Uber killed Yellow Cabs. GoKada may kill Okadas.

Uber came to Lagos around 2014 and went straight for the middle-class crowd albeit, that market wasn’t fat enough. They soon found out that any businesses targeting recherché segments in Nigeria never last long. Uber pivoted as the recession gradually wore off as ride-hailing became the go-to for almost every middle-classer.

It didn’t take too long before a pricing war ensured. Boy oh boy, it was bloody! By the time the smoke cleared, it was you and your cousins, that had the last laugh. Go on soun!

Baba Simbiat, the yellow cab driver was the collateral damage.

As expected, ride-hailing became so successful in Lagos that it killed Yellow cabs in high-brow areas. After all, only the well-to-do were taking yellow cabs before, so they all just ditched loyalty for comfort and value. Or why would you prefer to stand in the sun to roast or in the rain to take a public bath when you can get Uber at your doorstep with just an app? With a zero-brain-needed simple app, you request your ride and a (sometimes) decent man or pretty lady (on your lucky day) pulls over in an air-conditioned Toyota Corolla after some 10 – 15 minutes. How easier and fulfilling could commuting be?

To make matters worse for Baba Simbiat, Uber charges 33% less and ensures that you get as comfortable as you could be because the driver knows how much a five-star rating on his feedback dashboard could do for him. Baba Simbiat doesn’t give two flying horse legs. Woe betide you if you are deemed to be dressed indecently, Baba will remind you that your mom failed parenting 101.

Putting that into perspective, you pay N1,000 as the Uber fare for a 9 km distance, but Baba Simbiat will charge your sorry ass nothing less than N1,500 for the same journey in his rickety cab. How cruel! It’s like being asked to choose between Shawarma and Agege bread.

Funnily enough, Uber was not the first guy on the block to try out technology on transportation, but they seem to have done their homework well to have their model scale. The first shot at the use of technology for transportation in Lagos dates back to 2009 when the “Red Cab” was launched. Unfortunately, Citrans Global Limited, operators of the “Red Cab” failed to leverage on its first mover advantage.

Since Uber’s entrance into the Nigerian market, a flurry of other ride-hailing platforms has emerged, some of which include; Taxify, NaijaTaxi, CabMan, PamDrive, SmartCabs, Holy Cabs, Oga Taxi, GoMyWay, Alakowe, Smart Cab, Jekalo, Ridebliss amongst others.

But all that is history for those that care to know…

But then. traffic in Lagos has become so bad that a baby born at the start of one in the morning is old enough to enter JS 1 before it clears. Consequently, the utility of Uber is trending towards zero on bad days.

We are always in a hurry to get to our destinations and Okada is the next best thing. But then some of us can’t be found dead, alive, or even comatose at the back of an Okada and it’s not because of feeling fly; A trip to Igbobi will convince you. Nevertheless, Gokada and Max.ng have brought the Uber model to Okada business in Lagos.

The Gokada way makes a whole lot of sense if you don’t want to spend the rest of your eternity growing old inside the toxic Lagos traffic. And they are getting cheap enough to take a small dent on the regular Okada business; probably in the same high-brow areas.

Fortunately for the ingenuity of Chinedu Azodoh and Adetayo Bamiduro of Max.ng and Deji Oduntan of Gokada, Akinwunmi Ambode led administration has banned movement of all 100 cc motorbikes which are mainly driven by the regular “Okada” riders, hence giving room for them to scale with their 200 cc motorbikes. So, asides from getting you quickly to my desired destination, these guys also ensure that you don’t go home with a new set of rashes and infections anytime you use their helmet. That makes you more comfortable to get the next ride and beat traffic with class, wearing a fine green helmet.

Well, the jury is still out if they would be successful but trust me, the demand far outstrips the supply. If this can remain for the next 5 years, then we’ll all have to trust the “Invisible” to do its thing and wipe out all the Okadas from the street of Lagos

Now back to the Yellow Cabs. They have virtually disappeared from Lekki, Ikoyi, Victoria Island, and Ikeja areas, and I bet you, in 5 years, they could be 100% gone. Why? Because they would never be cheap enough to become a replacement for buses and never convenient enough to match Uber and Bolt.

That’s checkmate for Baba, he had better start thinking of how best he could make money off his car. Well, maybe he’ll run to Ibadan and repaint his vehicle, but I heard Taxify is doing stuff there already.

