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The New Normal – Digital Transfers and Remittance in Nigeria

The impact of the coronavirus pandemic could mark the end of physical cash payments due to hygiene concerns.

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The New Normal - Digital Transfers and Remittance in Nigeria

The coronavirus pandemic has, in no small way, affected many economies and industries across the world. It has also triggered a massive behavioural change amongst people, from how we interact with colleagues, friends, and family to how we function in general. The impact is also witnessed across the financial services industry, causing a necessary and rapid adjustment in the way we send and receive money.

Many experts predict that these changes will result in a new normal that will persist beyond the end of the pandemic and specifically, could mark the end of physical cash payments due to hygiene concerns. Studies have revealed that the materials that make up most banknotes provide the perfect environment for microbes to settle. Further findings identified the presence of harmful bacteria on banknotes including two life-threatening bacteria that have been linked to superbugs resistant to antibiotics. Research conducted by the London Metropolitan University in the UK showed that pathogens would survive on banknotes for up to 17 days. The World Health Organization (WHO) has suggested that people can get infected with the coronavirus through banknotes without observing proper hygiene, therefore it is widely agreed that at this time payments via digital money transfers are safer options.

Governments across the world have implemented different measures including restriction of movement, gatherings as well as encouraging citizens to adopt alternative money transfer channels. In an interview with the News Agency of Nigeria (NAN), the Director of Corporate Communications at the Central Bank of Nigeria (CBN) advised Nigerians to adopt alternative payment channels such as electronic and digital money transfer methods while limiting the use of cash as much as possible.

To this effect, banks have begun to intensify digital operations in lieu of traditional channels, rapidly increasing their stake in FinTech while many businesses have begun to encourage customers to conduct transactions through available digital platforms. Elsewhere across the world, South Korea’s Central Bank took out of circulation all banknotes for two weeks to restrict the spread of the virus while deep cleaning banknotes at high temperatures and ultraviolet light. The British Retail Consortium announced that the contactless payment limits have increased from GBP 30 to GBP 45 and is now being implemented by its members.

READ MORE: Ripple helps MoneyGram records 100% growth on digital transactions

Prior to the spread of the virus, governments in Africa had introduced measures and policies to increase the use of digital money transfer technology. In Nigeria, the CBN announced in September 2019 that its cashless policy will take effect on April 1 2020. This amongst other policies will only continue to encourage users to embrace digital transaction channels and increase the number of financially included adults in the country. Development partners including the Bill and Melinda Gates Foundation and the African Development Bank (AFDB) have also been supporting electronic and digital financial inclusion across Nigeria and the rest of Africa. AFDB launched its Digital Financial Inclusion Facility last year with the intention of boosting digital financial inclusion across the continent.

The New Normal - Digital Transfers and Remittance in Nigeria

 

Digital services are having a transformative impact on low-income households, as they provide a path to greater financial security and prosperity. We have continued to see an increase in digital transfers, as social distancing measures are encouraging people to use digital transfer methods – mobile money, bank transfer, and digital airtime top-ups. This method is cost-effective, saving money that can potentially be added to what the recipient receives, convenient for both sender and receiver, and provides a safe and hygienic alternative to carrying physical cash.

The GSM Association’s (GSMA) 2019 report indicates that mobile money use in Africa already showed strong growth indices. The continent’s mobile money accounts had exceeded $1 billion, with West Africa leading the charge. Deposit Money Banks (DMBs) also recorded a rise in e-payment earnings in Nigeria during the same period, which was also estimated to increase. These are all indicative of the substantial potential for growth in the industry even as COVID-19 causes people to explore digital payment channels.

No doubt, remittances have contributed significantly to Nigeria’s Gross Domestic Product (GDP) and has served as a source of income for many to support household, education and health bills amongst others. It is therefore important that this flow is not disrupted significantly. There is no better time than now to increase the awareness of these digital channels and encourage people to utilize them. Financial services and digital remittance organizations have continued to provide support to the digital transfer advocacy movement by offering different ways for friends and family to send money to loved ones across different borders.

Whilst the coronavirus pandemic has led to the era of social distancing, it has also increased awareness about the many advantages of digital technology. As ever, we encourage Nigerians to continue to follow government advice and guidelines from the World Health Organisation (WHO) whilst observing safety measures including keeping mobile devices clean.


Written by Gbenga Okejimi is Nigeria Country Director of WorldRemit. 

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Columnists

One year after Nigeria’s index case, what has her energy sector learned?

A critical question is, has the Nigerian energy sector learned anything from the oil shock?

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On February 27, Nigeria confirmed its first case of COVID-19 which at the time had infected just about 80, 000 people with a little below 3, 000 dead as a result. Exactly one year later today, with over 113, 000, 000 people infected and over 2, 500, 000 dead globally, the pandemic has radically transformed the way of life of the world. There has been learning across various sectors and a re-imagination of how things are done. A critical question is, has the Nigerian energy sector learned anything?

In early March, only about a week after Nigeria’s index case, the world was greeted by oil shocks resulting from the oil price war between Russia and Saudi Arabia, further aggravated by falling demands resulting from lockdowns, flight restrictions and the general apprehension about movement and the pandemic. Countries dependent on oil exports, like Nigeria, were concerned about the toll it would take on their economy.

Oil went to an all-time low, the lowest it has ever been in 18 years and many economies went into panic mode. It was not long before the Nigerian government removed petroleum subsidies at the tail end of Q1 as it was costing the country up to $2 billion a year. The end to subsidies -or what we assumed was the end, led to market-led pricing for petroleum.

