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, SubSaharan 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.
Tolu 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, Tolu 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.”
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