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GDP Q1 2022: Rapid Telecoms Growth Drives Emefiele’s Financial Inclusion Agenda


May 29, (THEWILL) – The exponential growth of the telecommunications (telecoms) industry which manifested after rebasing the economy in April 2014, accounts majorly for the recovery seen after the headwinds of COVID-19 and two recessions. The National Bureau of Statistics (NBS) reports show that the telecoms group which dominates the ‘Information and Communication sector,’ has recorded significant improvement both in growth and contribution to the GDP since 2015.

Analysis of NBS Q4 GDP reports in the past seven years revealed that the Information and Communication sector recorded steadily positive growth, with the exception of Q4 2017 when it suffered a 1.46 percent decline.  In terms of contribution to GDP, the sector’s record showed a 36.8 percent rise between 2015 (11.04 percent) and 2021 (15.21 percent); and 46.8 percent between Q4 2015 and Q1 2022 (16.20 percent). The growth trend rose from 5.21 percent in Q4 2015 to 12.07 percent in Q1 2022. The telecoms was also the driving force in the exponential growth of the non-oil sector which pushed agriculture to the fourth position.

“The non-oil sector grew by 6.08 per cent in real terms during the reference quarter (Q1 2022). This rate was higher by 5.28 per cent points compared to the rate recorded in the same quarter of 2021 and 1.34 per cent points higher than the fourth quarter of 2021. This sector was driven in the first quarter of 2022 mainly by information and communication (telecommunication); trade; financial and insurance (financial institutions); agriculture (crop production); and manufacturing (food, beverage and tobacco), accounting for positive GDP growth. In real terms, the non-Oil sector contributed 93.37 per cent to the nation’s GDP in the first quarter of 2022, higher than the share recorded in the first quarter of 2021 which was 90.75 per cent and lower than the fourth quarter of 2021 recorded as 94.81 per cent,” the NBS report revealed.

While the trend is promising, the deliverables it impacts on the 2019 Financial Inclusion agenda of the Central Bank of Nigeria (CBN) Governor, Mr Godwin Emefiele, is noteworthy.

Financial inclusion means that people have access to basic financial services like a savings account, credit and insurance. The importance is on the fact that financial services have the capacity to empower people, create jobs and open up the remote areas for meaningful economic activities. The higher the inclusion, the better the quality of life for the people. A higher exclusion rate in Nigeria could lead to a poorer population, as lack of access to credit and insurance puts them at an economic disadvantage.

The CBN had in a circular in 2018 lamented that Nigeria was not meeting any of the agreed financial inclusion targets included in the 2012 Financial Inclusion Strategy. The Enhancing Financial Innovation and Access, EFInA, data showed that only 64.1 percent was financially included by the end of 2020. This means that 36 percent of Nigerian adults, or 38.1 million of the country’s 106 million adults of 18 years and above, remain completely financially excluded – a shortfall by 16 percent points from the desired target of a 20 percent exclusion rate.

To underscore its importance, Emefiele, in his second term agenda as the CBN Governor in 2019, put Financial Inclusion at the forefront of his 5-point agenda.  He set a target of 2024 to achieve 95 percent financial inclusion.

“Over the next five years, through initiatives and policy measures such as the Shared Agent Network (SANEF) and the payment service banks, we intend to broaden access to financial services to individuals in underserved parts of the country. Our ultimate objective is to ensure that 95 per cent of eligible Nigerians have access to financial services by 2024. We will also intensify our financial literacy and consumer protection programs such that current and eligible bank customers are fully aware of the financial services being offered to them as well as the cost of utilizing these services, which will enable them to make well-informed choices,” Emefield stated in his world press conference on June 24, 2019.

The CBN, thereafter, fired from all cylinders, especially by embracing the Payment Service Bank (PSB) initiative. The move was different from the seeming lackluster, or wait-and-see attitude, it had adopted before then – since 2018 when it rolled out the Guidelines (revised in 2020) for the Licensing and Regulation of Payment Service Banks (PSB) with little results. It eventually embraced the PSB approach after several years of “pressure” from members of the public who urged it to tow the path of successful African countries like Kenya, Ghana and Ethiopia that had become role models in the financial inclusion.

A PSB is a category of banks with smaller-scale operations and the absence of credit risk and foreign exchange operations. They are regarded as a hybrid of conventional banks and fintech companies; they provide banking solutions with the flexibility, accessibility and technology tools employed by fintech companies in driving the financial inclusion project. Their major window of operation is telecoms. Unfortunately, COVID-19 pandemic which altered the path of normal life across the globe and spread a wave of disastrous health and economic damage, was expected to constitute a hitch in driving the Emefiele Financial Inclusion Agenda.