I’ve been blogging for 18 years; here are a few things I discovered

I started blogging in April 2001, 2 years after blog became a noun and a verb. I didn’t even know it was called blogging; I just wanted to be the cool dude. I mean, companies didn’t even have websites in 2001 abosi abosi a recent graduate?

Since that time, over 100 million Nigerians have been born, 160million + phone lines have been sold, and banks have reduced from 89 to 21 + Five.

It has been a fun and a fulfilling ride. Done a few tech changes since I went live in April 2001 but dumb me lost all my postings between April 2001 and July 2005. Very sad but I’m probably also grateful as most of what I wrote before they weren’t better than chicken shit.

I learned a few things

  1. Writing is hard; so hard that I know only psychopaths enjoy doing it. Procrastination and writer’s block are the biggest enemies
  2. Only a few bloggers will get to super-stardom and nobody really cares about your writing anyway. But if you are driven by passion instead of applause, Hallelujah!
  3. The traffic doesn’t come unless you are hosting that sex video of Kim Kardashian
  4. Consistency is key
  5. If you don’t love blogging, you can still start. Nobody would beat you up if you fail at it.
  6. My grammar improved significantly over the years. When I look at some of the sloppy writing I did, I cringe so badly my teeth rattle
  7. I managed to stay out of trouble by focusing on the few things I love to write about
  8. I finally discovered that I really do enjoy writing even if it’s a difficult thing. Does that make me a psychopath?

What do I love to write about?

Science fiction, personal development, payments, and technology. At one time I posted a few jokes, but they were just too crummy for me.

Greatest Joys

  1. Someone used my article as a reference for his Masters abroad. It was gratifying
  2. I get the most traffic for the Nigerian constitution as I have managed to collate all of them

My top 5 favorite articles

  1. In 100 years, 9 women will deliver a child in a month
  2. The end is nigh. artificial intelligence
  3. Certifications broke your heart
  4. Ladies, please stand up
  5. 10 predictions for digital payments in 2019

The Myth Around Literacy and Financial Inclusion

According to EFInA (Enhancing Financial Innovation and Access), Financial Inclusion is “the provision of a broad range of high-quality financial products, such as savings, credit, insurance, payments and pensions, which are relevant, appropriate and affordable for the entire adult population, especially the low-income segment” (EFInA, n.d., p1). It requires that financial services (bank accounts, credit, insurance, remunerative savings, and payments and remittance systems) be available and accessible to the underbanked and unbanked.

The Global Findex database showed that as of 2017, there were about 1.7 billion unbanked adults worldwide (Asli et al., 2017). The database also revealed that nearly 50% of these people lived in Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan (Asli, et al., 2017) as shown in figure 1 below.

Figure 1:    Adults without a bank account in 2017
Source: Global Findex database
Note: Data not displayed for economies where the share of adults without an account is 5% or less.
Reproduced under the Creative Commons Attribution license

The map shows that Financial Exclusion is mainly confined to the developing world. Figure 2 below shows that 4% of the world’s unbanked adults live in Nigeria. Between 40-64% of adult, Nigerians are excluded from any form of financial services, and ownership of Mobile Money accounts in Nigeria stayed at between 0% and 9% between 2014 and 2017 (Global Findex Database, 2017).

Figure 2:    Distribution of Adults without a bank account in 2017
Source: Global Findex database
Reproduced under the Creative Commons Attribution license

A recent report dubbed Nigeria “the poverty capital of the world” (Kazim, 2018) and the World Bank’s 2018 atlas of development goals showed that Nigeria had 86.9 million people living in extreme poverty (The World Bank Group, 2018). Compared to the second runner up, the Democratic Republic of Congo at 60.9 million people, that is saying something. One just can’t help wondering if our leaders care even just a tiny bit that Nigeria has overtaken India (with a population seven times that of Nigeria) as the country with the most significant number of people living below $1.90 a day (World Poverty Clock, 2019). Well, that’s a rant for another day.

