Without access to credit for everyone, Nigeria can’t hit the growth it wants

Credit changes lives. Access to credit boosts education, entrepreneurship, and economic growth. To unlock Nigeria’s potential, the government must protect lenders and borrowers alike.

Let’s start with a story about Bimpe and Uche. Bimpe, a graduate of Sociology from the University of Lagos, is working an underpaying job with no growth prospects. With a salary of N100,000 and more mouths to feed than she could afford, Bimpe was miserable. She couldn’t continue living that way and she decided to start a business. The thing is, Bimpe is a very talented seamstress with a flair for sassy African fashion you see on Instagram, and you go like “whoa!” She could easily earn a lot focusing on couture full time, but she needs about N800,000 to start. She barely had N5,000 at the end of the month after all necessary expenses. Where would she get N800,000 from?!

She tried to save aggressively but life kept getting in the way and it was nearly impossible. She had nowhere to turn to get a loan that size either. Her numerous but failed efforts to gather the funds she needed made her burnout and less focused at work. She lost her job and had to resort to petty trading, barely making ends meet.

Uche’s story is a little different. Uche didn’t have the opportunity of attending university like Bimpe. However, he did have the opportunity of an apprenticeship with his uncle who owns a logistics business and all Uche wanted was to start his own logistics company after his ‘freedom’. After a couple of years Uche was finally free and then his eyes cleared when he realized he was so focused on learning how to grow his own business that he forgot the ‘seed’ he needs to grow his business isn’t the kind you find easily.

Well, Uche’s seed came in the form of a loan from his cooperative and he bought his first two dispatch bikes for his logistics business. Within 10 years, Uche’s business grew exponentially and he’s now a big man with many delivery bikes, buses and even trucks for nationwide delivery.

Credit saves.

A loan saved Uche. And most likely many others who could only afford to build good lives through the thousands of jobs Uche created through his business. Now imagine if a million Uches got loans like that and built a million successful businesses. Imagine if some other Uches didn’t even have to wait and could get loans to go to school and get good jobs. Enough with the daydreaming, back to reality: Bimpe. Bimpe whose promising life was completely derailed because she couldn’t access a loan or any line of credit.

The fact remains credit completely transforms anything it touches and it’s essential to grow any economy. Without credit, growth is limited; stifled even. Every N1 injected into the economy has the potential to create 10x value. This phenomenon is known as the ‘multiplier effect’.

What is the multiplier effect?

I won’t bore you with the technical jargons; let’s leave that for the economists. For the purpose of my crusade for credit, the gist of it is that for every injection (investments, capital expenditure, etc) into the economy, there’s an amplified ripple effect on the value and income generated within that economy.

Think about this: you’re on your way back home after a long day at work and hunger pangs are flogging you worse than your primary school teacher! A woman selling roasted plantain by the roadside comes to your rescue (not all heroes wear capes, some tie wrapper) and you pay for the goods. You have not only put money in the hands of the roasted plantain seller, you have also put money in the hands of her plantain supplier, who in turn puts money in the hands of the farmer and even the delivery truck driver and offloaders. The list goes on. Everyone makes money. That’s what the multiplier effect is.

So should Nigeria miss out on this potential for prosperity because people don’t have money right away? That’s absurd.

Give them money to build their dreams!

Let’s pump credit into education and reap prosperity for everyone

Only about 1% of Nigerians are in the universities. I’m sure if we were to conduct a study to find out the relationship between the level of education of Nigerians and the poverty rate, we’d discover they are married with three children.

There are a few barriers to getting a quality tertiary education in Nigeria but the highest barrier of all is simply that people can’t afford it so they don’t bother. They focus on providing for themselves and their families instead. The sad truth is that this deprives them, and even their generations to come, of the chance to ever make it out of poverty. The poverty trap didn’t come here to play with anybody.

There’s no denying that the student loan scheme in the US comes with its own wahala. Student loans in the US allow people who would never even have dreamed of a university education to attend some of the best schools in the world. The US’ global leadership is directly correlated to the quality of its education. Go figure!

Nigeria has now followed suit and introduced the Student Loan (Access to Higher Education) Act, 2023. Whether this is practical and sustainable remains to be seen but the idea is definitely welcome. With this, Nigerians can access quality education previously out of reach for so many. This could be pivotal to the quality of life for the beneficiaries’ generations to come.

With these loans, students get access to a good education; if they are focused and graduate with a good grade, they greatly increase their chances of landing a good paying job and living a productive and prosperous life. And guess what? The ability to earn the income they do over their lifetime can be directly traced to their access to credit.

