Why Covid-19 should be call to action for financial inclusion boost in Nigeria

The coronavirus outbreak which has displaced millions of Nigerians to become financially vulnerable may have also presented an opportunity to onboard the country’s 40 million unbanked population.

With one of the highest financial exclusion rates in Africa at 36.8 percent, Nigeria could leverage its COVID-19 palliatives to grow its included population and thus meet the 80 percent inclusion target of the Central Bank.

“Given the current Covid-19 crisis, governments and regulators should take the opportunity to move quickly to allow Fintechs and digital financial services providers to build a clear path toward regulation,” Alicia Levine, COO, Chipper Cash, Africa-based instant cross-border mobile money transfers firm said recently at the Innovate Finance’s virtual panel for UK Fintech Week 2020.

Like most countries around the world, Nigeria has put up measures to ease the pressure that the coronavirus crisis is having on the income of many households, particularly the most vulnerable in society.

The nation with the largest economy in Africa however, preferred cash instead of electronic transfers.

The Federal government through the Ministry of Humanitarian Affairs embarked on a Conditional Cash Transfer programme. The National Social Investment Programme (N-SIP), a department under the ministry, handles the cash transfers through its Household Uplifting Programme (HUP).

So far, the Federal Government has rolled out the Conditional Cash Transfer (CCT) palliative in Anambra, Katsina, Kogi, Plateau, Oyo, Kano, Cross River, Bauchi, Adamawa, and Nasarawa states.

“Two days ago at the task force meeting, the Head of Service told me that the conditional cash transfer from the Federal Government would be N20,000 to people in 10 local government areas of Oyo State,” Seyi Makinde, governor of Oyo State said regarding the outcome of the programme in his state.

But, with the choice of physical locations for the conditional cash transfer programme Nigeria is losing an important opportunity to reach the population of the financially excluded through digital payment channels which are safer and cost-effective.

Brazil, a South American country with 45 million unbanked population is an example of one of the countries that have leveraged the impact of COVID-19 to boost its financial inclusion rate.

The Brazilian government recently launched the emergency aid programme- coronavoucher aimed at giving support to 54 million of its population who became financially vulnerable as a result of the coronavirus crisis.

Through the country’s central bank- Caixa Econômica Federal (CEF), Brazil said it would be paying its vulnerable population 600 reais ($117) monthly until June through the coronavoucher . This includes millions of previously unbanked citizens, who are being provided with a mobile-based savings account.

Twenty-four  hours after Brazil’s new emergency aid registration website and app, a technology-driven financial inclusion exercise went live; 9.86 million of its excluded population were able to open a bank account.

This represents 39.3 percent of those who have opened the digital account offered by the bank to receive the monthly payments from the processed applications from over 25.1 million Brazilians

The digital account of Brazil’s coronavoucher provides basic functions such as payments and transfers. With no plans of issuing physical cards, the five main telecommunications providers operating in the country – Algar, Claro, Oi, TIM and Vivo – are enabling free access to the app.

The database of socially vulnerable citizens handled by Dataprev, the social security technology company owned by Brazil is automatically assessed and validated against the personal information of citizens applying for financial aid through coronavoucher.

According to CEF, the website where citizens can sign up for the financial support programme had 240 million views since launching on April 7, 2020. Some 62 million SMS messages had been sent to confirm the requests.

Data by the bank show that the Android version of the emergency aid registration app had been downloaded by 21.8 million users, while the iOS version saw 699,000 downloads.

To spur inclusive access to financial services in Nigeria, industry experts have recommended that the Federal Government should use electronic payment channels like mobile money and USSD to transfer the Covid-19 palliative as they have been identified as the easiest way to reach the unbanked population.

“Longer-term, we run the risk of more Nigerians becoming financially excluded as a result of this crisis, at the exact moment when they as individuals and the overall economy would need their participation the most,” said Ashley Immanuel, head of Programmes at Enhancing Financial Innovation & Access (EFiNA) said.

Unlike the Telecommunication companies in Brazil, Telco operators in Nigeria which according to the data by the Nigerian Communications Commission (NCC) have a reach of 86 percent, and 182.7 million customers, the single largest customer base in the country have not been allowed to provide financial services despite showing interest.

Telcos in Africa’s later economy are currently awaiting the Central Bank of Nigeria for a mobile money licence.

Telecommunication operators’ push to offer mobile money service officially got a nod by the central bank of Nigeria with the issuance of guidelines in October 2018 for players to apply for the licence to operate as payment service banks (PSB).

Before October 2018, only banks and licensed financial institutions were allowed to provide financial services in Nigeria.

Although telecom operators and other Fintech companies indicated interests to operate in the market, the CBN policy would not allow them.

The regulator eventually shifted because of the increasing rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access.

But after almost one year and a half since the apex loosened its policy to accommodate new players in Nigeria’s financial services industry; the direction of the mobile money initiative remains unclear.