 

Figure 3:    Top 10 African countries with extreme poverty (June 2018)
Source: The World Bank Group SDG Atlas 2018
Reproduced under the World Bank’s Open Data Initiative

Financial illiteracy has been blamed for the statistics in Nigeria. It is argued that the main reasons for financial exclusion in Nigeria are poverty and illiteracy (Martin, 2008). As of 2015, the adult (15 years and over) literacy rate for Nigeria was 59.6% (Knoema Database, 2015). It is the popular belief that most financially illiterate Nigerians are the uneducated and the under-educated. Illiteracy has been linked, consciously or unconsciously, to financial illiteracy. This conception is even somewhat backed by research and statistics. But, is this really the case? Is it true that the illiterate shy away from financial instruments and services mainly because they are unable to grasp the basic concepts of finance? Is this really the full picture?

Financial literacy can be defined as the ability to identify, acquire and utilize financial information and services independently. It is demonstrated by the ability to display the basic skills needed to function in the present economy. These basic skills include numeracy, problem-solving and general prose literacy (Robson, 2012), as well as the ability to figure out abstract things. The interesting thing is that the very same basic skills are required to get a grasp of mobile smartphone technology as well. In fact, it can be argued that mobile telephone technologies are much more complex than financial technologies. This, however, hasn’t stopped the developing world from taking up mobile technology. Sub-Saharan Africa is the fastest-growing mobile region in the world (Damian, 2018) with over 400 million mobile subscribers and an overall subscriber penetration rate of 44% (GSMA, 2018). About 250 million of these mobile subscribers own a smartphone (Damian, 2018) and this figure is expected to grow to 690 million by 2025 (GSMA, 2018). And believe me, not all those 690 million smartphone owners will be university graduates. Just ask the Bodaboda driver in Uganda or Bàba Làsìsì who sells beef in Sábó market.

Figure 4:    Mobile subscription and penetration in Nigeria and Africa
Source: Jumia Mobile Report: Nigeria 2018

The big question now is: if digital inclusion is exploding across the continent, why then isn’t the same true for financial inclusion? When mobile phones first hit the scene in 1983 with the Motorola DynaTAC 800x, they seemed so advanced and brain-wracking, and they came with fat user manuals. The Motorola DynaTAC 800x cost almost $4,000, was about a foot long, and had a battery life of a half hour. IBM’s Simon was probably the world’s first commercially available smartphone. It cost about $1, 099 and was equipped with a calendar, address book, clock, notepad, PDA, email service, fax service, a QWERTY keyboard, and a touchscreen. In the 26 years since Simon’s debut, smartphones have come a long way. They have become more affordable and pretty easy to use. In order to stay competitive, phone makers have had to “dumb down” the previously complex technologies that run these devices by hiding these technologies behind easy to use interfaces. We went from having to tap like a million times just to get to the figure 9 to QWERTY phone pads with emojis. Even my three-year-old niece can pick out the camera and YouTube icons in a heartbeat and knows to swipe to unlock her mum’s phone. Now, Bàba Làsìsì, who didn’t go beyond primary 6 and who can’t speak a lick of English, has WhatsApp on his phone and can torment all his friends and kids with random broadcast messages that threaten doom and damnation if you don’t forward them to 20 people. He didn’t need a degree or the ability to speak Queen’s English to be able to take selfies on his phone or to send a message to Mama Put to let her know that her cuts of meat are ready. The figure below shows that a larger percentage of Nigerians can carry out several functions on a smartphone than are able to perform financial transactions.

Figure 5:    Phone user capability in Nigeria in 2017
Source: FII Nigeria 2017 Wave 5 Report

Why have people taken to mobile technology in a way that has seemed impossible with financial services and products? The truth is that people simply developed functional literacy around mobile phones – how to identify numbers, key in airtime tokens, read balances, etc. It helped that the mobile phone developers made the technology accessible and within reach of everyone, educated or not. The user interfaces on phones are very intuitive and make navigating the otherwise overwhelming world of technology pretty straight forward. It is easier for Bàba Làsìsì to recognize the phonebook icon and call button on his phone than for him to wrap his head around the notion of a revolving line of credit.

What then is this telling us about the so-called illiterate Nigerian? Illiteracy doesn’t necessarily mean that people are dumb or have low IQ. Illiteracy is mostly a function of access, or a lack of it, to formal education. Illiteracy cannot take all the blame for financial illiteracy and financial exclusion. In fact, a survey carried out amongst students from a large metropolitan university in South African revealed that 17% of the respondents were financially illiterate, and 68% moderately financially illiterate (Shambare & Rugimbana, 2012). This shows that education does not necessarily imply financial literacy and that even the educated still struggle with some aspects of their finances.