The logic applies too even if the student chooses to start a business after graduating. They create jobs for others, they pay taxes and they have more money for consumption. Those who benefit from the jobs they create also pay taxes and increase their consumption. Rinse. Repeat.

The deal gets even sweeter. Why? Because people with better lives are able to give their children better lives too. The value generated just keeps multiplying. Did I just solve the poverty trap or what??

The simple fact is, no great country has ever emerged without educated minds and the US leads the pack with robust financial support and credit for students. Without Nigerian funding education like our lives depends on it, we wouldn’t get anywhere.

Don’t turn off the money gun just yet: entrepreneurs need loans even more

It just makes sense to give money to people who have the capacity to grow it, doesn’t it?

Say an entrepreneur starts a business with a loan of N5 million. You know what this means for the economy? Jackpot. They create jobs. They purchase materials from suppliers. They pay consumption and corporate taxes.

It doesn’t stop there. The suppliers are also able to create even more jobs with their increased income and every single one of them has to pay taxes to the government too. This same value chain is created even in small businesses. Remember the roasted plantain seller who saved you in traffic earlier? Take even the Uber drivers who take loans or take advantage of hire purchase options to buy a car and pay it off over some time. They’re big boys now o!

The fact is, everytime you give someone money, you empower them to create value. Cash injections end up becoming a powerful creative force to drive value creation in an economy many times over.

Credit. The gift that just keeps on giving.

If credit is so great, who’s hoarding it and why?

The value the economy stands to benefit from accessible and affordable credit is apparent so where’s all the good credit? It’s there but lenders aren’t lending. Why? Because no one is protecting them. We talk so much about borrower protection but if you hear the terrible things borrowers are doing to lenders on a daily basis, you’d quickly offer lenders a box of tissues for their hot tears.

Nigerians take loans and don’t pay back. This discourages lenders and forces them to limit the credit they offer to small ticket loans and high interest rates to account for their risk exposure. The problem here is that these kinds of loans are utterly useless to people who need a substantial cash injection to create significant value.

The government needs to protect lenders too. They can’t expect to be able to meet the credit needs of over 200 million Nigerians alone. Or do they think they can?

Nigeria isn’t the guinea pig and this isn’t an experiment. China did it already

If you want to know how effective credit is in transforming economies, just look at China. Their state-owned enterprises (SEOs) received low interest loans and the economic benefit was massive. With these loans, the SEOs were able to ensure economic stability, trigger substantial economic growth, reduce their unemployment rate and commit to undertaking large-scale infrastructure projects.

These loans came with their own challenges too but answer me this: Is China a superpower or no?

Then that’s that about that.

Let’s even come back home to Nigeria. We’ve had economic miracles borne out of credit as well. Take Dangote and Otedola whom all the kids look up to. Despite hailing from wealth, Dangote took out a loan of N63 billion, inclusive of $75m from IFC, to build the Obajana cement factory. Otedola did the same with a much larger syndicated loan towards Zenon Petroleum and Gas in 2007. Even the telecoms giant, MTN, signed a loan deal for N200 billion just four years ago when it floated its shares on the stock market.

Dear Nigeria, think smart and think fast!

The case is clear for Nigeria.The Government needs to think smart and think fast.

For the Government to take heed and jumpstart the economy, here are a few no-nonsense but simple things they can do immediately:

The government should step in beyond borrower protection and protect lenders as well and encourage them to lend more. Of course, this should be done with recourse to checks that guide lending: ethical interest rates, due process, etc.

The government can create a set of rules, regulated by the CBN that explicitly protects lenders without bureaucratic red tape: instead of lenders and borrowers dragging each other to court, lenders can report defaulters and get cooperation from defaulters’ banks to settle the loan. They should consider giving lenders access to use the global standing instruction (GSI) and putting it to much better use.

For the suggestion above to work, loans can be registered by lenders with a regulatory body and perhaps be given a limit to what can be recovered on loans in default e.g lenders can only recover their principal, with no penalties or interest when a loan goes into default. In the same attitude of transparency, an increase in the interest rate must also be communicated to borrowers and the authorities ahead of time before implementation.This process should be seamless and possibly electronic.

In summary, if the government doesn’t use credit to leverage the economy, the exponential growth we so desperately need will never happen. The best time to start was years ago. The next best time is now.

If your employer won’t give you a staff loan, ditch them!

Access to credit in Nigeria is tough, limiting dreams and necessities. Companies offering staff loans isn’t a luxury, it’s essential for motivation and productivity. If your employer won’t help, it’s time to find one that will.

