In a report, Nigeria Macro-Economic and Banking Sector Themes for 2019, Guaranty Trust Bank has highlighted the licensing of telecommunication companies as Payment Service Banks, as a threat to the earnings of traditional banks in Nigeria. The goals of the PSBs include facilitating transactions in remittal services, micro-savings and rural cash withdrawals. The report notes that the entrance of the PSBs will improve financial inclusion, customer service while ensuring the digitalisation of banking services. However, such banks cannot lend money to customers or participate in the foreign exchange market. Both MTN Nigeria and Airtel have indicated their interest in providing mobile money services to their customers, with MTN targeting Q2 2019 for approval and launch.
President Muhammadu Buhari signed Executive Order 7 of 2019 on the Road Infrastructure Development and Refurbishment Investment Tax Credit Scheme last Friday. The aim of the order is to develop a framework for public-private partnerships to bridge the road infrastructure gap existing in the country. The order targets 19 road projects in 11 states totalling 794.4 kilometres to be built by six manufacturing and construction companies. The President lamented the revenue shortfalls that have hindered the ability of government to fully fund critical infrastructure project. The inability of the National Assembly to pass budgetary allocations in a timely manner has also hindered the progress of many projects. Dangote Industries Limited, Lafarge Africa, Unilever Nigeria, Flour Mills of Nigeria, Nigeria LNG and the China Road and Bridge Corporation Nigeria Limited have been selected as the investors in these road projects.
MTN Nigeria has sued the Kogi state government over the lockdown of its base station in Lokoja, the state capital. The base station has been shut since 23 January. The state’s Internal Revenue Service had shut down the facilities of MTN in the state over the alleged failure to remit tax obligations of ₦120 million to the state government. MTN says that the minister of finance has not approved the taxes being requested by the KGIRS. The Attorney-General of Kogi and the Nigerian Communications Commission were also named as parties to the suit filed at a state high court in Lokoja.
The Zamfara State Government has called on the people of the state to embark on a three day fast to seek the intervention of God with respect to the rising spate of insecurity in the state. The request was made by the state’s commissioner on LG and Chieftaincy Affairs, Bello Dankande. Following an attack on Zurmi town by armed bandits on Monday, at least 12 persons were kidnapped. Late last year, the state’s governor, Abdulaziz Yari, supported calls for a declaration of a state of emergency and offered to resign if it would restore security to the troubled state. He had in June washed his hands of his responsibility as the Chief Security Officer of the Zamfara following the inability of the state government to stem increasing insecurity.
Commentary
- While the GTBank report does portend a downside for banks’ traditional earnings, it is worth noting that Nigerian banks have had all the time in the world to make bank-led mobile money and financial inclusion work, but have not done so. Opening the space to non-bank entities will expand access and improve services for the customers. These are lofty goals in an economy in dire need of modernisation, which boasts an uncomfortably high number of unbanked participants. The telcos provide the best opportunity for the country to realise the central bank’s ambitious vision for 80 percent of Nigerian adults to be financially included by 2020. For context, The United Bank for Africa, the country’s third biggest lender, barely has 8 million customers. GTBank, itself the country largest, services 13.4 million corporate and retail customers. 9mobile, the smallest of the country’s four major telcos had 15.9 million subscriptions in Q4 2018. MTN, the industry behemoth boasts of 67 million. The math is incontrovertible. If the banks fail to respond by creating better value at competitive costs, they will have only themselves, not Nigerians or the regulators, to blame.
- Executive Order 7 is a welcome development. Four years into his Presidency, Mr Buhari appears to be waking up to what has been obvious for decades – that the Nigerian government does not have the revenue muscle power to fund large scale infrastructure projects. Nigeria is in dire need of infrastructure, and with deficits at a billion-dollar record high amid government revenue constraints, schemes of this nature will be important in bridging the infrastructure gap. Why this new order is particularly positive is that the projects will be tailored to suit specific industry requirements. At the same time, it avoids the sort of official bureaucratic morass that hinders progress and adds to construction costs. Notwithstanding, proper monitoring will be required to ensure companies do not just use the new measures as a way of dodging taxes while delivering substandard infrastructure.
- We hope that MTN goes through with its legal action against the Kogi state government. When the federal government has made a company the object of its target practice, state governments follow suit. This has to stop. Governments, especially of states that have little going on in their business environment, should support business and not become the reason why firms lose money in their states.
- The continued deterioration in Zamfara, and the turn to God, displays rather embarrassingly, the serious limitation of Nigeria’s federal structure especially on matters of internal security. The state government has to depend on Abuja to deploy not just the military, but also the police. A decentralised police system would, in theory, allow more proactive measures to be taken faster, under less bureaucratic constraints. In the larger picture, this situation also shows how stretched Nigeria’s military is with current deployments in 32 states as well as the failure of intelligence to identify the bandits’ networks, their leaders and the root causes of these intermittent crises. Finally, a point to note: in April 2018, the Anka Emirate Council in the same state, called for a three-day fast with regards to the same problem. Multiple attacks afterwards left scores dead. God was not listening.