Mr. Abayomi Olomu, the Business Director, Financial Service Institutions at CWG Plc, a Pan-African Information and Communications Technology company, has opined that there is a ray of hope in the horizon for the Nigerian telecommunications industry in 2021.
In this interview with Nairametrics, he projected that despite the impact of COVID-19 on the global economy in 2020, the industry is expected to grow by at least 5.7%, while the Financial Service Institutions (FSI) is to also experience growth due to increased transaction and a further improvement in the financial inclusion plan.
How would you assess the Nigerian economy in 2020?
The negative impact of the COVID-19 pandemic cannot be over-emphasized, still, the Nigerian economy has shown some resilience and there seems to be a ray of hope in the horizon, judging from certain macroeconomic indicators and recent government policies to help strengthen the Naira.
Taking a critical look into the Nigerian economy this FY2020, the GDP contracted by 6.10% in Q2 and had a mild downturn of 3.62% in Q3 (year-on-year) – this represents an improvement of 2.48% growth rate (comparing Q2 – Q3). It still means that Nigeria recorded two consecutive quarters of negative growth rate in FY2020, the performance of the economy in Q3 2020 reflected residual effects of the restrictions to movement and economic activity implemented across the country in early Q2. After these restrictions were lifted and businesses re-opened, some economic activities returned to positive growth. A total of 18 economic activities recorded growth in Q3 2020, compared to 13 activities in Q2.
The oil sector contributed 8.73 per cent to total real GDP in Q3 2020 – down from 8.93% recorded in the preceding quarter, Q2 2020. The non-oil sector contributed 91.27 per cent to the nation’s GDP in the third quarter of 2020, which is 3.54 per cent higher than in Q2 2020. The non-oil sector was driven mainly by Information and Communication (Telecommunications), with other drivers being Agriculture (Crop Production), Construction, Financial and Insurance (Financial Institutions), and Public Administration. In my opinion, we need to focus more on the non-oil sector to drive sustainability.
Probing further into some specific economic indicators such as inflation rate, unemployment rate, and interest rates, we will be able to make some certain inferences. Consumer Price Index (CPI) rose by 14.23% in October as against 13.71% in September and 12.13% in January 2020. The unemployment rate stood at 27.1% as at Q2 2020, even though this is beginning to reduce gradually.
The interest rate currently stands at 11.50% as against 13.50% in January 2020. Overall, 2020 has not been a great year for the Nigerian economy but the fact that the non-oil sector is growing, which ultimately compensates for the decline in growth in the oil sector is something to cheer about and hopefully, it can be the real motivation that is needed to diversify the economy. Also, judging by the available data and the current economic outlook, the economy was in recession during Q3 and hopefully, it will be out of it by the end of Q1 2021.
With COVID-19 still around, going forward, what do you think can be done to have an established e-Payment system in Nigeria?
The electronic system of payment has come to stay but the traditional trend of over-reliance on cash transaction by Nigerians happens to be the major challenge to this emerging system. Asides educating the populace on the need to switch to making transactions using e-payment options, the government needs to come up with favourable policies that will encourage people to use the e-Payment options now that physical contact has reduced.
The fundamental issue of trust must also be addressed. The government needs to take the fight against cybercrime more seriously and assure the people that it is safe to transact online. The regulatory body must ensure that the failed transaction rate is reduced to the minimum and peradventure it happens, a reversal should be done almost immediately. This can be achieved when there is a seamless line of communication between our financial institutions.
Lastly, licenses should be issued to more mobile money providers because they will be able to operate in remote areas where banks may not be situated. This will increase the financial inclusion rate by accommodating the illiterates and ignorant in the cashless policy agenda of the government.
How would you describe the CBN’s financial inclusion drive in Nigeria and its impact?
The financial inclusion drive has been identified globally as a vehicle for economic development and since its adoption by the CBN, it has seen the exclusion rate drop from 53% in 2008 to 46.3% in 2010 with a target of 20% by 2020. The channels for delivering financial services have been equally targeted by CBN, with deposit money bank branches targeted to increase from 6.8 units per 100,000 adults in 2010 to 7.6 units per 100,000 adults in 2020, microfinance bank branches to increase from 2.9 units to 5.5 units; ATMs from 11.8 units to 203.6 units, POSs from 13.3 units to 850 units, Mobile agents from 0 to 62 units, all per 100,000 adults between 2010 and 2020.
In line with CBN’s vision, CWG has world-class cutting-edge solutions that will help to bring this vision to reality. CWG has a range of solutions from ATM AAS to POS solutions. Till date, CWG has successfully installed over 4000 ATMs and manages over 2500 ATMs for banks across Nigeria. Our Finedge solution will further help to advance the Microfinance industry in Nigeria; Also, we have started pushing other solutions that cut across the commercial banks, Stockbrokers, mobile money providers, asset management, insurance and PFAs.
What are your predictions for the Nigerian Economy in 2021?
With COVID-19 vaccines now being approved for use by most countries, it means there will be an improvement in the global economy come 2021. The global price of crude oil is expected to increase, and the global manufacturing industry will also record increased production. That said, the Nigerian economy should be out of recession by the end of Q2 2021 with a steady drop-in inflation rate due to the proposed opening of the land borders and also, a global increase in production. The prices of raw materials should also reduce, and this will impact our manufacturing sector positively.
The unemployment rate is expected to contract by at least 1.3% before the end of Q2. With the recent AFCFTA agreement, there will be an increase in the GDP as many MSMEs will benefit from these initiatives. The GDP is expected to increase by at least 2.1% before the end of the year.
The Non-oil sector will continue to experience growth with the telecommunications industry expected to grow by at least 5.7%. The FSI will also experience growth due to increased transaction and a further improvement in the financial inclusion plan. State Governments will also want to increase spending as election year is drawing closer. They would want to embark on projects that will be campaign-worthy and as a result, we might experience a significant rise in government spending come 2021.
Many banks in Nigeria rely on CWG’s expertise to operate. What exactly is CWG offering financial institutions in Nigeria?
CWG offers ATM installation and management service to banks and the company is taking it further through her ATM AAS initiative. We provide cloud services and software solutions to over 60% of all financial institutions in Nigeria and have successfully implemented and supported Finacle, the foremost core banking application for most Nigerian banks. We also play in the Risk management space by helping the financial institutions mitigate against risk such as Employee Fraud, AML, Credit risk etc.
CWG also provides products and services such as Finedge (It enables MFB to effectively reduce operational costs and challenges relating to IT resources), Vericash (a banking software that delivers a robust and unified Pan African mobile solution such as mobile banking and mobile wallets), and POS in the FSI space.