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Economists canvass agent banking to save economy


As more Nigerians source credit from unorthodox lenders

As revenues plummet and the government, at different levels, scramble for funds to meet urgent financial obligations, economists and allied experts have called for an aggressive financial inclusion programme to tap into the ‘goldmine’ in underground monies to stimulate growth.


This comes as the Coronavirus (COVID-19) pandemic has restricted the ability of commercial banks to mobilise savings and provide money through lending.

Banking activities have been in passive mode since April, with some money deposit bank (MDB) outlets yet to open months into a phased easing of the COVID-19 shutdown.

But there is anxiety in the financial circles that the limited banking service, which appears to be part of the new normal, could undermine the ongoing financial inclusion campaign of the Central Bank of Nigeria (CBN), thus increasing the billions of dead (inactive) money.

However, a fintech expert and CEO of eTranzact, Niyi Toluwalope, said financial inclusion has nothing to do with brick-and-mortar processes anymore. He said the authorities must find a smart way to bring unbanked Nigerians, which he estimated at 70 million, into the financial system.


“Today, we have 35 to 40 million BVNs; this means about 40 million Nigerians have bank accounts. If you take this figure from the number of Nigerians that use mobile telephones, you possibly have about 70 million Nigerians who are not covered by the financial system. These people make phone calls daily. Where is the money they spend? Where do they take it from?” Toluwalope queried.

He said millions of people were outside the financial system because of trust issues. He suggested the aggressive development of agent networks around the people they trust and do ‘esusu’ with. Solutions, he said, should be built around those people, after which they are brought into the formal sector.

According to him, the country stands to benefit from increased earnings, more employment and higher tax revenues when the money outside the financial system is creatively attracted through agent banking. He called on the authorities to fine-tune frameworks to aggressively pursue the agent banking model as an alternative to infective conventional practice.

The Africa Report, last year, put the figure of unbanked Nigerian adults at 60 million. Even the digital disruption touted as the magic wand appears sluggish in reducing this number. Some experts have suggested that efforts put into financial inclusion are incapable of addressing the cultural practices that fuel private savings.


Prof. Simon Irtwange, a former President of the Institute of Chartered Economists of Nigeria (ICEN), also argued that agent banking could be used as a strategy for deepening financial inclusion. He noted that traditional banking could not reach millions of rural dwellers in different parts of the country.

Irtwange charged relevant authorities to see financial ‘disenchantment’ beyond what the country loses to the inability to leverage unbanked resources for intermediation purposes, saying, “We should be worried that these people cannot access funds for economic enterprises” and contribute actively to national wealth creation.

Prof. Sheriffdeen Adewale Tella, a professor of economics at the Olabisi Onabanjo University, also charged the government to shun external debt and leverage money kept off the financial system to build the much-needed infrastructure. He said there were enough funds to source from the looted moneybags through an investment instrument.

A few days ago, photos of bundles of damp and defaced N1000 bills neatly arranged in several sacks trended on social media. Whereas the authenticity of the claims that the money was stolen, hidden, and forgotten by a politician was not verifiable, the photos were a reminder of the culture of graft and profligacy in the public sector.


Tella said such money could be called up for proper use in investments.

But if heeded, the advice could leave the country with a moral question – should a constituted authority be seen as promoting money laundering?

The government, a few years ago, started a whistle-blowing policy to bring the “economic saboteurs” to book and turn dormant resources allegedly stolen and kept in ‘safe haven’ into economic resources. Within the period the policy was in force, The Guardian’s calculation puts the recovered cash as announced by the Economic and Financial Crimes Commission (EFCC) at N52, 206, 906, 644.

The management and utilisation of the recoveries come with their burden. For instance, the suspended EFCC Chairman, Ibrahim Magu, is being investigated over the manner he managed the recovered loots, including seized physical cash kept away from the banks but uncovered by the anti-graft agency.


Ken Ife, another professor of economics, said Nigeria does not necessarily have to break the moral code to bail out the economy. He insisted, “There is sufficient legitimate funds that could be creatively harnessed for national development agenda and private sector investment.”

The way this could work, he stated, is to develop a national saving scheme that can feed both the private and public sectors. He dismissed the fear that excessive feasting of the public sector could crowd-out private investment, saying, “The money is outside the conventional banking system.”

Also speaking, Prof. Ndubisi Nwokoma, Director, Centre for Economic Policy Analysis and Research (CEPAR), University of Lagos, said whenever monies are taken away from circulation or outside the banking system, it represents a leakage in the facilitation of economic activities.

According to him, this affects remotely the flow of liquidity, credit, and prices of goods. “Enhanced use of cashless transactions will help to mitigate the incidence of such leakages,” Nwokoma said.


Segun Ajibola, Professor of Economics, Babcock University, lamented the inability of the financial sector to expand to the financial hinterlands. He described money kept in private, septic tanks, and other places as unproductive.

He argued that money primarily serves as a medium of exchange used to facilitate trade and other economic activities but that it can only perform this function if allowed to remain in circulation.

The economist said: “It is the velocity of a unit of currency (how many times it changes hands in say one year) that determines its impact on the economy. It is either left with banks (to lend out) or spent on a business transaction. Any person that locks up money is not helping the economy.”

Meanwhile, ‘esusu’ (local contributory scheme) and other cut-throat informal lending schemes thrive to fill the hole created by stiff conventional banking. Whereas many people associate the unregulated practice with rural dwellers, thousands of them currently operate in cities.


Sources said the practices increased with the phobia for visiting banking halls coupled with the number of outlets closed to business.

There is also a segment of black-market lending business said to have been managed/operated by bankers, who are exploring the inadequacies of their employers for personal gains.

Those that are privy to the operation said such bankers take advantage of the rigid conditions of the formal intermediation system to build clientele who they charge as high as 50 percent for six-month-tenor facilities.

“They focus on customers who need urgent and short-term loans that cannot be serviced by banks. Some of them use loose funds in their custody,” a source disclosed.


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