“We just have to do what we have to do; the mission of the European Central Bank is to fight inflation and have price stability, inflation is terrible for all of us and it’s particularly terrible for those who have low incomes”.
This is a paraphrased quote from Christiane Lagarde (President of the European Central Bank) during an interview where she was explaining the reason certain regulatory decisions had to be made to curb inflation in the region. Her statement depending on your economic system leanings, (socialism or capitalism) could be either; cold and unfeeling or decisive and clear.
It is the unavoidable challenge a policy maker grapples with when faced with an unpopular idea. The dilemma of the envisioned long-term benefit of such decisions for the economy and the inadvertent short-term shocks that disproportionately and negatively impact vulnerable populations with the additional risk of creating new problems or exacerbating existing ones.
It is the same for Nigerian policymakers, who have, over the past year, been aggressively driving a programme of policies and regulations aimed at tackling informality. Such moves include the enforcement of digital ID requirements to be able to use one’s mobile phone to make voice calls, and more recently; the mandate to own a formal bank account to successfully change old naira notes to the new one in a move towards a cashless financial system.
The process in both cases, albeit seeking to pull excluded people into the formal digital and financial ecosystems, poses more threats of sabotaging the formal inclusion goal if not done properly.
For instance, people who had not linked their National Identity Number (NIN) to their SIM by March 31st, 2022, were cut off from voice services on April 4th 2022, and by January 31st 2023, people yet to exchange their old Naira notes for new ones, will no longer be able to use the old notes and unlikely to be formally banked.
The enforcement of mandatory transitions must happen when the most vulnerable members of society are fully sensitised and have a mechanism for compliance in place that is easy, affordable and in close proximity to them
Both moves are bold attempts to accelerate a transition to digital and wider financial services that can underpin inclusive economic growth for decades; and in principle, this kind of aggressive policy making, and its enforcement is how you drive change, and force a stagnant system to take action. If done well, it has the potential to be truly transformational.
More so, driving inclusion into the formal economy, creates robust channels and structures that provide support to the right people, securely, transparently and reliably, while opening up access to a wider range of value-added services.
Essentially, it removes a significant barrier to inclusion for marginalised communities while creating a strong avenue for sales for businesses/service providers who have struggled to reach the excluded populations with relevant products.
However, to achieve this, the delicate dance that needs to happen is finding the right timing for when an ecosystem is deemed ready for transition and ensuring availability of appropriate and much-needed infrastructure and policy frameworks that do not further marginalise already vulnerable communities who are unable to comply, even if they wanted to.
The enforcement of mandatory transitions must happen when the most vulnerable members of society are fully sensitised and have a mechanism for compliance in place that is easy, affordable and in close proximity to them.
With more than 38 million Nigeria’s unbanked, and more than 100 million eligible Nigerians without National Identity Numbers (NIN), there is a clear danger that these populations will be impacted significantly if they are unable to comply.
Analysis of EFInA’s 2020 survey data, conducted by Inclusion for all, a multifaceted advocacy initiative for poor Nigerians, suggests that poor people are considerably less likely to have a National Identity Number, less likely to be banked and more likely to live in rural areas.
They don’t have NIN for a range of reasons including, lack of awareness, lack of access to an enrolment centre, or they face socio-cultural barriers. They don’t have a bank account for similar reasons.
Many can’t meet the KYC requirements, struggling to provide ID or proof of address, and can’t reach a financial access point because it is too far away or too expensive to get to. 54% of the unbanked poor save exclusively in cash and 46% of the low-income (living below 50% of the poverty line) populations do not have a NIN. They are more likely to be women than men.
Many of these vulnerable Nigerians have been cut off from using voice services on their mobile phone since April 4th last year and will now be faced with the added challenge of losing money they are unable to change because they can’t fulfil the requirements to do so. Thus, our question – In doing what we have to do, are we hurting or helping the poor?
So how can we address this? The simple answer is to first; design the policy and approach with the poor and vulnerable groups in mind. Secondly, to build ecosystems that serve the needs of the hard-to-reach Nigerians as well as the needs of those who are easy to serve.
Finally, to prioritise the poorest in the policy making process. If these guidelines are followed, the impact of these important policies will be truly transformational and will leave a legacy that this government can point to for decades to come.
Collins-Ogbuo is a social development advocate, and she currently heads Inclusion for all