From the initial 80 per cent target, Nigeria is hoping to achieve 95 per cent financial inclusion by the year 2024. Telecommunications has been identified as the key enabler of this target and, according to the Nigerian Communications Commission, more regulatory efforts are being channeled towards this national goal. SAMSON AKINTARO reports
Although Nigeria missed its target of achieving 80 per cent financial inclusion by the end of 2020, the country has recorded some feats in the area of getting more people into the financial system. The progress made so far indicated that the country is on the right track, especially with the shift in attention from a purely bank-led system to telecommunications, which saw the emergence of payment service banks (PSBs).
Several stakeholders have also attested to the centrality of telecommunications, not only to the financial inclusion journey, but also to all aspects of the economy. Against this backdrop, the Nigerian Communications Commission (NCC), which is the country’s telecoms regulator, has risen to the occasion by forging the needed partnership with the Central Bank of Nigeria (CBN) and ensuring the provision of the right infrastructure for financial inclusion to ride upon.
Financial inclusion and telecoms
With over 200 million active mobile subscriptions compared with about 40 million bank accounts, industry experts have posited that the best way for Nigeria to get more citizens into the financial system is to leverage mobile connectivity. According to them, access to telecom services by distant, isolated, unserved and underserved communities will enable more citizens embrace the digital financial culture. Executive Vice Chairman of NCC, Prof. Umar Danbatta, accentuated this recently when he delivered a lecture at the 5th annual ‘The Bullion Lecture’ held in Lagos. He stated categorically that the country would need more broadband penetration to achieve its financial inclusion target as this would enable more Nigerians to access digital financial services through their phones and other internet devices. According to him, a report by the Enhancing Financial Innovation & Access (EFInA) indicated that even though its data showed that more people had become financially included, the financial inclusion pace was not matching the country’s population growth rate. “Therefore, to achieve an accelerated financial inclusion target that the country desires, even as the population grows, technology and, more importantly, broadband, has to play a massive significant role and what I see technology doing in terms of Nigeria’s financial inclusion is actually to democratise access,” he said.
With the realisation that ubiquitous broadband would drive financial inclusion and other aspects of the economy, Danbatta said NCC had embarked on various regulatory initiatives that continue to increase access to telephone lines and improve access to high-speed Internet. “This is in line with the Commission’s mandate of ensuring universal access to telecoms services in the country consistent with the ITU’s goal of achieving digital inclusion, globally. “Foremost amongst these regulatory initiatives is the implementation of the Open Access Model for infrastructure deployment through the competitively selected infrastructure companies (InfraCos) called the Infra- Co Project. The InfraCo initiative is expected to provide, at a minimum, broadband fibre and connectivity to every local government area of the federation, totaling 774 fibre Points of Access (PoAs) with a minimum speed of 10 Gbps, which will translate to, at least, 38,296km of Optic Fibre Cable (OFC) to the transmission over the next years,” he said. Danbatta noted that the Commission had licensed six of the seven InfraCos to implement this project and it was intended that the presence of fibre point of access in each LGA would not only spur development, lower cost of entry for telcos and bring about innovative services and applications, but also, improve the conditions of living in the rural, urban and semi-urban areas, especially with respect to access to financial services. “The InfraCo Project can be considered as the beginning of the ‘Next Level’ journey towards achieving the 120,000km target of fibre connectivity set by the current administration. We have recently begun a process to strategically review the InfraCo framework and its funding options towards ensuring effective implementation of the national fibre project. When fully implemented, it will ensure robust and pervasive broadband infrastructure to drive availability, accessibility, and affordability of financial services,” the NCC boss said.
Danbatta said the Commission had also provided the requisite infrastructure, connectivity and capacity to interconnect four Inter-net Exchange Points (IXPs) in Lagos, Enugu, Port Harcourt, and Kano in order to localise some of the internet traffic in Nigeria and encourage the creation, hosting, and interchange of data within Nigeria. This, he said, had enabled the local hosting of companies like Google, Facebook, Vodacom, China Telecom, Akamai and Juniper Solutions, among others, alongside all major Nigerian Internet Service Providers (ISPs), Mobile Network Operators, Sub-Marine Cable Operators as well as major tier 1 to 3 Data Centers. “This has not only reduced cost, which is key to digital financial inclusion and conserved foreign exchange, but also has drastically reduced latency. Thus ensuring the sustainability of digital financial services,” he said.
