Digital ID seen taking Nigeria’s GDP to 7 per cent

Implementation of digital identification systems in Nigeria could potentially catapult the country’s gross domestic product (GDP) to 5 to 7 per cent in 2030, according to a McKinsey’s latest report ‘Digital Identification: A key to inclusive growth’. The GDP grew 1.9 per cent in 2018 compared to 2017 when it was at 0.8 per cent.

In the same vein, the country’s informal sector dominance of the economy could mean individuals will receive 74 per cent of the overall value of an effective Digital ID system. Among the individuals, consumers and commercial providers of goods and services would account for 24 per cent. On the other hand, microenterprises will account for 28 per cent.

Digital identification (Digital ID) describes a foundational set of enabling technologies that can be pivotal in a wide range of interactions between individuals and institutions, especially with financial services. It enables individuals to unlock value and benefit as they interact with firms, governments, and other individuals in six roles: as consumers, workers, microenterprises, taxpayers and beneficiaries.

In Nigeria Digital IDs have been identified as a critical factor for citizens to access social benefits such as subsidies and entitlements. Nigeria has had a long history of knowing the importance of identification and has repeatedly failed to capitalise. In 1978, the Department of National Civil Registration (DNCR) was set up within the Federal Ministry of Interior (FMI). DNCR was tasked with issuing national identity cards. The program lasted 18 months. In 2001, DNCR contracted a private partner to enrol people, and issue national identity cards, at a fiscal cost of $236.8 million. The program ran for five years, issued national identity cards to 37.3 million people, and was shelved. The system developed was not reused. In 2007, the government passed a law, the National Identity Management Commission (NIMC) Act, and set up NIMC as the government agency responsible for identification in Nigeria.

The Nigerian national ID card which was launched on 28 August 2014 by former President Jonathan Goodluck was created to among many functions to facilitate ease of payment for millions of Nigerians living in areas that traditional financial institutions are not able to reach. With the national ID card many Nigerians can access financial services using their USSD codes, thereby eliminating the burden imposed by lack of internet access. However, years after with billions of naira expended, the national ID card is yet to become a reality. The consequence is that identities of millions of Nigerians are unaccounted for.

The World Bank reports that less than 50 per cent of Nigerians have any ID card at all, whilst only 9 per cent of individuals have a national ID number (NIN). Based on the Global Findex Survey results of 2018, 33 per cent of those who do not have ID cite that it is too difficult to obtain, whilst approximately 20 per cent blame lack of supporting documentation.

The McKinsey’s report notes that digital ID could contribute to providing access to financial services for over 1.7 billion people in the world who are currently financially excluded. For Nigeria, that means enabling about 64.5 million people to access financial services; reducing fraud and errors in tax filing to generate more than $13 billion in additional tax revenue; and saving 1.8 billion hours through stream-lined e-government services.

Interestingly, the Nigeria government has said it may consider imposing higher taxes on a class of consumer goods. But some private sector leaders have said that what is needed is to widen the tax net to ensure many more Nigerians pay their tax. It may prove a herculean task without accurate data and proper identification of the taxable population in the country.

“Globally, governments and businesses are implementing digital identification programs with mixed results and adoption levels,” authors of the results at McKinsey noted. “But when carefully designed, digital ID programs can help people participating more fully in their economy and society as consumers, workers, and citizens. As a result, digital ID not only enables civic and social empowerment, especially in emerging economies but also makes possible real and inclusive economic gains – a less well understood aspect of the technology.”