READ: Shell Foundation and DFC mobilize $145 million for renewable energy in Africa, Asia

Around the same time, the marginal field bid rounds were launched, with the various fees to be paid by prospective investors rising exponentially from what they were under the last bid rounds, and required to be paid up front. The country also witnessed increased divestment in oil and gas assets by major oil and gas companies. At the start of Q4, the government introduced what it called service-reflective tariffs which were about twice the initial costs previously paid by customers.

There was equally a significant peak in renewable energy projects as many were turning to it for succor due to increased petroleum prices and utility power tariffs. The Federal government also launched its solar power strategy to electrify 5 million homes with solar power. We saw a heightened commitment to gas utilization, with the Central Bank introducing the N250bn intervention facility to stimulate investment in the local gas value chain.

The Minister of Petroleum for State, Chief Timipre Sylva had also promised that gas-powered cars would begin operating in October 2020. In his words “The alternative we are now introducing is gas, which is definitely going to be cheaper than the subsidised rate of PMS”.

READ: Could lack of power supply be hindering Nigeria’s COVID-19 recovery?

He went on to say that Nigerians were urged to convert their cars to dual fuel. Four months later, we are yet to see any auto gas cars ply our roads. There were also very swift moves to pass the Petroleum Industry Bill (PIB) last year, and indeed many stakeholders waited expectantly for it, but the legislature failed to deliver.

Soon, the Federal Government launched the Nigerian Gas Expansion Program at the tail end of Q4, a month after the news of the country officially entering recession broke. The aim of the Program was to increase gas development from three streams- Liquefied Natural gas (LNG,) Liquefied Petroleum Gas (LPG) and Compressed Natural Gas (CNG).

With initial reports of a vaccine rollout, the oil price that had crashed to lower than $30 per barrel last year began a steady and somewhat magical rise and currently has gone as high as $67, with predictions that it could rise to as much as $100, particularly with the release of more vaccines and easing of lockdown.

READ: Dangote Group kicks off $150 million solar project

With things looking good for the country again, we see a return of the petroleum subsidy in the locked pricing of petrol. A return of fuel subsidy means heavily increased subsidy payments for the country and similarly an increased propensity for corruption and misuse of funds which has characterized Nigeria’s subsidy regime for long. We cannot claim to have learned much as a country if we think all is well, and we are out of the woods.

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It would be counterintuitive to wait on another oil shock to begin to quickly diversify our portfolio and heavily invest in gas and renewables. Like the Biblical story of Joseph and Pharaoh, we should save during our “seven fat years” for the “seven lean years”.

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This is not the time for Nigeria to sit back and gloat in its rising oil fortunes, but a time to invest in improving energy access for its citizens by funding renewable energy research, aggressively supporting a solar drive, entering into public-private partnerships for gas development and providing incentives for businesses working in the energy transition space. Perhaps climate change and the decisions made around it will be the next price cruncher for oil. Whichever way, we cannot afford not to be battle-ready.

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5 successful ways to increase profits in your business

Constantly working on these areas of your business, you are more likely to have raised profits.

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Development Bank of Nigeria , Companies Allied Matters Act (CAMA)

Most business owners are required to make certain changes to their business operations to achieve more profits. It is a fact that it is not possible to raise the profits directly, therefore, you need to increase them indirectly. It is not going to be possible without having a specific strategy in place. The only thing that is possible is improving the variables of your business and this can lead to an increase in profits and a higher bottom line.

Lead generation and conversion

A process that is used for attracting interested prospects to the business is lead generation. Suppose five people out of the ten coming to your business place end up purchasing the product or services from your business, you can try to raise the number of people coming to the business to fifteen. This allows you to make more money by increasing the profits by 50%. Lead conversion is a process used for converting the leads into paying customers. It is a measure of the effectiveness of your sales efforts. If it is possible to raise the conversion rate from 1 out of 10 to 2 out of 10 it is likely to double the sales figures and get you raised profits. There is no replacement for continuous sales training sessions. It applies to the owner and everyone that speaks to the clients.

READ: How scammers use SIM cards to rob your bank accounts

 Transactions

The number of independent sales you make to the customers you have acquired can be increased by raising the frequency of the purchases by say ten percent. You will thereby increase the number of sales and also rise profits by the same amount. Think about the things you could do for getting your existing customers to purchase more from your business and also make these purchases frequently. The size of the transaction and the profit you make from every one of them matters as well. You need to be on the lookout for ways of up-selling all the customers so that this person will buy more every time.

Profit margins

Profit margins could be the gross profits you make from all the sales of products or services. By finding out the ways of raising the price or lowering the cost of making the product and services without reducing the quality you will be able to raise the profits per every sale. All the money you save while holding the costing constant flows straight to the business bottom line as profit. Every time you decrease the expenses and at the same time, if you can hold the sales and revenues constant, money is going straight to your pocket as net profit.

Reach a global audience

In the modern scheme of things, all cities are turning into global economies. Therefore language translation services can be used for increasing the profits of any business big or small. It might be a good idea to translate the content on your website to reach a global audience. The global language services industry is rising quickly and can touch a figure of $50 billion by the end of the year. Most of these services these days are used by both private and government sectors alike. With rising globalization, the demand for translation is also increasing.

Customer acquisition costs

Consider the amount of money you have to spend to acquire every paying customer. You need to continuously be on the lookout for creative ways of improving your promotion and advertising so that there is a reduction in the money you have to spend to get a new customer. This will have a positive effect on the profits of your business. You can also try to increase the number of customers that come to you as a result of referrals from your existing satisfied customers. Developing single or multiple referral systems can impact the business positively and in turn, can help in making more money for your business.

Conclusion

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When you are constantly working on these areas of your business seeking improvement in all of them, you are more likely to have raised profits. You will make more money and it will contribute to the success of your future financial endeavours.

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