Thoughts on unlocking growth in Nigeria’s economy
I was having a discussion with my boss earlier today which led to us talking about the economic outlook in Nigeria and income inequality. In doing so, an interesting point came up. The banking industry and in particular CBN is really holding back the economy for no justifiable reason.
In Kenya, mobile money transactions have seen so much adoption that they equal nearly half of the country’s GDP. Money moves and money moves fast. This means that one way or the other even the bottom of the social strata will benefit from this efficiency. And it’s only half the story. Leveraging the widespread adoption of mobile money new financial services are being offered and are equally seeing rapid adoption in the country. 29% of mobile phone owners in Kenya have borrowed from M-Shwari (a Safaricom loan product) and there are 49 loan apps in the country according to a recent report (link). The literature on the benefits of financial inclusion on the economy is unequivocal.
This is in sharp contrast with Nigeria. Retail banking is still in the stone-age and tbh the commercial banks don’t really give a hoot about the bottom of the pyramid or they simply are too lackluster to innovate. McKinsey says the problem is linked to ‘owo epo’, fuel money. According to them “The prominence of oil in a national economy often steers banks away from lending more to other sectors or to the consumer market.” It turns out that banks in Nigeria provide <10% credit facilities to the consumer market. In contrast, the figure for South Africa is 45%. These guys are holding back the goddam economy!
CBN: The chief culprit
My position (reinforced by my boss) is that telcos are best positioned to make the real change similar to what has happened in Kenya. I mean look at m-cash. A noble effort, but where is it today? The telcos, given that they have the capital, the technical expertise, and operational expertise to scale to millions of Nigerians even in the most remote regions should just be given the free reign to do this thing. Alas CBN ‘no gree’. They want them to work with the banks and split revenues. Mtcheew.
There are two sides to Nigeria. The side of poverty and corruption and incompetent leaders. That’s the reality of Nigeria but that’s not the promise of Nigeria. Every day, I read about enterprising young Nigerians leveraging technology, with resilience and courage, against all odds building the future of the country and increasingly in the financial space. These people are out to unlock the growth of the country come rain or sunshine and they will. That’s the promise of Nigeria. That’s the hope.
