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Why our banks should emulate mobile money operators in Kenya –Ambode, Lagos governor

By Omodele Adigun

The Lagos State Governor, Akinwunmi Ambode, was not happy at the rate of unemployment in the country. As a way out, he said, “we need the CBN and NDIC to work together with the banks and other players in the system to decide together what type of financial system that will really impact employment and bring more people into the formal financial system.”

At the recent Bankers’ Committee Retreat in Lagos, Ambode challenged the Nigerian banks to borrow a leaf from the mobile money operator in Kenya, M-pesa, which has accumulated over 18 million users, directly engaged close to 300,000 agents and responsible for lifting 2 per cent of Kenyan households out of extreme poverty. 



The theme of the Bankers’ Committee retreat this year, “Improving Financial Access, Job Creation, and Inclusive Growth in Nigeria”, covers three key issues that are at the heart of the economy and are important determinants of its future prosperity, and indeed at the very heart of my priority agenda as Governor of Lagos State. Thankfully, the economy has turned a corner and we continue to see positive indices of economic recovery and an encouraging outlook for the future.

However, economists have stated quite strongly that for Nigeria to attain its potential, we need the economy to grow by 6.7 per cent a year. In fact, the CBN (Central Bank of Nigeria) governor recently stated that we need to grow by at least 6 per cent per annum because the population growth is almost 3 per cent. This is critical if we are going to move the needle in reducing poverty, preventing social unrest and unlocking the full potential of this country.

To meet our growth ambitions, we need jobs. Figures from the National Bureau of Statistics (NBS) show that in employment terms, from a labour force population of about 81 million people, we currently have 11.5 million people unemployed in Nigeria and 17 million people under-employed with the total employment around 52.6 million while the working age population grows by 3.7 per cent every year. So to make a meaningful dent on unemployment and underemployment, and to reduce poverty (which is at over 60 per cent), we need to be creating at least four million jobs per year.

Where do banks fit into all of these? Well, the reality is if we do not have a well-functioning banking sector, all of this is not possible. Both investment and day-to-day commerce requires the intermediation of banks. And while someone outside of the formal financial sector can in some cases make a living, the reality is that incomes of the bottom of the pyramid are increased when we have better financial inclusion.

But we are not there yet. In fact, CBN’s data indicates that only 48.6 per cent, equivalent to 46.9 million, Nigerians have access to formal financial services. Obviously, this is behind developed nations but it is also behind some of our African peers.


You all are familiar with the story of the remarkable success of M-Pesa in Kenya. But here are a few facts: M-Pesa celebrated its 10th anniversary in March 2017. Before its launch, the average distance to a bank in Kenya was 9.2km. Today, the distance to an M-Pesa agent is less than 1.4km.

The service, which has accumulated over 18 million users in Kenya alone, has directly engaged close to 300,000 agents nationwide and is said to be responsible for lifting 2 per cent of Kenyan households out of extreme poverty. 

Essentially, this type of low-cost access to banking services has made a major contribution to Kenyan economic development, and created a very large number of jobs, particularly in micro-enterprises.

Here in Nigeria, mobile money has been slow to take off. Mobile money usage in particular has remained low, increasing from 0.7 million adults in 2014 to 0.9 million in 2016. This shows that the uptake is still very low when compared to the number of adults, about 58.2 million, who were mobile phone owners in 2016.

One reason for this is that there are too many competing systems and regulations. While we generally don’t like monopolies, the reality is that the system is much more valuable if everyone uses it and that is what M-Pesa has managed to achieve elsewhere on the continent.

So while all of you are very focused on how the digital revolution is affecting financial services, I want to challenge you today to go faster. We need the CBN and NDIC (Nigeria Deposit Insurance Corporation) to work together with the banks and other players in the system to decide together what type of financial system will really impact employment and bring more people into the formal financial system. This is where we should really focus today as a nation and not on Federal Ministry of Finance, CBN and DMO (Debt Managemnet Office) requesting for letters of approval for commercial loans from states; not the kind of directives or decisions  that actually try to stiffle growth and commerce.

One clear example is this: I, as a state government, I want to take a commercial loan from a bank. They tell me, I should go and get a letter from DMO; I should go and get approval from the Federal Ministry of Finance; I should go the CBN. Who does that? And you want to accelerate growth? So everything I am doing, even when I take a loan from a bank, even when I do bond, I only try to defend the economy.

Job creation

Each construction site you see in Lagos, I am trying to create employment at the lower level so that the artisans, the bricklayers, can go home with N5000. I don’ t need to do something in Badagry but I need to employ people there so that they stay in Badagry and they do not need to come to central Lagos. So when you take the extra money outside the IGR (Internally Generated Revenue), you are only trying to help the economy to reflate itself. And that is why you are able to excite yourself with the growth you have seen in the third quarter (of 2017) that you say was 1.5 per cent. That is not the number we want. So sometimes, government seems to shoot itself in the leg. Why should Lagos State go and be meeting DMO? I want to take a commercial loan when 80 per cent of my IGR can pay the loan itself back. So you see, there is some sense of homogeneity in the policies we make, but sometimes they are not really flexible. And you come back and say you want to create jobs. But the things that create jobs are the things we are actually working against. And you create unnecessary competition in the system. This set of system does not happen by accident. It takes active interventions by all the members of the Bankers’ Committee, guided by a few of what is the ultimate design and regulations need to be. They should give a well functioning low cost financial system that will work for all Nigerians. That is my challenge.

The CBN governor was sounding bitter that there was so much fund, the MSME fund, over N200 billion, yet to be utilised by our banks. This MSMEs fund given by the CBN is at 9 per cent interest rate. But I as a government, I decided to create employment trust fund. I released them at 5 per cent. If you want to activate a particular sector, of which the generality of Nigerians are in, you have to shut your eyes to profit-making sometimes. It is a sector-driven strategy. So the people in the MSMEs,  we have helped over 6,000 people. So what is the big deal if you release that? So if CBN says they are interventionists and you want this money to be given, just the way you are doing for agric loan, why are you specialising in agric loan and putting it at 9 per cent? It is because you want to touch that particular sector. So if you want to touch the people at the lower level, there has to be something different about them. Don’t forget also, it is not a commercial loan. It is money from the CBN to the banks that are just intermediaries to give it to the poor people. So if you give me, I will give them at 5 per cent.

I would like them to be bold in their thinking and ready to translate the ideas into policies and actions that will ensure inclusive growth for Nigeria and positively impact our people.

As a government, I pledge our full support in providing an enabling environment for the banking industry to thrive and we will continue working actively towards the ease of doing and transacting business.


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August 2018
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