Sometime in 2019 – in those heady days of travel innocence – I went with a group of friends to Buka Restaurant in Osu, Accra, Ghana. Amidst much jollification one thing quickly struck me; the black and white Quick Recognition (QR) codes affixed on the top of every drink (canned or bottled) that was served.
I asked a waiter what that was for and was told that it was a way of knowing that taxes had been paid on each drink – excise taxes that is. Well, I know that Ghana does not joke with her taxes and so we weren’t surprised later to see listed on our bill, education tax, health insurance and so on. I wrote a long article about my journey and urged that Nigeria learns some lessons in revenue generation from the Ghanaians.
But on the aspect of financial market development and innovations in banking, I would have given it to Nigeria. We are known to have some of the best bankers in the world. That has its downsides though as we economists always fret about the wars between financialization and industrialization. We would rather encourage industries than banks. We also complain about why our banks’ profitability cannot translate to buoyancy for industries and other sectors.
That aside, of late even our central bank has been very ‘activist’ in action, churning out innovation after innovation especially in the payment systems space. We therefore not only have strong banks with reach in and out of Africa, but our banking publics have access to some technologies that are not otherwise available in some of the developed economies.
The transfer of funds through USSD (Unstructured Supplementary Service Data) which Nigerians now take for granted, is not available to the banking public in many a developed economy that I know. This makes me look at the Nigerian economy from a different angle. Perhaps we have a higher velocity of peer-to-peer small fund movements than other countries. Abroad, people may not send monies around to their friends and family as we do here. Life is structured and most salary earners have direct debit orders to established service providers wiping off their balances each month-end.
Apart from the use of USSD codes, the Central Bank of Nigeria and the Securities and Exchange Commission has licensed a handful of FINTECH companies, and notably in the payment services space, we have the Payment Services Solution Providers (PSSPs), the Payment Service Banks (PSBs), the Mobile Money Operators (MMOs), among others. Many smart Nigerian youths are involved in this growth space presently, making their mark. There are transactions which ease the average bank account holders’ life that are possible in Nigeria and not present elsewhere.
However, on learning about Ghana’s introduction of QR Codes into the payment service space, I had to take notice. If Ghana as a country does not have the smorgasbord of payment service options that Nigeria parades, on this one, it has trumped Africa. As a fact, only two other countries in the world have standardized QR Codes for tax payment (Singapore’s SGQR and India’s Bharat QR). Ghana has earned her bragging rights today as perhaps the only country in the world to have deployed QR Codes for payment services. The ongoing Covid-19 pandemic provided a good reason for that country to push ahead with the project, as it became another way of ensuring contactless payments even as economies begin to open up after very costly lockdowns. Ghana debuted in November 2020.
Advantages of QR Codes
The use of QR codes for payment services is quite beneficial though. Setting it up is quick and does not require any heavy investments on the part of retailers. It actually reduces the pressure on Point of Sales (POS) machines (some retailers may do away with them entirely). The technology can also work with smartphones as well as dumb, sorry feature phones. I have also heard someone call them ‘yam’ phones.
I am navigating hard not to sound offensive to those brands that were indispensable in the early 2000s. Oh my, they saved so many lives! So, this technology needs no new investment in any dedicated hardware. The down-to-earthiness of it all means that this could even drive more financial inclusion because it does not require much literacy, so people who have been unbanked can see opportunities to engage. Traders and shoppers in Katamanto, Agbogbolshie, or Makola markets in Accra, as well as their counterparts in Oshodi, Mile 12, Okrika and Kano here in Nigeria, can set up in a jiffy and be ready to collect and make their payments using this technology.
What is more? Users do not even need bank accounts. Mobile money will do as users are able to make payments from mobile wallets. This idea is smart as it has the ability to integrate the financial system across board, with all banks seeing themselves seamlessly, while banks and mobile phone companies also become interoperable. Well, so much for the big ‘grammar’
How does this work?
I did some research. For Ghanaians who are already used to seeing QR Codes (that black and white dotted square) on every excisable good (cigarette packs, canned or bottled non-alcoholic and alcoholic drinks, and even bottled water), the transition is seamless. For Nigerians, the way it will work is that a buyer can scan the displayed QR Code of the merchant (seller) – who is obliged to display same – enter amount to be paid and confirm, and bingo! an alert will be received.
The processes are simple but quite secure such as to prevent one paying into the wrong accounts. The merchant is also saved the trouble of shop attendants receiving money into their personal or other accounts. The payer (shopper) is sure that by scanning the QR Code, he/she is paying into the real account of the shop. The government is also surer that more transactions are passing through accounts rather than through cash.
This enables government to be able to collect more taxes and also have a better handle on money laundering activities. This governmental advantage should be added to what Ghana has been doing since three years now; using smart phone-readable QR Codes to drive excise duties and thus ramping up compliance in a big way. Nigeria could borrow from this approach. Win-win.
