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Cash is no longer king – Digital Money as a lever during a pandemic

Nigeria’s inability to leverage digital technology systemically is not just a low-income people issue.

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Security in digital and online money transactions

Olugbenga GB Agboola

As a result of the economic crisis created by the pandemic, almost 1.6 billion informal economy workers (representing the most vulnerable in the labour market), out of a worldwide total of two billion and a global workforce of 3.3 billion, have suffered massive damage to their capacity to earn a living. This is due to lockdown measures and/or because they work in the hardest-hit sectors.” – ILO Monitor: Covid-19 and the World of Work. 3rd Edition.

Shut land borders and airspaces are gradually opening back up, and we have seen economic activities pick up after it all came to a pause due to the COVID-19 pandemic. It’s clear that survival is dependent on good health and a working economy. The cost of the restricted movements because of the global lockdown phases are still being tallied but the World Bank envisions a 5.2% decrease in global GDP with most countries expected to face recession in 2020. That’s not hard to imagine, considering that at the end of the first half of April, 81% of the world’s workforce were affected by workplace closures, according to the United Nations. As expected, the impact is most severe in low-income countries that have more workers in the informal sector. Low middle-income countries such as Nigeria average more than 80% of the population in the informal sector. In a large city like Lagos, this sector comprises more than two-thirds of the working population.  In a recent World Bank country update which suggests that there could be a rise of vulnerable Nigerians by five million by the end of 2020. With a new globally-sanctioned lifestyle that emphasizes physical distancing to slow the virus’ infection rate and flatten the curve, where does this leave Nigeria?

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The New Normal

Following the introduction of the cashless policy by the Central Bank in 2012; the initiative was implemented to move Nigeria and Nigerians further to a Digital Age and to mop up cash in the economy. It was also encouraged in an effort to manage inflation. Since COVID, there has been a monumental increase in the adoption of digital payment methods, an estimate of which resulted in a 365 percent increase in online activities. This increased drive has been spurred as a result of innovative financial technological solutions from Fintechs such as Flutterwave who is able to facilitate payments for businesses and encourage last-mile payments.  While this is remarkable, only sustained and prolonged usage can move the country close to the targeted financial inclusion goal of providing  60 million unbanked adults with formal financial services by year-end 2020.

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So how do we sustain the tempo?

The voluntary migration to electronic channels for financial transactions during the pandemic points to the fact that policies and penalties alone aren’t enough. Electronic channels enabling businesses and consumers the opportunity to adapt to the new normal without the disadvantage of steep learning curves. The alternative(s) need to be more accessible, easy to use and secure – the kind of features that make Flutterwave preferred.

Days before the lockdown was to begin in March, there was panic purchase all over the country which resulted in inflation of prices. Unknown to a lot of these sellers, it was the calm before the storm. Lockdown meant restricted movement and soon a lot of customers couldn’t visit their favourite shops. Local dispatch bikes came to the rescue but this applied only to existing customers as there was no way of recruiting or servicing new customers.

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As a business, we saw that a lot of our merchants were significantly impacted by these lockdowns – specifically in the transportation and travel sectors. For the others that were not, we noticed they weren’t making their usual daily turn over. We were concerned and thought of ways to support all businesses: Enterprise & SMEs. For our small businesses, we responded by organising webinars and launching a campaign #KeeptheLightsOn and also built Flutterwave Store – an SME store platform. We set it up for businesses whose physical stores do not offer essential services and so had to shut down during the lockdown, and also for those who had no physical or online stores. What we have seen since doing that, is that businesses who sold only in one part of town before, for example, in Lekki, started receiving orders from not only other parts of the country but different continents all together –  giving rise to another problem of delivery. Kate is one of our new merchants who sells handmade handbags out of Akure. When she got orders for three units from a buyer in San Francisco, she was so ecstatic she called her friend who helped set up her page on our platform. Before then, the farthest Kate had sold her goods was in Lagos via an aunt who often visited her mum. We have restaurants shipping orders across states and this is good. The entire transaction is electronic and this is also good. However, to scale to full adoption of mobile money and digital payments, financial inclusion has to be at the front and centre.