The world’s poor and un(der)educated don’t need to go to school or have a fancy degree to understand banking. The banks need to borrow a leaf out of Apple and Samsung’s book and present financial services and products in such a way that they can be understood using functional literacy. If undergrads, who are technically considered as literate if they could get to that level of education, don’t understand the concepts of compound interest or have any idea what a credit history is, how then is the man on the streets expected to do that? these banking concepts need to be simplified and made as easy to grasp as tapping an icon on a phone screen. If using an App required having to type in some code in C++, smartphones would have died out eons ago.

The simple truth is this: having a bank account should be as simple as using a mobile phone; having insurance should be as simple as understanding risk; services should be cheap enough to be within the grasps of the poor – the poor are very sensitive to pricing. In my opinion, banking for the poor should be free, and the banks should figure out how to make money off their larger customer base; understanding how your savings is performing should be as easy as saying “Ok Google.”

References

  1. Asli, D., Klapper, L., Singer, D., Ansar, S., & Hess, J. (2018). The Global Findex Database 2017: Measuring Financial Inclusion and the Fintech Revolution. Washington, DC: World Bank.
  2. Enhancing Financial Innovation & Access (n.d.). Financial Inclusion. Retrieved from https://www.efina.org.ng/about/financial-inclusion/
  3. FII Nigeria 2017 wave 5 report. (2018). Retrieved from http://finclusion.org/uploads/file/nigeria-wave-5-report_final.pdf
  4. GSM Association. (2018). The mobile economy: Sub-Saharan Africa 2018. Retrieved from https://www.gsma.com/r/mobileeconomy/sub-saharan-africa/
  5. Kazim, Y. (2018). Nigeria has become the poverty capital of the world. Quartz Africa. Retrieved from https://qz.com/africa/1313380/nigerias-has-the-highest-rate-of-extreme-poverty-globally/
  6. Kolawole, O. (2018). Jumia mobile report: Nigeria 2018. Retrieved from https://www.jumia.com.ng/mobile-report/
  7. Martin, O.N., (2008). Basic thoughts on reversing the trend of financial exclusion in Nigeria. Economic Reflections. Vol. B. No. 21. Retrieved from https://www.proshareng.com/admin/upload/reports/Basic%20Thoughts%20on%20Reversing%20the%20Trend%20of%20Financial%20Exclusion%20in%20Nigeria.pdf.
  8. Nigeria – Adult (15+) literacy rate. Knoema Database. Retrieved from https://knoema.com/atlas/Nigeria/topics/Education/Literacy/Adult-literacy-rate
  9. Radcliffe, D. (2018). Mobile in sub-Saharan Africa: Can world’s fastest-growing mobile region keep up? Retrieved from https://www.zdnet.com/article/mobile-in-sub-saharan-africa-can-worlds-fastest-growing-mobile-region-keep-it-up/
  10. Robson, J. (2012). The case for financial literacy: assessing the effects of financial literacy interventions for low income and vulnerable groups in Canada. Canadian Centre for Financial Inclusion. Retrieved from https://canlearnsociety.ca/wp-content/uploads/2013/01/The-Case-for-Financial-Literacy-EN.pdf
  11. Shambare, R. & Rugimbana, R. (2012). Financial literacy among the educated: An exploratory study of selected university students in South Africa. Thunderbird international Business Review, 54, No. 4. Retrieved from https://onlinelibrary.wiley.com/doi/epdf/10.1002/tie.21485.
  12. World Poverty Clock (2019). https://worldpoverty.io/

We ain’t alone, on Earth (probably)

Man has always been fascinated with the idea of there being other forms of life in the vastness of space, and from the middle of the 20th century, we have been relentlessly searching for extra-terrestrial life. Scientists have spent years searching for life in space, making postulate after postulate, sending outmanned and un-manned space crafts, and collecting and analyzing tons of data. What if what we have spent decades and billions of dollars searching for in vain is actually right here, right under our nose? What if there was another form of intelligent life, right here on earth, unknown, unseen, undiscovered?