And oh! Lest I forget, if smartphones will only scan to see details of which account they intend to pay to, how does it work for other less-smart phones? In Ghana, the dumb phones have to dial a USSD in order to get on the same QR platform.
Like every innovation, constant updates and rule-tightening is required because some chaps have made it their business to crack and hack any innovation. A band of people exist whose generational career is to defraud other people of their hard-earned wealth. In China, a few instances came up where people set up QR Codes to try and get into people’s phones and steal information. They had to reduce how much could be engaged using this platform. But there are tech people who are making this approach more and more efficient and secure. Many restaurants in Nigeria already saved their menus in QR Codes which takes a customer to their websites and shows all the prices and displays. They say it’s a new world out there.
Let us engage!
TOPE FASUA, an Economist, Author and Entrepreneur writes in from Lagos.
CIFI: Despite CBN funds, can the creative industry thrive in this environment?
The Nigerian technology ecosystem is at its nascent stage, and beyond money, there is the need to ensure an enabling environment for operators.
Despite a frail 2020 for the Nigerian economy, there was a bit of silver lining. The Nigerian Information, Communication, and Technology (ICT) sector emerged as the leading segment of the economy aiding the country’s exit from recession by a whisker in Q4 2020.
The development, in effect, justifies to some extent, the earlier decision of the Central Bank of Nigeria (CBN) to create the Creative Industry Financing Initiative (CIFI) to support businesses in the following areas:
- Information Technology
- Movie Production and Distribution
The CBN began to contemplate the idea of the CIFI following the influx of private investment into the technology space in 2019. For instance, according to the African Tech Start-ups Funding report for 2019, Nigeria got foreign exchange inflows totalling US$137.9m in the period.
This continued into 2020, considering that despite the pandemic, the sector still attracted an additional US$122m in seed funding. Furthermore, the sector contributed 13.12% of the total real Gross Domestic Product (GDP) of Nigeria which came to N19.53tn as of Q4 2020.
Evaluating the progress made so far with the CIFI, as of Q3 2020, the CBN had reportedly disbursed c. N3.12bn in intervention to 320 beneficiaries. While there are concerns around the tenor of the loan for Software Engineers and accessibility of funds to other technological entrepreneurs, we laud the CIFI and encourage relevant agencies to do more.
The Nigerian technology ecosystem is at its nascent stage, and beyond money, there is the need to ensure an enabling environment for operators. For instance, the recent BVN concerns that rocked the financial technology space and the regulatory uncertainty which is a key risk for telecommunication operators among other concerns, are issues that should be decisively dealt with.
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
Book of States 2020: Vast resources, low industrial development
State governments have been heavily reliant on FAAC distribution to meet recurrent expenditure, thus making no room for capital spending.
The Nigerian Investment Promotion Commission (NIPC) in a recent report titled “Book of States 2020” highlighted the investment prospects of the 36 states of the federation including the Federal Capital Territory (FCT) to steer attention to the subnational investment opportunities in Nigeria. We note that the report is an outcome of a partnership between the commission and the Nigeria Governors’ Forum (NGF) to showcase the key investment opportunities for each state.
The report focused on the key areas of physical capital (airports, railway stations and seaports), resources (natural and minerals) and demography (population and labour force) of each state including their Internally Generated Revenues (IGRs), budget spending and household consumption.
While we acknowledge the decrepit infrastructure as a major hindrance to the growth of businesses and economic prosperity of many states, we note the little emphasis placed by the states on financing capital projects to attract private sector investments. Over the years, state governments have been heavily reliant on FAAC distribution to meet recurrent expenditure, thus making no room for capital spending.
The truth is that as long as state governments do not make desperate efforts to develop their internal revenue-generating capacity, the states in the country would continue to operate an inefficient rent collection system where they rely solely on FAAC allocation to meet basic needs such as paying workers’ salaries.
In our view, we believe the efforts to revive the ailing status of many states depend on the effectiveness and soundness of policies made to propel investments. Currently, Nigeria has enormous potentials to improve tourism given its ample amount of resources to attract both local and international tourists. Many countries in the continent such as South Africa, Kenya and Morocco have made great fortunes from tourism.
Over 50% of the states have recorded no foreign direct investments over time due to little or no requisite infrastructure needed to attract capital inflows amid untapped resources in these affected regions. Also, we believe the Federal Government needs to relax its control on some of the state-owned resources to enable the states better exploit these resources.
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.
Nairametrics | Company Earnings
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- Sovereign Trust Insurance Plc notifies stakeholders of 26th Annual General Meeting.
- Dangote Cement Plc to hold AGM on May 26th
- Linkage Assurance Plc proposes N500million as final dividend for 2020, and a bonus issue on its existing shares.
- VFD Group set to raise additional capital of N9.01 billion through rights issue and private placement.
- GT Bank records a 9% dip in profit to N45.55 billion in Q1 2021.