particularly with adults that earn daily wages will not do us any favours in closing this gap.
This article will be addressing the impact of the pandemic on Nigeria’s financial inclusion drive and recommendations to stakeholders- fintech, social enterprises, and government on how best to mitigate and innovate in the short and medium-term.
Although the effects of this pandemic are going to hit hard in the short and medium-term; there is ample opportunity to cushion the effects by getting the most vulnerable adult Nigerians financially included to give them access to the opportunities highlighted in the recommendation section of this article.
The Not-So-Ugly (Covid-19 Impact) Remote Work: This is inevitable as many bricks and mortar financial service providers have to swim against this tide that is in uncharted territory. The banks are sequestered and so are the customers; financial service providers are leveraging on every office and communication tool to keep work going. You can find us in front of our computers with the webcam on having your ‘beloved’ Monday morning meeting with your line manager trying to explain why you have been unable to land that customer. Loans & Lending: There will definitely be a surge in the requests for loan facilities to meet up to daily and expensive demand of staying at home; I can imagine most lending institutions and apps are inundated with loan requests given the ease of getting credit in less than 5 minutes. Loan default is guaranteed as some workers have been laid off, and those who earn daily wages in non-essential sectors will be unable to meet up with their repayments. The good news is the Central Bank of Nigeria has directed that moratorium be given to credit facilities and most financial service providers have taken a consumer-friendly position by providing up to 3 months moratorium to ease the burden on borrowers. The Central Bank of Nigeria has also directed that interest rates on all applicable intervention funds be reduced from 9% to 5% (be sure to check that your bank has done it.) It is also expected that lending institutions will reduce the credit limits of customers to mitigate default.
Mobile Money Usage: Following the lockdown measures and call for social distancing, most transactions will be conducted via mobile banking apps and agents to cater to under-served and peri-urban communities. According to EFINA Access to Finance 2018 Survey, Mobile money usage increased by 2.2% from 2016 and we expect these numbers to increase exponentially by the end of 2020 with the lockdown being a key catalyst. Leveraging the use of USSD offline technology, it has become easier reaching the under-served with affordable banking services as it does not require internet usage. We expect to see growth in the Access to Finance 2020 survey statistics on mobile banking usage in the areas with previously high financial exclusion rates.
The Good (Recommendations):
There is a huge opportunity for new players in the financial inclusion space irrespective of your business location- Urban centers or rural communities and if you are passionate about under-served communities, there are over 28 million excluded people in this demography. Reduction in barriers to entry by regulators in the financial inclusion space such as high cost of fees will also encourage more players and ultimately bring us closer to Nigeria’s financial inclusion goal of achieving a 20% reduction in the excluded population by 2020. Kenya’s largest Telco announced a fee waiver on M-Pesa, the country’s leading mobile money product for 90 days to reduce the physical exchange of currency in response to the COVID-19 outbreak following a directive from Kenya’s President Uhuru Kenyatta to explore ways of deepening mobile-money usage to reduce risk of spreading the virus through physical handling of cash. Implementation of such measures will use digital finance as a lever to influence social distancing, P2P transactions, and financial inclusion in an infectious health crisis. Fintech and Social Enterprises: There is an opportunity for fintech companies to innovate and go beyond payments and transactions. One of the many effects of the pandemic and lockdown measures is an increase in illnesses especially in rural and densely populated households/communities where social distancing is nothing but a pipe dream. This is the time to collaborate with health management and pension organisations to develop a product that caters to the vulnerable and under-served. Micro & SME Businesses and Households Nigeria with over 37 million micro, small and medium enterprises (MSMEs) account for over 84% of the jobs in the country; the Central Bank of Nigeria, taking the 48.5% contribution of the sector to our GDP, introduced the N50 billion Targeted Credit Facility (TCF) in March 2020 as a stimulus package to support households and MSMEs affected by the COVID-19 pandemic. This facility will be disbursed through the NIRSAL Microfinance Bank (NMFB) with a reviewed maximum amount for MSMEs now pegged at N2.5mm (formerly 15mm) and a moratorium period of up to 1 year. To date, 80,000+ number of applications have been received and you can access the guidelines and application via the NMFB website https://nmfb.com.ng/ There is also a need for a membership/association system to be created for hawkers and roadside sellers who fall under the category of micro-businesses to access to facilities such as the COVID relief for affected businesses. The association will be responsible for disbursement, monitoring, and repayment of the facility.
Government Agencies As it is, the government is fast losing the trust of its citizens as the stories from the implementation of social protection programmes are highly discouraging. Although we are in a too little too late situation, I will still recommend that the government makes financial inclusion and biometric registration an essential part of its social registration process. This will reduce the risk of paying “ghost beneficiaries” as each person registered will have the BVN as a unique identifier. In the US where there is a stimulus package for citizens earning less than 75000 USD. Eligible citizens are now receiving $1200 monthly support. 7 eleven (a Walmart competitor) and Mastercard created a card with an account behind it to quickly capture the excluded and reduce their wait time to receive the stimulus by several weeks when compared to the post-delivery option.
About the Author Onyeka Akpaida is a financial service professional with 9+ years of experience in financial inclusion, consumer-centric digital banking, and public sector engagement in a top tier leading International Bank, a verified mentor at mentor X-Africa and the founder of Rendra Foundation where she works to promote financial inclusion for low- income and migrant women in northern Nigeria. www.instagram.com/rendrafoundation