Financial inclusion: a low-hanging fruit for post Covid-19 economic recovery and growth in Nigeria

Financial inclusion: a low-hanging fruit for post Covid-19 economic recovery and growth in Nigeria


Covid-19 is the sci-fi sounding name given to the latest coronavirus from Wuhan, China. What is now clear is that early warning systems, response protocols, international and national response preparedness and institutions are either unavailable or painfully embryonic. Inevitably, the contagion spread, mainly through global aviation, tourism and even diplomatic activity.

In Nigeria, there was an apparent early response and bated confidence that the decisive handling of the Ebola outbreak would somehow deliver learning points and capacity to minimize the spread of the virus. The State governments collaborated with the Ministry of Health, Nigerian Centre for Disease Control (NCDC) and other federal agencies to ramp up measures, based on the facts on the ground.

However, growing alarm and voices calling for a more proactive and holistic approach resulted in aviation flight bans and a lock down in Lagos, Abuja and Ogun State, ordered by the President. Various State governments have also come up with their own calibrated measures, including rolling or total lockdowns.

Measures were taken by the Central Bank of Nigeria to help cope with the unfolding impacts on the financial services sector and a more strategic attempt to mitigate likely recessionary impacts and risks of credit default by SME’s after the crisis. Lines of credit, tax rebates, loan renegotiation processes, among others, have been made available.

More measures are anticipated and an Economic Stimulus Bill recently passed by the House of Representatives has been passed to the Senate. Among other things the Bill seeks to provide tax rebate of 50% of PAYE for registered businesses that avoid retrenching staff who are in their employment between 1 March 2020, (the proposed date of commencement of the law), until 31 December 2020.

Many companies, including financial service providers (FSP’s), are also offering rebates and other palliatives to customers. Whether these policy, fiscal and monetary measures are the most suitable, as well as the quality of their implementation and synergy between different arms, levels and agencies of governments, is of course another thing. However, the measures are similar to initiatives promoted by the Bretton Woods institutions and adopted by several governments around the world.

One commentator wondered whether any business will be interested in taking loans at this time, as they will be more concerned with sheer survival. In the era of the Great Depression, President Franklin Roosevelt’s economic recovery measures, the “New Deal” (I & II) helped the private sector ‘overcome risk-aversion and finance new opportunities for growth’. It went beyond merely trying to save businesses.

It frontally and pragmatically, albeit open to experimentation, confronted depression. It audaciously rewrote the economic compact by economically empowering and recruiting the poor and underprivileged.

The development model of China also, was largely successful because it was audacious and people-centered. It embraced market efficiency, and promoted productivity and innovation. It recruited vast floods of people from rural communities into the more efficient production sector, albeit in the urbanized settings. Even though it has focused more on promoting the industrial and financial sectors, yet it has ensured sufficient productivity and innovation in the rural economy and agriculture to avoid the food scarcity of the earlier Maoist doctrinaire communist era.

The global socio-economic order appears to be at an inflection point.

Global society will transit, post Covid-19, even more sharply to digitization, digital channels and probably more nativism. Countries will seek to build resilience by being more self-sufficient in critical inputs or minimizing vulnerability to global supply chain vagaries. They will promote greater digital and social inter-connectedness and higher productivity by refurbishing or innovating around physical and social infrastructure.

The ability to have robust health and food distribution buffers and channels, able to serve all segments of the population seamlessly, will be a sprint target for discerning governments. This will require greater focus and emphasis on health, education, agriculture, rural communities and empowering the poor.

The winners will embark quick, systematic and well executed audacious social and economic innovation.

The two models highlighted earlier hold out some useful lessons for public policy and economic planning in a post Covid 19 Nigeria. Covid-19 will deliver recessionary impacts on the Nigerian economy.

Nigeria appears ill-prepared to cope with the fall-out of the global innovation shocks and trade redirection that will be unleashed.

The quickest means of engendering GDP growth is by increasing economic activity, capital investment and productivity improvements, innovation, education and infrastructure modernization. Digital financial services will be a key enabler of economic recovery and activity in a post Covid-19 world. Reports of the inability of State governments to effectively organize and distribute relief to poor households[1] are disturbing but unsurprising.

If about 80–95 per cent of citizens were financially and digitally included, cash transfers and distribution of food would probably be more successful and, thereby lessen the risk of community infection of the virus from imminent citizen’s mass lock down violation.

Audacious investment, innovation and measures designed to mobilize idle economic capacity from the financially excluded — women, youths, agriculture and rural communities (comprising not less than 80 million Nigerians), is a low-hanging fruit and ready route to quicker economic recovery and development for Nigeria. This can rise to a potential market of 135 million if the underserved or entire Bottom of Pyramid (B.O.P.) market are also sufficiently financially included.

It would be suicidal not to progress current policies and investments in the agriculture value chain to a point where farmers and food production in rural communities are effectively and financially included and integrated into national distribution channels. More so, as the current lock down in Lagos State spurred the Mile 12 market to arrange online ordering, packaging and delivery of food items and vegetables to customers.

Public policy should go beyond the current palliatives and embrace audacious socio-economic strategy and measures. It’s not just about spending government funds or subsidies. Policy must actively facilitate competition and innovation in the private sector, particularly in financial services, to overcome risk aversion and embrace opportunities for investing in new markets and opportunities for growth.

Our customer segmentation framework (PDF) identifies viable customer segments which, with appropriately designed products, can help FSP’s recover quickly and improve their profit post-Covid-19 crisis.

This should rapidly grow national economic activity and aid recovery. Our study on Agents and CICO economics also demonstrates that an additional ten thousand agents can be immediately and carefully placed in rural locations and they would be immediately viable.

This is an opportune time to design enabling public policy and market creating innovation by FSP’s to creatively and boldly overcome the challenges of identity verification/KYC, activate the payment service banks, steeply increase agent networks and develop customer focused products.

More audacious and immediate measures to roll out inclusive financial services to every Nigerian, post Covid-19, is a national socio-economic priority and necessity. The next pandemic or global economic shock may be absolutely and irreparably ruinous.

The time to act is now!

Professor Olawale Ajai is the Head of DFS policy research and engagement at the Sustainable and Inclusive Digital Financial Services initiative

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