Fate of 36m unbanked Nigerians in limbo amid coronavirus lockdown
…as stress test hits country’s financial inclusion
With the lockdown of Lagos, Ogun and FCT on Monday following the increasing rate of coronavirus cases in the states, the fate of Nigeria’s unbanked population of almost 40 million is unknown.
Nigeria’s financially excluded population who are mostly at the bottom of the economy with a high dependency on their informal day-to-day transactions for survival are expected to take the most heat from the lockdown.
“It is going to be a tough time for the unbanked population in these states because it is an emergency period. They are going to be mostly hit by the exercise and especially those in the informal sector who live on their daily earnings, “a commissioner of finance from one of the states told Businessday on the condition of anonymity.
To curtail the spread of the deadly coronavirus, President Muhammadu Buhari on Sunday said “based on the advice of the Federal Ministry of Health and the NCDC, I am directing the cessation of all movements in Lagos and the FCT for an initial period of 14 days with effect from 11pm on Monday, 30th March 2020. This restriction will also apply to Ogun State due to its proximity to Lagos and the high traffic between the two States.”
According to the president, commercial establishments such as processing, distribution and retail companies; petroleum disruption and retail entities, power generation, transmission and distribution companies; and private security companies are exempted from the lockdown.
The residents of Lagos, Ogun and FCT were instructed by the president to “stay in their homes.” All businesses and offices within these locations were ordered to fully close during the lockdown with the inclusion of financial institutions.
“This is going to be a major stress test for financial inclusion, but we must not delay: the time to act is now,” Eric Noggle, Senior Research Director, Informing Decisions with Data warned before the president ordered the lockdown.
As banks closed their branch offices from Tuesday, their skeletal services coupled with the restrictions in movement is expected to push more customers to use their digital banking services.
The unbanked and digitally underserved population will, however, have the most difficulties in carrying out financial transactions in the period of the lockdown, industry sources said.
“We are fully aware that such measures will cause much hardship and inconvenience to many citizens. But this is a matter of life and death. If we look at the dreadful daily toll of deaths in Italy, France and Spain,” President Buhari said.
According to Chuba Ezekwesili, co-founder and partner at Future Africa, what will determine efficiency is the ability for the banks or financial institutions like NIBSS or Interswitch to operate and respond to issues while they run a skeletal system during this period of remote work.
“It might mean slower responses as these institutions adjust their system towards a different way of working,” Ezekwesili said.
Even in the absence of the pandemic, Nigeria still operates a cash-based economy. This is despite the cashless policy drive by the Central Bank.
This implies that a large number of the financially included population will still have to visit the ATMS for cash to transact with the foodstuff vendors for example, as a large segment of this kind of small and informal businesses do not rely on the digital payment system.
As of Monday afternoon, queues were starting to grow longer than usual at ATMS in Lagos, as many fear the ATMS may soon run out of cash.
Data by NIBSS shows that Nigeria has about 17,518 ATMS servicing over 70 million people with active bank accounts. These machines are likely to face more pressures as more people are hoping to withdraw money for necessities.
“I no longer allow my customers to pay through bank transfers. Most of the time, the transfers will bounce back and I will be at a loss,” a petty trader who identified herself as Iya Beji said.
If Iya Beji were to be in Ghana or Kenya, the case would have been different as the informal market in some of those African countries depends largely on mobile money for financial transactions.
Telco-led financial inclusion model in most African countries has led to tremendous progress in the number of people with access to financial services. It is however not the case in Nigeria owning to its Bank-led inclusion model.
The latest figures by EFINA put Nigeria’s financial inclusion rate at 63.2 percent, meaning as much as 36.8 percent or 36.6 million adults still lack access.
Telecommunication operators’ push to offer mobile money services in Nigeria received the official nod of the regulator, the Central Bank with the issuance of guidelines for players to apply for the licence in October 2018.
But a year and almost six months after the Central Bank loosened its policy to accommodate new players in Nigeria’s financial services industry; the direction of the mobile money initiative remains unclear.