About 71% of the earth’s surface is covered by its oceans. The oceans span 360 square kilometers of the earth’s surface and the deepest point in the oceans is estimated to be over 10 kilometers deep. Look at it this way: if you were to drop Everest into the ocean at this point, there would still be loads of space left over for a sky-scrapper at its top. Marine life displays a wider diversity than terrestrial life, and the classification system for marine life requires broader categories than terrestrial life does and contains more phyla. In fact, 30 of the 33 phyla that make up the kingdom Animalia describe marine life, and 15 of those 30 phyla are exclusive to marine life (Nybakken & Webster, 1998). This led scientists to conclude that life on earth started from the ocean and then evolved into different species as influenced by the environment. Life started out in the ocean roughly 3 billion years ago, and terrestrials didn’t come into the picture until 400 million years ago (Benchley & Gradwohl, 1995), making terrestrials “pretty young things” compared to the ocean dwellers.

Despite covering 71% of the earth’s surface, the ocean, and indeed life within it, is poorly understood by man. It would seem that since marine life accounts for 30 out of 33 phyla, more marine species would have been discovered and described by now. According to marine biologists James Nybakken and Steven Webster, 1.5 million terrestrial species have been identified and described, while only 250,000 of the estimated 400,000 marine species have been identified [2], and that from just about 5% of the earth’s oceans explored. In fact, we know more about the planetary systems in space than we know about the earth’s oceans, and we have sent more people to space than we have sent down to the deep sea (BBC, 2008).

So, the question now is, what if deep in the oceans’ depths, some intelligent life has evolved but never made it to the surface? Is it too far-fetched to postulate that somewhere in all that unexplored and little-understood depth, there is actually some form of life that is intelligent? If it is true that life evolved from the oceans, what’s to say that life did not continue to evolve at a more sophisticated rate in the depths than it did on land? You might ask, how can it be possible that we haven’t discovered them, or even heard a single peep from them? Well, for starters, for all of man’s intelligence and technological development, we have only been able to explore just 5% of the oceans so far. Imagine what the other 95% could hold. And just the same way we haven’t advanced far enough to explore their dark, mysterious kingdom, they might be just as oblivious of life above the surface. As a matter of fact, only three humans have ever ventured down to what we believe to be the deepest point on earth’s seabed, the Challenger Deep located in the Pacific Ocean. In 1960, Jacques Piccard and Lt. Don Walsh descended 35, 797 feet into the Challenger Deep and stayed just 20 minutes. They didn’t get to see much of the sea bed or collect much data because their submarine disturbed the sand on the sea bed and reduced visibility (CBC News, 2012). In 2012, Hollywood director, James Cameron (best known for the Terminator films, Titanic and Avatar) descended to 35,000 feet in the solo-pilot submarine Deep-Sea Challenger (CBC News, 2012).  He spent over 3 hours down there, hardly enough time to say hello or stay for dinner. With such limited exploration, it is very possible that we have gone unnoticed by these life forms (for all we know, they could have chalked up all that dust that Piccard and Walsh kicked up as some weird and unexplained phenomenon, just like we’ve been scratching our heads about the Polar Vortex and all the unusually cold weather it brought with it). My guess, though, is that they probably know about us, and being smart, they’ve decided to keep us oblivious to their existence. Who can blame them, eh?

You might argue further that how can this life form, should it exist, be considered “intelligent” if it exists in such “adverse” conditions as we believe to exist in the oceans’ depths. The first hole to pick in this argument is the fact that we are definitely limiting the definition of “intelligent” to our own biased and somewhat skewed criteria. I mean, we consider man to be “intelligent,” and yet we seem to have a one-track mind obsessed with either killing off our species outright or rendering our habitat inhabitable (the fact that we consider man intelligent says something about our intelligence!).

Is another question worth chewing over is this: who says that the true proof of evolution is the ability to breathe through lungs or walk on two legs? What if this hypothetical life form in the oceans’ depths has developed some intricate respiratory system that would boggle the human mind? What if they have developed sophisticated technologies that make life under all that pressure possible? What’s to say they haven’t evolved in a planar way that makes them impervious to pressure? What if they have evolved way beyond homo sapiens and have even more intricate sensory receptors that would make eyes look like relics from the age of the dinosaurs? Their sensory receptors could be so sophisticated that they could have a different level of sensitivity than humans to electromagnetic waves, seismic waves, radiation, and even other categories of physical phenomena that we don’t know diddly squat about, and those could be their “eye” and “ears” down there. The truth of the matter is we just don’t know, and going by what we do know about evolution and all we don’t know yet about our planet, it is possible for such a life form to exist. In my humble opinion, we had better be careful not to piss them off with our treatment of the environment. They just might decide they’ve had enough of our nonsense and decide to kick us off the planet. Just saying.