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Unlike Kate, a lot of micro-businesses are unable to move their businesses or payments online because they run cash in-cash out systems. This means they rely on the proceeds from daily sales to restock for the next day and to cater to their daily needs. They cannot afford the luxury of next day settlements, which is the current method employed in digital payments systems. The inability to save a substantial amount over a period of time also means they are unable to scale their businesses unless there is a credit intervention. The majority of those in this population block are not served by traditional financial providers and have been excluded from accessing basic services including loans. All these factors contribute to the distrust of many low-income individuals in formal financial institutions.  While a portion of these sectors are able to find comfort in the service lines of MicroFinance Institutions, a larger percentage, due to their business models are still unable to access the necessary financial facilities to grow their businesses.

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Nigeria’s inability to leverage digital technology systemically is not just a low-income people issue; it is one that cuts across all sectors; from education, to agriculture, commerce and healthcare, and will take a while to change. For example, the Federal Government under its National Social Investment Programme Conditional carried out its Conditional Cash Transfer programme by physically distributing money to vulnerable households across states as a way of cushioning the effect of the pandemic. It would have been a good opportunity to leverage this exercise (which began in 2013) to deepen digital money adoption among the underserved.  A case in point is in Abuja, where although there are 5000 beneficiaries, only 190 people were reached in a day. This means there needs to be a systemic change starting from the top. It’s also important to note that while the current pandemic affects everyone, it has a disproportionate impact on the lower-income population, a segment that is already socio-economically marginalised.

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Another opportunity for the government to improve on its 2020 initiatives including financial inclusion can include further partnerships with the Fintech ecosystem as a delivery agent for these policies. For instance, the Central Bank of Kenya partnered with Safaricom, Kenya’s largest telco, to waive transaction fees on money transfers less than $10. This resulted in a deepening of mobile money usage and adoption as the Central Bank reported more than $1.5 million additional users pivoted to mobile money and 80% of 80% of transactions were within the band of the fee waiver – a clear indication of adoption of low-income households. Following this, the Bank expanded the initial 3-month waiver to run through the end of 2020. By working with Fintechs and Banks, the Central Bank will be able to provide an opportunity to grow both adoption of digital services while providing an opportunity to improve on the identification of Nigerians aside the use of the BVN (Biometric Verification Number)

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In March 2019, in a similar move to increase digital adoption, Ghana implemented policies and initiatives that saw a rise in active mobile money accounts – almost 15m users. While the adoption of mobile money is novel in Nigeria, alternative payment channels are not unfamiliar to the average Nigerian or the Financially vulnerable Nigerian. Experts argue that by focusing on the vulnerable and building financial solutions benefitting their case studies, there could be similar growth recorded as its sister countries. Some argue that cost of service is critical to scaling digital money which is usually solved by scale; but scaling digital payments will only be spurred via partnerships. The stakeholders such as the government should create policies that prioritise and incentivize young businesses to scale and succeed. Bundling of services, providing tax rebates, and implementing zero fees on businesses of a certain age or transaction volume threshold will serve to fast track financial inclusion of the vulnerable in the society.

Nairametrics frequently publishes articles from experts such as financial analysts, economists, researchers and investors. We also feature articles from guest writers and bloggers who wish to push their views and opinions through our platform.To get your articles on Nairametrics, kindly send an email to [email protected] and we will publish it within 24 hours of approval by our editorial team.

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Nigeria’s high recurrent costs, low revenue and escalating debt numbers

Nigeria continues to face issues of poor revenue generation and a lack of will to efficiently manage its expenditure.

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Debt, Fitch downgradesS&P downgrades Nigeria, Nigeria’s credit rating faces downgrade by Fitch, Oil price crash, Coronavirus: The trouble that lies ahead for Nigeria, Avoiding 2016: What Nigeria should do to fight the coming economic storm, Fitch downgrades, federal government (FG)

In the recently released Q3 2020 debt report by the National Bureau of Statistics, the total public debt was N32.22trn as of 30 September 2020, with local debt making up 62.18% of the total public debt in the period while external debt made up 37.82%.