Your employer is probably demanding your arm, legs, and probably one of your kidneys. All fine and good; aren’t we all family? Not so fast: if they can’t do what families do by giving you a decent access to loans when you need it instead of loan sharks swimming around the murky waters of Nigeria, then maybe time you got another job.

You want to know why? Here we go!

In Africa, and especially Nigeria, we practically save for everything important for our lives. Rent, getting a car, paying school fees. Woe betides you if a nasty medical issue arises. That could be the end of you, or even worse a loved one. After all, we know most of us have poor savings.

Even much more, because there is no access to loans, most Nigerians aren’t able to live their dreams. They can’t go to good schools or send their kids there. They can’t live in their own homes. They can’t get a decent car. They can’t even get a good laptop to start working remotely. Oh right, even if they get a new laptop, what about getting a generator or solar inverter to keep the light on when PHCN strikes?

Getting a loan is one of the fastest ways to get things done. But getting a loan in Nigeria is treacherous. The bank you have been banking with for years is suddenly airing you or making demands even an angel can barely meet. The lending companies, on the other hand, are asking for interest rates so high you don’t know if you would give them your soul instead. You have also heard stories of how lenders disgrace people who were late to make payments.

No wonder less than 2% of Nigerians have access to credit.

Looking at the challenges of getting a credit when needed, it’s even 200% harder if you are working because this would be distracting, and demoralizing. And if you are slacking at work because you’re trying to get a loan, you may as well lose your job. Triple jeopardy!

But you know what, don’t we turn to family when things go awry? Didn’t your boss just say last Friday that you’re family, to justify making you work the weekend?

So why isn’t your company lending you money? 😵

Don’t look confused. Companies offering their staff loans have been a staple of professional life for centuries. It’s almost not a privilege; it’s a right.

You wouldn’t even believe it, most of the middle-class to upper-class people in Nigeria today got a leg up in life with decent or cheap loans from the companies. Ask your CEO, Chairman, founder, etc. how life started for them. None of them was that thrifty or better than you – they all got loans at ridiculous rates to build the beautiful lives everyone admires.

I for one got a cheap mortgage when I worked at United Bank for Africa without any background check. Thanks UBA! My first cars were gotten with zero interest company loans, I got home appliances through partnerships with my employers.

While lending can be scary because many people don’t pay back, companies don’t have the fear that lenders have – they know you 100% in character and in truth; if you don’t pay your loan, you would be sacked. Oh! They even deduct the money from your paycheck and give you the balance.

And it’s not because companies are nice (some are indeed very nice, like Lendsqr). Giving loans to staff keeps them motivated, focused, and happy. Taking away the distractions of hunting for loans at the time of need is super important for productivity and employee happiness.

And what can companies do for you?

In truth, asking for a mortgage in this economy is killing even for the fattest companies. But at the minimum, they can help with personal loans to sort out things you can’t tell HR. They can help with asset finance to get devices, new generators (hoping you have the fuel to power it), inverter and solar panels. They can even help with loans for holidays – send you to far places so that when you come back, you are full of inspiration and deliver amazing quarters.

So what should you do? Just ask your HR for a company today. If she airs you, ask your founder, MD, Chairman, whatever.

If your best friends and family can’t come to your aid when you need them, are they still friends or family? If your employer can’t save your hide when you need them the most, ditch them!

I don’t need my eyes anymore.

After 11 years, I finally checked my eyes and doubted if I needed new glasses. The doctor explained how aging affects vision, and now that I think about it, soon there may be futuristic eye implants and we can bypass natural sight.

Last week, I finally dragged myself to check my eyes out and it was an interesting experience of doubting if I may not need those pairs anymore.

You see, my gazing globes have been dimming for a while. It got so bad I was worried I could mistakenly stroll into someone else’s apartment and get myself some slaps. It has been almost 11 years since I got my first pair but unfortunately, because I use the laptop or PC a lot, I tend not to use them.

I promptly got them lost.

So I tried to use contacts, but sticking those stuff into my eyes was an exercise in self flagellation. And even when I managed to stick them on with pepper in my eyes, I still never saw things properly.

I simply resigned to fate. Hoping to outlive the dimness.

Back to getting new glasses. The doctor was pretty nice and pretty as well. She showed me a large scale model of human eyes and ran me through the different parts (or what would you call them?).

She pointed out that the eyes shoot over 10 bits per second through the optic nerves. But as we get older, or with some unfortunate souls with Glaucoma, the nerves start getting on their own nerves – struggling to keep up.

It struck me, if we could do ear implants or change the hips for the elderly, what if we could do something that shows light and vision directly to the optic nerves, bypassing the eyes?

Does that mean we won’t need eyes?

What if those cameras are so good – 8k vision. 20/20. Amazing shit!