One last possibility is that we’ve encountered these deep-sea inhabitants, and we’ve all been oblivious of each other. Who knows, maybe one of them was out for a stroll when James Cameron rocked up, and he said to himself, “yet another weird tree has floated this way.”. Depending on how these beings have evolved, our sensory receptors might very well be inadequate to sense them. If they exist in a 2-D plane or even a plane with more dimensions than ours, we might yet be decades from developing technology that would be capable of discovering them. According to Stephen Hawking (1996), “one can define Life to be an ordered system that can sustain itself against the tendency to disorder and can reproduce itself. That is, it can make similar, but independent, ordered systems”, so we can’t disqualify them from being “life” just because they don’t exist in our known plane. And if the only pictures you’re coming up with in your head are of cyborgs or creepy-crawlies with tentacles and ten heads, you’ve been watching too many Sci-Fi movies.

Considering that the sun is estimated to still have about 5 billion years’ worth of hydrogen to burn before winking out, we can technically say that the earth, which is just about a hundred million years younger than the sun, will be around for quite some time yet (provided we don’t blow it up first). Adding to that the fact that multi-cellular organisms have been around for just 600 million of the earth’s 4.5 billion years (Choi, 2017), it is safe to say that there is loads of time to explore and discover more about our planet, or even to maybe evolve ourselves and finally earn that title “intelligent life”. One thing is sure, however: there is so much more than we know out there, or should I say, down there.


References

  1. BBC Video. (2008). The Blue Planet: Seas of Life [DVD]. United BBC Home Entertainment.
  2. Benchley, C., & Gradwohl, J. (1995). Ocean Planet: Writings and Images of the Sea. Harry N. Abrams Inc., New York.
  3. CBS News. (2012). James Cameron reaches record 7-mile ocean depth. CBS Interactive Inc. Retrieved from: https://www.cbsnews.com/news/james-cameron-reaches-record-7-mile-ocean-depth/
  4. Choi, C. Q. (2017). How did Multicellular life evolve? Astrobiology at NASA: Life in the Universe. Retrieved from https://astrobiology.nasa.gov/news/how-did-multicellular-life-evolve/
  5. Hawking, S. (1996). Life in the Universe. [Lecture]. Retrieved from http://www.hawking.org.uk/life-in-the-universe.html.
  6. Nybakken, J.W. & Webster, S.K. (1998). Life in the Ocean. Scientific American, Inc.

The Absence of Legal Infrastructure is the Bane of Consumer Lending

Adedeji Olowe, CEO of Trium Networks Limited
Babatunde Makanjuola, Coronation Merchant Bank Limited

 

If you ask the average Nigerian about his/her understanding of infrastructure, you are likely to get a response that depicts something tangible, e.g., airports, railways, roads, etc. This is not wrong; however, it is not exhaustive.

By definition, Infrastructure is the underlying systems and services, such as transport and power supplies, that a country or organization uses to work effectively. In short, infrastructure is the bedrock of any economy – it is just as hard to imagine traveling from Lagos to London without an airport (physical infrastructure), as it is to imagine civilization without laws and regulation (intangible infrastructure).

Financial services play a key role in economic growth: one cannot emphasize how important it is that scarce resources are channeled to its most efficient use, or the role of banking plays in economic prosperity. But what is the current state of Nigerian banks? Banks stay profitable mostly by fees and commissions, and income from investment securities rather than their core business, lending.

Persistent negative loan growth, and a corporate-concentrated loan book, for most banks, suggests that credit needed for economic expansion is not being extended to you and me, the everyday person, seeking capital to foster business and entrepreneurship. Figure 1 shows that credit (when considered as a percentage of GDP) to the private sector in recent times has been meager.

Figure 1: Credit to the Private Sector as a % of GDP

Source: CBN, Bloomberg

To some extent, it is hard to blame the banks; only just recovering from an industry plagued by poor asset quality and non-performing loans, most bankers play safe by extending risk-free investments to the Federal Government at high double-digits interest rates while they shy away from creating risk-assets. You have to ponder: what can be done to address this? First, let’s consider the opportunities that lie in the Nigerian retail loan market.