In November 2021, the CBN granted Approval in Principle (AIP) to two of the country’s largest mobile telecoms service operators – MTN Nigeria and Airtel Africa. The AIP prepared ground for the final approval in six months’ time. This would enable them to operate grassroots financial services especially the Mobile Money channel which is expected to remove most of the barriers to obtaining bank accounts such as the Bank Verification Number (BVN) and other KYC (Know-Your-Customer) requirements.

The CBN had earlier issued PSB licences to 9Mobile and Globacom in 2020. While 9Mobile had launched its 9PSB in 2020, Globacom licence is still cooling off on the shelf – unutilised. Incidentally 9Mobile’s PSB project did not go far before it ran into murky waters for what experts described as lack of intensity. Aside from the announced partnership with Fluterwave in September 2020, the 9Mobile PSB project has remained in the silence mode.

In the second quarter of 2022, CBN granted final approval for MTN and Airtel to operate a full payment Service in Nigeria using their individual channels. MTN received the final approval to operate as Momo Payment Service Bank Limited (Momo PSB). Airtel subsidiary, SMARTCASH Payment Service Bank Limited (‘Smartcash’) was granted approval to operate a Payment Service Bank in Nigeria. The CBN had earlier granted Airtel’s subsidiary, Airtel Mobile Commerce Nigeria Ltd, a full “super agent” license, allowing it to serve customers of Nigerian banks, payment service banks, and licensed mobile money carriers.

The CEO, Airtel Africa, Segun Ogunsanya, said, “This licence enables us to expand our digital financial products and reach the millions of Nigerians that do not currently have access to traditional financial services. We are delighted to be able to pursue our shared agenda with the Nigerian Government, the CBN and traditional financial institutions to further deepen financial inclusion in the country for the benefit of all citizens and the Nigerian economy.”

The two major telecoms companies agreed that the license would enable them to reach the unbanked and promote the apex bank’s agenda of financial inclusion.

Their complete PSB license would allow them to operate financial services in Nigeria, including receiving cash deposits, processing payments and remittances, issuing debit and prepaid cards, operating electronic wallets, and other services.

“They will focus on rural areas and in places where Nigerians do not have access to banking services. In rural areas, they are also mandated to provide at least 50 percent  physical access points (sometimes known as kiosks). They may also have ATM galleries in some of their locations where customers can withdraw cash,” said Enoch Mbah, an ICT expert.

The two telecoms firms have earlier listed on the Nigerian Exchange (NGX) where they have become major stocks that impact the capital market tremendously.  While MTN is the largest quoted company by revenue, Airtel is one of the two highest priced stocks. (The other is Nestle Nigeria Plc.) MTN reported N1.7 trillion data revenue in its 2021 FY financial statement. Customers of the two major telecoms companies spent N986 billion on data in January and February 2022 as against N154.4 billion in the corresponding data. The two network providers are expected to use their PSB operations to create 100,000 jobs for the Nigerian youth; this will also boost the nation’s and states’ tax revenue.

The use of the mobile money-led financial inclusion model has been adopted by many countries that previously suffered high financial exclusion rates because it is one of the easiest ways to include the hard-to-reach unbanked population into the formal financial system.

With just a phone number, any Nigerian who does not have a bank account will most likely be able to ride on the infrastructure of any of the telecoms firms or other service providers to transact through an e-wallet or mobile money account.

“Given the unrivalled reach of GSM network operators across the country, with MTN covering over 90 percent of the nation’s population, its active engagement in the mobile money space will help increase financial access,” analysts at FBNQuest had said.

With the licence to MTN and Airtel, any Nigerian who does not have a bank account will most likely be able to ride on the infrastructure of any of the telecoms or other service providers to transact through an e-wallet or mobile money account, thereby escaping the hurdles of account opening or maintenance process. This will also take care of the 40 million unbanked adult Nigerians that the eNaira App has excluded because they have no access to a bank account which the App requires.

Analysts and industry experts agree that the financial services landscape has attained a revolution stage that is not only moving fast but expediently to the benefit of those in the rural areas and in the hard-to-reach environments. “We expect a massive turnaround in the financial services sector and a robust penetration by the telecom firms which are already familiar with the terrain where they have operated for over two decades. At this rate, Emefiele’s 2024 financial inclusion target will be attained and surpassed,” said Mike Akagha, a Mobile Money Operator.

To fight competition with the fast-growing telecoms inroad into the financial  services industry, the banks are transforming into holding entities to enable them to float PSB and related subsidiaries.