This is similar to the country’s debt structure in the same period of 2019 when domestic debt made up 68.45% of total public debt and external debt made up 31.55%. Whilst debt to GDP ratio remains within the acceptable threshold, we are increasingly concerned about the nation’s ballooning debt service to revenue ratio.

READ: U.S. budget suffers a deficit of $3.1 trillion in 2020, as pandemic slams the economy

Recall that the Federal Government of Nigeria following a series of revisions to the 2020 appropriation bill arrived at a fiscal deficit of N4.98trn. Based on the finance ministry data, an aggregation of debt monetization (N2.86trn) and New borrowings (N3.28trn) was used to finance the deficit.

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The 2021 appropriation bill forecasts a budget deficit of N5.60tn which would be financed mainly by borrowings of N4.69tn, privatization proceeds of N205.15bn and project linked bilateral & multilateral loans of N709.69bn. The country’s financing structure is of concern when one considers that the budget is tilted more towards recurrent expenditure than capital expenditure and raises questions on the sustainability of the current fiscal practices.

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The significantly higher recurrent component of the budget continues to drag the country’s economic growth, resulting in poor infrastructural development. Spending more on capital projects can promote industrialization, improve local purchasing power and help the federal government’s diversification drive.

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Nigeria continues to face issues of poor revenue generation and lack of will to efficiently manage its expenditure. No significant cuts have been made to its overheads and statutory spending has continued to rise. Nigeria’s growing debt stock with little to show for it in terms of capital expenditure remains a major concern.

READ: Nigeria’s total public debt stock increased by N2.381 trillion in 3 months


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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How Africa’s youth contribute to the African society

The growth of technology has created an opportunity for several African youths to come up with new innovations.

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Africa has been called a lot of names – dark continent, the savage, the continent of Safaris, third world, emerging market continent and more recently, Sh**hole, but it is hardly called the Continent of Youths.

It is not a secret that the youths are the future of the African continent. They are already emerging and will be the next thought leaders, creators and innovators that will help galvanize the African continent to greater heights.

According to the United Nations in 2015, Africa has 226 million youth aged 15-24 and one-fifth of the world’s youth population. This means that one out of every five youth on earth is from Africa. The African Youth population is forecasted to grow by 42% by 2030. There should be a new focus on the youth in Africa, as we examine how much they contribute currently to the continent.

One area where youth are thriving well in Africa is in the tech sector. The sector has become an interesting source of Foreign Direct Investments and in 2019 accounted for close to half a billion-dollar raked into the continent. In 2020, – the Paystack/Stripes deal brought in about 200 million dollars. The growth of technology has created an opportunity for several African youths to come up with new innovations, which are even more helpful in the current fledging economic and social climate affected by the pandemic.

There are several examples of many African youths using technology to start new ventures. Mike Endale, an Ethiopian American based in Washington, D.C, who is the principal at BLEN Corp, an information technology firm that leads the Ethiopia COVID-19 Emergency Tech Volunteer Task Team and assists Ethiopia’s Ministry of Health. During the pandemic, they have recruited over 1,700 software engineers and have even created an Africa COVID-19 response toolkit.

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Temie Giwa-Tubosun, the founder of LifeBank in Nigeria, is another African youth making strides in the tech scene. Since its establishment in 2016, it helps to deliver 22,830 units of blood, according to Next Billion, to hospitals in Nigeria, which help connect donors to blood banks. Next Billion also stated that LifeBank conducts drive through COVID-19 testing and supply oxygen to health centers. The Lifebank recently expanded in East Africa. In December 20280, the US- Africa Business Center of the US Chamber in conjunction with the American Business Council Nigeria in recognition of the great impact of start-ups in the wake of the Pandemic, inaugurated a digital entrepreneurship competition.

African youths are also thriving in the entertainment sector, particularly in the music business.  The Afrobeats genre continues to rule the music world and the likes of Burna Boy, Davido, Mr. Eazi and Omah Lay, who are still in their 20’s, spearhead and remain the face of the genre. The international recognition of Afrobeats has given artists more visibility on the global forefront. This was the case for Davido, Mr. Eazi and Tiwa Savage, who were featured on the cover of the Billboard magazine. Music remains of significant importance and the youths are a big factor to the success of the industry.