 

How big can retail lending be?

In the United States of America, one of the world’s most advanced economies, the retail market is estimated US$1.49 trillion in a US$19.3tn economy. Using the same inference for Nigeria, with an economy a fifth of the US (US$375bn), we can extrapolate about US$28bn or approximately N10.2tn. This is a quick and rough estimate. Of course, some form of country discount will have to be applied to this number as most Nigerians have no access to banking and financial services, see Figure 2. However, it shows the potential of Nigeria’s retail loan market if things can be done right.

Figure 2: % of banked adults around the world – Nigeria lagging on financial inclusion

Source: World Bank Database

As I said earlier, lenders hedge credit risks by lending to few big reputable corporates and invest the rest of their liquidity in risk-free fixed income instruments. This means most individual borrowers are denied credit.

If you have ever tried to secure a loan from your bank for business, then you probably know that most, if not all banks, require an arm, a leg and one of your kidneys before they are comfortable giving a line of credit to individuals. But this should not be the case in an ideal, business-friendly, and growing economy.

In a nutshell, banks are generally averse to lending to individuals and SMEs without an established reputation. The reason is simple: just the way the cost of power (fueling and maintain a generator) is a massive headache to most businesses, the cost of due diligence, credit assessment, and setting up legal checks for unsecured lending make unrealistically expensive to loan seekers – this is the bane of consumer lending.

The government has failed to change this paradigm in many ways. On the one hand, the FGN crowds out private sector credit by persistently offering juices yields to local financial institutions. Secondly, and more importantly, our government has failed to set up the infrastructure needed to facilitate unsecured lending; especially a legal system to protect lenders and borrowers.

 

How can this be done?

It would be helpful for the CBN and the banks, work closely with legal professionals, to take responsibility of fixing this challenge by developing a framework for retail, SME lending and loan recovery within the scope of their existing regulatory capabilities.

I dare say that our problems have already been partially solved with the introduction of the Bank Verification Number (BVN). The BVN is a unique identifier that links an individual’s bank accounts together and stores your personal and biometric data; think of it like a Social Security Number used in the US, but not yet as elaborate. It is an elegant and modern identity infrastructure that has leapfrogged the Nigerian banking from rudimentary to top-class in just a few years.

This framework should serve as the legal backbone for lending, such that there is appropriate recompense for anyone who does not pay his loans as at when due.

Imagine that whenever a customer takes a loan and does not pay back as at when due, the lender is required to contact the customer and specify a grace period, perhaps three months, within which the borrower is to fulfill their outstanding obligation else they would be reported to a national registry of defaulters. Of course, banks must show evidence of this notice to the registry periodically.

This is expected to prompt the borrower to pay back his outstanding loans before the grace period elapses. If within the grace period the customer pays back, all well and right between the lender and borrower.

However, if the debt extends beyond this period, more aggressive measures will kick in. The bank will push the data to the national registry which will then act on it with an automated warning with details of the consequences should the borrower fail to oblige. Punishment for defaulters will include preventing all of the debtor’s bank accounts from any further debits – this will also apply to guarantors of defaulters.

This will involve more details and a lot of fine tuning – we will also need a quick and reliable credit rating/scoring system – but it presents a possible view of how we can get the banks more comfortable with retail lending.

Furthermore, a lot needs to be done by the CBN and banks to ensure that potential borrowers are well informed about the benefits of taking loans and the consequences should they default. We recommend a campaign through various media platforms/outlets – analog and digital.

 

How could this impact the economy?

The potential cash injection to the retail and SME sectors will promote entrepreneurship, increase retail consumption which will subsequently drive manufacturing, wholesale, and retail distribution, etc.

There will also be the increased rate at which money changes hands (velocity of money) which ensures improved cash flow for many businesses – this increased value will grow jobs, reduce unemployment and slowly pull many of the populace out of poverty.

We all complain about that lousy road or local travel experience, or the lack of a rail system in a megacity like Lagos – this is valid and genuine issues regarding our infrastructure. But I don’t hear as much noise about how difficult it is to get a loan to start a business. Maybe we aren’t just looking at things right.

Nigerians are a vibrant bunch of people full of ideas and entrepreneurial spirit (look at the fantastic leaps of the entertainment industry), and all that we need is a system that will give the required platform to showcase this to the world.