What if we could overlay it with web3 🤣🤣 and some few porn?

What if we could send movies directly to it?

What if it could see in 360 so I could see what my annoying kids are doing without me being their

What if the signals could come from my house cameras when I’m not home

Or how would it be getting signals to my brain with a drone?

Or as a scientist, I’m fed by signals from a microscope.

Do I still need eyes?

10 predictions for digital payments in 2023

2022 was full of surprises, challenging even the most seasoned predictors. Here are my top 10 predictions for 2023, from fintech battles to regulatory shifts and market consolidations.

2022 was the year that took everyone by surprise – it was the year that soothsayers like me got rapidly defenestrated because, to be frank, our predictions are educated guesses. I’m not sure a thousand random monkeys would have done worse.

If someone told me that tech valuations would have such a bad rout, I would have bet my entire savings and two of my limbs.

I’m not sure the future look-see would be any different this year.

Nevertheless, to err is human but to predict is also human. So, let’s do it.

#1 CBN loses the cashless war. Again.

When the Central Bank of Nigeria came out with the new Naira notes and cashless policy to go with them, like bread and butter, every smart person hailed it as one of the best policy approaches to drive adoption of digital payments. But then I was publicly cautious that cash isn’t something that gives up easily. Unfortunately, the CBN lost the initiative by not properly managing stakeholders, and with the help of corrupt politicians, cash will probably win this round.

#2 Telcos lose the USSD war. Again

Banks have refused to play ball with telcos as far as paying for USSD sessions is concerned. And trust me, it’s not a valid game as the arguments from the telcos to make banks pay for USSD are so asinine I wouldn’t understand why they are even dragging banks into it in the first place. Banks won the round but the telcos are threatening to come back again. This time around, the banks will spank them, even with MTN and Karl in the ring, decisively and conclusively.

#3 Top super agent networks crack cardless transactions

Everyone knows that super agents have been growing like wild vines. But so far, the super agents have only been serving the financially included who have debit cards. Eventually, their growth will peak. But knowing the smart guys running the show, they will push into doing cardless transactions as the innovation will extend new vista of growth. Expect anyone to be able to do transactions without cards at any agent location around you soon.

#4 Market coalesces around few major fintech players

While it doesn’t snow in Nigeria, the funding winter is pretty cold and our teeth are chattering. That means with no immediate cash available, there will be tons of funerals for dead startups not able to fund their sustenance. The truth is, the problems startups are solving won’t disappear, so those lucky enough to be alive will continue to solve these problems, expand and grow. At the end of the year, only a few major and more powerful players will remain.

Should we bet on the winners?

#5 The new debit card scheme misses the mark

The CBN, NIBSS, and banks really do love to solve the payments problem in a cost-effective way. You can’t blame them – running transactions with international card brands can be quite expensive, especially when all the FX margins on international transactions have vanished. So they came together to launch a new card scheme starting in January. But this may miss the mark because of various reasons: #1 they don’t have the experience of the incumbent scheme operators; #2 the current operators won’t really help, they may even make sure it doesn’t work; #3 if it doesn’t work well, the market will dump it like a bad habit; #4 read 1 to 3 again.

#6 FCCPC lending regulation loses relevance

Last year, some lenders were acting like absolute troublemakers – their behavior was so bad it was practically criminal. But when the FCCPC tried to fix the problem, they conveniently forgot to address the root cause – borrowers just don’t like to pay up. By ignoring the lenders in their quest for privacy, the FCCPC has no allies in the industry to help them succeed. And when the FCCPC gets tired of chasing down lenders, which will happen soon anyway, the entire FCCPC compliance will fall apart.

#7 Moniepoint becomes a commercial bank

This isn’t even a prediction; it’s as certain as my dog not becoming the next president of Nigeria (I don’t’ve a dog and even if I did, nobody would vote for it). Moniepoint is an MFB that became the financial infrastructure for Teamapt and is growing faster than thunder. It makes logical sense for Moniepoint to become a proper commercial bank: #1 it can now use its excess liquidity to do treasury transactions and make tons of money instead of counting pennies; #2 it can start banking larger customers to develop stronger clout (think corporates); #3 it can do large credits to FMCGs and lock down the entire value chain; #4 What else won’t it do?

#8 MTN PSB becomes the largest super-agent

Here’s the one thing you don’t do with Karl Toriola – bet against him. So come 2023, putting the fraud and madness of 2022 behind him, MoMo, the MTN bank, will start to use the best of its network leverage to catch up with Moniepoint to become the largest agency network in Nigeria. If it cracks the cardless transaction, then that will be its leverage.

