Nigeria lacking in financial response to coronavirus, digital finance - IMF

International Monetary Fund’s recent publication of the Financial Access Survey (FAS) indicates that progress was made in Nigeria with regards to access to financial services like lending to small and medium-sized enterprises (SME) and digital finance.

On Monday, the IMF released the 11th issue of the report, which also incorporated Financial Access COVID-19 Policy Tracker by the IMF, which is a tool that records the various measures taken by countries around the world to ease the movement of paper money transactions to mobile money and also how they support the financing of small and medium-sized enterprises during this COVID-19 period.

The Financial Access Survey of 2020 indicated that Nigeria is lacking in the provision of digital financial services as opposed to other African countries and also developing countries around the world.

The IMF’s policy tracker centers on small and medium-sized enterprises and mobile money transactions, despite the fact that many countries around the world have also circulated data on various policy responses to the pandemic in relation to digital financial services.

The International Monetary Fund tracked and classified the policies that center on improving the use of digital financial services during COVID-19 into four main categories: (i) simplifying the transaction processes, (ii)increase in balance and transaction limits, (iii) making Know you customer requirement easy, (iv) reducing transaction fees.

As reported by the International Monetary Fund, the various steps that were adopted by the Central Bank of Nigeria (CBN) in the advent of the lockdown to reduce the spread of the COVID-19 pandemic incorporated the development of advanced online financial transaction services such as mobile money service providers as part of essential workers and businesses.

The Nigerian public was also urged by the Apex bank to reduce their use of cash as an alternative means of payment like mobile banking, USSD, mobile money, and internet banking to avoid getting infected by the disease.

With increased concern over the pandemic and its spread, many Nigerian continue to look for safe ways to recycle their money without getting any physical contact or risking exposure to COVID-19.

Most people, instead of mobile money, prefer investing their money in Forex trading. This is one of the reasons why Forex trading in Nigeria has been on the rise over the past year, and participation is expected to increase as many more people get educated about Forex trading.

Information from the International Monetary Fund tracker indicated that the Central Bank Of Nigeria had reduced the fees of using digital banking services so that more customers can access the services, updated in August.

As opposed to CNB, the Bank of Ghana, on March 20, 2020, stated that new sign-ups for the service would be free for the first three months, and many users were able to make transactions of up to GHS 100 with no additional charges and the Know your customer regulations in the country were made easy.

Ghana takes a key role

The Central Bank of Ghana wasn’t left out in the process as well, as they raised the mobile money wallet limits for customers, daily transaction limits were also increased, and all customers had an increase in total monthly transaction limit. Furthermore, MTN Ghana’s Mobile Money service amended the limits to September by extending fee waivers and also access.

The central bank in Kenya also made several policy changes to promote digital financial services in two of the categories listed by the IMF. The bank took some steps that started from March 2020 and will be operational through December 31, 2020.

These changes included removing the transaction fees on all transactions of up to KES 1,000. The Central Bank of Kenya also increased the limit for mobile money transactions, and there was also an increase in the limit of mobile money wallets. The bank also eliminated all fees non between bank accounts and mobile money wallets.

The Financial Access Survey 2020 indicated that Nigeria’s progress in financial access was weak before the pandemic flared-up this 2020. A good example is in the mobile money sector, which increased by 0.46% of GDP in Nigeria in 2015 to 1.53% in 2018. The value of mobile money transactions increased from 19.65% to 74.25% in Ghana during the same period.

Over a period of four years, there was an increase in the number of mobile money operators per 1,000 square kilometers by 22.32% of the GDP as of 2018, as opposed to 1,392.52 to1,742.99during the same period in Ghana.

According to the International Monetary Fund’s tracker, in 2018, Ghana recorded over 1,752.51 newly registered mobile money accounts for every 1,000 adults, as opposed to Nigeria’s 77.20 per 1,000 adults. Although in 2018, Nigeria has more ATMs per 100,000 adults than Ghana. In Nigeria, there was a 0.72 increase per 100,000 adults as opposed to Ghana’s 1.52 per the same number of adults.

In terms of the steps that the nation has taken to sustain small and medium-sized enterprises from the effects of the pandemic, it has been subdivided into five classes. (i) lower interest rates (ii) debt moratoriums (iii) financial assistance (iv) loan guarantees (v) tax relief. The International Monetary Fund noted that these efforts will support small businesses, which accounts for 90% of the world’s employment, and promotes the GDP in developing economies over 40%.

Within the coronavirus pandemic measures by the Central Bank of Nigeria to assist households and micro, small and medium enterprises that are impacted by COVID-19, an N50 billion was introduced by the apex bank Targeted Credit Facility, that is controlled by NIRSAL Microfinance Bank.

As accounted for by the International Monetary Fund tracker, these measures indicate that the Central Bank of Nigeria only took response steps in one of the named categories for small and medium-sized finance, under financial assistance.

It is good enough to say that, although in May 2020, the Central Bank of Nigeria made a reduction of its monetary policy rates from 13.5% to 12.5% and later down to 11.5% in September 2020, the move did not focus on intervention for small and medium-sized enterprises. The pause on loan repayment ordered in March by the Central Bank of Nigeria was a response for development finance institutions, not commercial banks.