The Boston Consulting Group (BCG), a global management consultancy firm, has proposed the promotion of financial inclusion, equitable distribution of resources, infrastructural development and formulation of requisite fiscal policies as initiatives that will drive Nigeria’s post-Covid economic recovery.
The measures were highlighted in a recent BCG report titled: “How to Forge an Inclusive Post-Covid Recovery in Nigeria”, authored by Tolu Oyekan, a Partner at the firm’s Lagos office. The report stated that the initiatives, which form part of Nigeria’s sustainability plan, are critical in staving off the Covid-19 induced economic contraction, which could further compound the poverty situation in the country.
According to 2021 World Bank projections, Sub-Saharan Africa will experience a severe economic slump. It is predicted that the negative impact on Nigeria, being the continent’s largest economy and most populous country, will be grave, especially amongst the poor. A steep drop in per capita income could lead to an increase in the number of vulnerable Nigerians. An estimated 83 million Nigerians – about 40 percent of the population – already live below the poverty lines in the country.
Oyekan, however, posits that a financial inclusion drive through infrastructural intervention projects, will reduce Nigeria’s poverty population and also have a positive multiplier effect on the Nigerian economy. He listed the electrification of rural households through a pay-as-you-go solar service and cashless transactions via telco induced mobile money platforms, as examples of such infrastructural intervention projects.
The Nigerian government has a target of installing new home solar power systems and mini-grids for over 5 million low-income households by the end of 2023. Many of these households either have no source of power, or rely on small, inefficient generators for electricity. These families will need to use PAYGo, an installment financing option offered with mobile money bank accounts, to purchase the installation kits for these systems. Customers who have an existing mobile money account have a higher chance of accessing the facility than others who don’t.
Speaking on the impact of the project, Oyekan said: “Our analysis shows that a PAYGo loan would make solar kits affordable for about half of the 31 million households that do not have reliable electricity and may also considered to be in a low-income bracket. What’s more, we found that 3.2 million out of 17 million households currently using kerosene and candles as their lighting source could afford the monthly PAYGo payments based on their current spending on lighting, plus about 10 per cent of their nonfood budget.”
He highlighted a recent USAID research which estimates that between 15 to 30 percent of PAYGo solar customers will create a credit history for the first time when they purchase a solar home system with a PAYGo plan. Stressing the importance of having a credit history and financial footprint, he said: “That credit history could, in turn, lead to other loans for large expenses, such as school fees, which can consume up to 40 percent of a family’s annual income. Credit histories are also a critical driver of growth for small-business enterprises and first-time business entrepreneurs.”