In Nigeria, the music revenue grew from $26 million in 2014 to $34 million dollars in 2018, according to Statista. The music revenue in Nigeria is expected to increase to $44 million by 2023 as reported by Statista.

Africa’s youth are also flying high in the area of sports, particularly in soccer. Wilfred Ndidi and Kelechi Ihenacho of Nigeria (both players at Leicester City in the English Premier League) come to mind. Also, Percy Tau, a South African soccer player, who was with R.S.C Anderlecht in Belgium, will now be returning to his parent club, Brighton & Hove Albion in the premier league. Tau plays in a forward position and he is expected to make his debut for the seagulls (Brighton & Hove Albion) in the 2020-21 season of the premier league.

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Lastly, youths in Africa have also been influential on the activism forefront, especially in the last couple of years. This was evident in October of 2020, when several Nigerian youths took to the streets to fight against police brutality in the End SARS protests. In Uganda, Musicians like Bobi Wine’s foray into Politics first as a parliamentarian and presidential candidate is attracting more youth to get into politics.

Other youths like Christelle Kwizera, founder of Water Access Rwanda, have been involved in helping communities with access to water. According to Global Citizen, Kwizera’s plan is to eradicate water scarcity and to provide clean water for people in local communities. Currently, her organization has supplied 70,000 people in Rwanda with clean water. Kwizera’s efforts earned her the Cisco Youth Leadership Award at the 2020 Global Citizen Prize.

African youths definitely have a lot to offer in several sectors and this would be vital to the growth of the continent. African governments need to understand this and invest meaningfully and in a sustainable way on the youth population to reduce the migration drain.

The enthusiasm, the work rate, and efforts are why the current children of Africa have an opportunity to be wonderful leaders of tomorrow. With the right nurturing environment in place, Africa’s future is in safe hands.

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Written by Paul Olele

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World Bank’s global outlook amid COVID-19 surge

The World Bank’s projection for Sub-Saharan Africa (SSA) is expected to grow by 2.7%, while the expected growth for Nigeria is set at 1.1% in 2021.

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Recently, the World Bank published its January 2021 global economic prospects. The bank expects global growth to expand by 4% in 2021 from an estimated 4.3% contraction in 2020.

In the report, the World Bank expressed concerns about the recovery phase of many economies, especially the emerging and developing economies except policymakers can put in place robust and comprehensive policy framework to improve the existing frail business and economic environment caused by the unprecedented coronavirus pandemic.

The bank’s growth projection for advanced economies (AEs) and emerging & developing economies (EMDEs) including China was 3.3% and 5.0% in 2021 respectively. Sub-Saharan Africa (SSA) is expected to grow by 2.7%, while the expected growth for Nigeria is set at 1.1% in 2021.

The World Bank appears less optimistic about the growth prospects across the globe including Nigeria as many countries are enfeebled as a result of the ripple effect of the pandemic causing elevated debt levels, rising unemployment and with the new strain of Covid-19 in many countries resulting in renewed lockdowns and restrictions, growth estimates may not be met. The bank stresses that quicker vaccination process across the world would aid faster economic growth which could step up to 5%, while a possible delay in rollout of vaccines amid rising infections could hamper growth expansion to 1.6% in 2021.

The prospect of quick vaccination appears a little bleak to us at this time. To give perspective, according to the Center for Disease Control (CDC) a few days ago, only 6.7 million Americans had received at least the first dose of the vaccine and that is roughly 2% of America’s population in 2 months.

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The bank extended its weakened optimism to Nigeria as the country faces severe pressures from dwindling oil revenues, weak private investments, eroding consumer spending power and declining foreign investor participation.

In our opinion, restoring the economy to the path of sustainable growth requires government’s conscious efforts in addressing structural challenges impeding growth in the economy.


CSL Stockbrokers Limited, Lagos (CSLS) is a wholly owned subsidiary of FCMB Group Plc and is regulated by the Securities and Exchange Commission, Nigeria. CSLS is a member of the Nigerian Stock Exchange.

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