In addition to the above, Danbatta said the Commission, through the Universal Service Provision Fund (USPF), had been actively stimulating the adoption of ICT in various areas of society in order to facilitate connectivity and access, thereby building resilient infrastructure and promoting sustainable industrial growth in the country. Some of the projects undertaken in this regard include Tertiary Institutions Knowledge Center (TIKC), School Knowledge Centre (SKC), Base Transceiver Station (BTS), Backbone Transmission Infrastructure (BTRAIN) project, University Inter-Campus Connectivity (UnICC), E-Accessibility or ICT for Challenged Groups/Persons Living with Disabilities (PWD), among others. “Through all the afore-mentioned initiatives, broadband penetration in Nigeria has been on the upward trajectory, rising to 45.02 per cent as of December, 2020. Penetration was far below 10 per cent when I assumed office in 2015. The Commission is, therefore, poised to further accelerate this growth, as it works with the Ministry of Communication and Digital Economy to support the Federal Government’s National Digital Economy Policy and Strategy (NDEPS), drive the Nigerian National Broadband Plan (NNBP) 2000-2025 targets of 70 per cent broadband penetration, towards boosting digital access across the nooks and crannies of the country,” he said.
USSD as a factor
As telecommunication services and infrastructure become more accessible in the country, banks identified the Unstructured Supplementary Data Service (USSD) channel as a cost-efficient way of delivering financial services to their customers. Banks subsequently applied for and were granted USSD short codes by NCC to deliver financial services to Nigerians. The banks, other financial institutions (OFI) and mobile money operators licensed by CBN are now leveraging the large number of mobile subscriptions in the country to provide mobile-based financial transactions to Nigerians, leveraging the USSD platform of Mobile Network Operators (MNOs). To bridge the current access gaps and in order to provide enough SIM numbers that can be used by Nigerians in this era of new and emerging technologies where most devices and things would be connected within the Internet of Things (IoT) ecosystem, requiring more SIM cards to be used, Danbatta disclosed that NCC, as a proactive regulatory agency, had developed a new numbering plan (NNP) that will serve the needs of 500 million connected Nigerians for the next 30 years. “The NNP would, among others, help to provide numbers that will satisfy the needs of the projected one billion globally- interconnected machines and devices by 2050; promote efficiency in the allocation of the scarce national resource; promote competition among service providers; and eliminate the risk of running short of all categories of numbers. No doubt, the financial services sector will benefit hugely from this regulatory measure, as it will facilitate the introduction and development of innovative services across different sectors of the economy with financial services sector being one of the beneficiaries,” he said.
Collaboration with CBN
Danbatta noted that while the initial approach adopted by government was to make mobile money operations bank-led, NCC has actively engaged and collaborated with CBN, through signing of a momentous Memorandum of Understanding (MoU) to ensure mobile money licences are also issued to telecoms operators that will operate as Payment Service Bank (PSB). “This is based on the recognition of the fact that since the MNOs own the over 204 million mobile subscribers – scattered in rural and urban settings – on their networks, allowing these operators to offer direct digital financial services to their customers would produce better financial inclusion traction. “This has been witnessed in the case of the ‘Mpesa’ introduced by Safaricom in Kenya, which has made mobile money the most popular channel of carrying out financial transactions in the country with most Kenyans now financially included. It is gratifying , therefore, that the roll-out of Payment Service Banks guidelines that allows licensing of telco subsidiaries have become a welcome development and should be implemented,” he said.
While the telecoms regulator is working assiduously to ensure that the right infrastructure is available to drive the financial inclusion target, there is a need for greater cooperation and collaboration between the banking and telecommunications sectors to achieve this national goal.