#9 Startup investment recovers because nothing lasts forever, not even bad news

While the winter may seem to drag on forever, and the sun seems not to shine again, things will start thawing. You see, nothing lasts forever. Around Q3 and Q4 of 2023, VCs will be back in the investment arena, seeking out the next Paystack, Flutterwave, and Teamapt. This time around, though, the due diligence will be worse than a colonoscopy.

#10 CBDCs, including eNaira, are laid to rest

In 2022, the crypto winter started, and boy, it will be cold and long. The winter has already frozen NFTs, numerous exchanges, and tons of tokens. Meme coins are now, guess what, just meme coins! Expect the same fate for Central Bank Digital Currencies (CBDCs), including our dear eNaira.

The problem with CBDC is that it is trying to solve a problem that doesn’t exist. Cryptocurrencies were created to sideline regulations and central control, so the concept of CBDC itself is anathema.

The CBN relaunched the eNaira and got banks to line up behind it. But we all know that nobody is using it for anything. Maybe they should just allow the ghost to rest in peace this year.

Wondering what happened the previous years and the predictions? Read about my takes for 2018, 2019, 2020, 2021, and 2022.

If CBN wants cashless, it should #maketransferfree

The Central Bank of Nigeria’s (CBN) directive on cashless is necessary and beneficial in the long run but success depends on CBN’s actions to support and secure the system.

The Central Bank of Nigeria’s (CBN) directive on cashless is a direction the country needs, which I support 100%. Some may argue that this impacts the poor and the bottom of the pyramid negatively – yes, it does, at first, but in the long run, this is significantly superior to cash and would benefit everyone.

But why would I support an approach many have termed poorly thought through and echoes a military approach that sets many ordinary Nigerians on edge? It’s because sometimes you cannot fling out the baby with the bath water.

Because of the impact on many Nigerians and the poorly received approach by the CBN, several Nigerians are pushing that CBN should suspend the new cashless policy. This is a poor thought, and it’s as flawed as asking Nigerians to stop making phone calls and start shouting to get the attention of their neighbors.

To make cashless successful and for everyone to reap the benefits and growth potential, sacrifices are expected of everyone. And we know that these sacrifices are not trivial.

Of course, the CBN is asking everyone to sacrifice a lot, but what are the CBN and the bankers giving in return?

This is where it gets sketchy and unfairly lopsided. It’s also where the success of cashless is in doubt. If the poor feel taken for a ride and disadvantaged, everyone will find a way to sabotage the cashless policy.

When you consider the CBN’s argument that this would curb kidnapping (a rich man’s problem) and vote buying (a poor man’s opportunity), the chance of success for CBN is severely curtailed.

Cashless would never curb kidnapping – if my loved one were kidnapped, I’m not sure I’m ready to lose them because I don’t want to pay the 5% extra charge on the cash ransom. A politician doesn’t care about the 10% on the N1b he will use to buy votes. The original N1b wasn’t his to start with.

After all, when the Naira fell badly to the USD, the poorer exchange rate was never a problem when politicians bought USD to get votes.

So what exactly can the CBN do? There are three immediate solutions.

CBN should make the electronic transfer free for everyone. But to block abuse, there should be a limit and a monthly cap. Why would this work? It’s simple – the poor, most affected by the cashless, and the elites (the CBN and bank executives), think about money and value differently. Time is expensive for the executives, so paying N50 for the transfer is nothing to them. But for the poor, every kobo counts. They cannot understand why they must pay N50 for a transfer when they can walk to the market and use cash without spending extra.

The CBN should go on a massive campaign to woo Nigerians and not talk down on them. Many Nigerians don’t trust the financial system. They think it’s rigged against them for the benefit of bankers. Many Nigerians are also scared of going to the banks because banks are formal and bankers look scary sometimes.

To make this work, the CBN should create relatable ads and public service announcements using influencers that can cut through the noise and let everyone know the CBN means good.

The CBN should also enforce liability shifts to the banks. Why would this work? Most Nigerians that would be forced to go cashless are digital neophytes, which means the bad actors will take advantage of them. The bankers are the ones that control digital payment services, and it’s their sole responsibility to make it safe and secure for all their customers. Maybe when bankers start paying for these frauds, they will put in more effort to keep everyone safer.

In conclusion, the new cashless policy by the CBN and bankers is a rare opportunity for the Nigerian financial ecosystem to grow and for financial inclusion to bring benefits to Nigerians. But without the bankers and CBN making transactions free (and cheaper) for Nigerians and taking other measures to assuage Nigerians about the benefits of this initiative, it would fail.

This chance is too good to be lost. Let CBN #maketransferfree.