The recent surge in economic growth and activity has presented numerous challenges for the Nigerian Policy Makers. The biggest one they are facing is how to ensure that the growth at the macro-level of the economy is translated at the micro-level, ensuring greater financial inclusion leading to greater benefits for its people.
According to a 2014 survey by EFInA on Access to Financial Services in Nigeria, there are 93.5 million Nigerian adults, of which 59.8 million live in rural areas while 33.7 million live in urban areas. Of the rural population, about half are financially excluded, (28.6 million adults); while about a quarter of those who live in in urban areas (8.4 million adults) are financially excluded. Nigerian policy makers are determined to readdress these issues, with Nigerian Central Bank, determined to deliver on its policy of Cashless Nigeria.
Cashless Nigeria entails a wide range of policy initiatives ranging from public information campaigns, point-of-sale guidelines, restrictions on cash-in-transit services, and substantial fees to dis-incentivize cash withdrawals and deposits (although high kick-in thresholds mean these fees generally only impact on medium to large businesses). Nigeria has also introduced a National Electronic (e-ID) Card with payment capabilities.
This desired change has now found backing with corporate Nigeria as well. Question for corporate businesses in Nigeria is; how to make the transition to digital payments rather than if or when? The Better than Cash Alliance has just released two studies of Nigeria’s journey from cash to digital payments. The large businesses studied now pay on average 61% of salaries by volume electronically (compared to 31% in medium businesses and 15% in small businesses).
The study suggests that digital form of payments have been a massive success for large businesses yet among small businesses and individuals it has yet to find the same level of acceptance as it has done among large businesses. Furthermore, they also lack awareness about the benefits of digital payment acceptance. Payments by individuals make up the overwhelming majority of total payments by volume, but only 1% of these are made electronically. Still, the scope of Cashless Nigeria’s ambition is a clear sign that Nigerian policy-makers are intensely focused on bringing their economy into the digital age.
This clearly highlights that in order for digital payments to flourish government has to be the key driver of progress in the transition from cash to digital payments. Governments need to set clear policy frameworks, and then accelerate progress, leading by their example. For example, the Nigerian Government now makes all of its payments to businesses and 62% of its payments to individuals (by volume) electronically.
The challenge now is to convert the success in the corporate sector into advances in the small business sector and in P2P transactions. This will only be possible through sustained and astute policy of promoting digital payments across the whole economy rather than just the corporate sector.