Data & Financial Inclusion | |
Data & Financial Inclusion | |
2157 VIEWS | |
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Wednesday, May 27, 2020 / 04:00 PM / Otunba (Mrs) 'Debola Osibogun*
The COVID-19 pandemic is generating an unprecedented global health
crisis which in turn has critical implications on the the financial system both
in content and context. The entire global population which has become
vulnerable due the health crisis would also be mostly affected by the
brewing financial crisis if not properly managed and protected
through deliberate and conscientious financial education and enlightenment. As some
parts of the world celebrate world financial literacy month, Consumer
Awareness and Financial Enlightenment Initiative (CAFEi) uses this
opportunity to assess the implication of the COVID-19 pandemic on Financial
Inclusion and Financial Literacy.
Financial Inclusion is undoubtedly an integral component of the
Sustainable Development Goals which is a cliche to enhance the growth standards
of the developing world. However, the breakout of COVID-19 pandemic has
shown the importance and necessity of financial Inclusion in the
world of governance and business of financial services, today.
At the beginning of the COVID-19 pandemic, the Nigerian government
experienced difficulties in planning and segmenting its citizenry qualified to
benefit from its social support programs. This challenge was majorly as a
result of an absence of financial data on the entire population which
greatly affected the impact of various government intervention
schemes at both the State and Federal Levels. The Federal government activated
the conditional Cash Transfer Scheme and the Food Distribution scheme as
measures to cushion the effect of the lock down on the population. In the
case of the Conditional Cash transfer scheme, the lack of comprehensive
financial data created a problem in identifying the poorest of the
poor while in the case of food supply, it was difficult to plan for those
who are in actual need of this palliatives. Nigeria though has an
ambitious financial inclusion strategy to include 70% of the population in the
formal financial system by 2020 (Central Bank of Nigeria, 2012, and Box 1, and
Table 1) the country is yet to meet this target. Financial Inclusion
therefore needs to be taken more seriously by the government during and in
the post COVID-19 Era to guarantee a sustainable growth and development.
It was also obvious that Financial Literacy was paid less attention
to, than Financial Inclusion in the Pre-COVID-19 Era. The COVID-19
pandemic has however brought key financial literacy issues such as savings,
taxation, access to credit and use of digital platforms
back as topical and germane for debates and implementation. The Pandemic
has exposed government resources as dwindling and unlikely to be able to
support in any future crisis. This is because the government is faced
with an increasing debt profile and bloated expenditure. Consumer Awareness and
Financial Enlightenment Initiative (CAFEi) before the advent of the COVID-19
pandemic attempted to bring to the fore the importance of Saving by
publishing articles on the subject matter and celebrating World Savings day
with the international community. We often highlighted the
importance of savings before spending rather than spending before saving.
Somehow during the current pandemic majority of households that were unable to
save were lucky and able to rely on food banks and generous donors of
palliatives to survive. The next emergency may be worse and so there is a need
for proper re-orientation and education on the importance of savings. The
COVID-19 experience has taught us that we must now prioritize our spending
and save more for an uncertain future.
Furthermore, the effect of the COVID-19 pandemic has put a
strain on government sources of revenue as evident in the decline in
crude oil prices. The government is therefore likely to take issues such
as taxation more seriously as it seeks to diversify its revenue base
from crude oil. Taxation as a financial
literacy issue needs to be given a refocus in the post
COVID-19 era. People need to understand their obligations as individuals
and their expectations from government.
In addition to the points earlier raised, another
key area in financial literacy that needs to be looked into is access
to credit. Small businesses are the engine room of the
economy, but majority of them are struggling. The directive
given by the Central Bank of Nigeria (CBN) to increase loan to
deposit ratio of Banks to 65% has increased the
opportunity to lend to SMEs and in turn save the economy. Small
businesses therefore need to understand terms and conditions on credit
contracts and also when to and when not to borrow. There needs to be more
awareness for SMEs on their obligations, expectations and
avenues for dispute resolution in loan agreements.
Lastly, another key aspect of Financial Literacy that needs more
consciousness is the importance of familiarizing with alternative means of
banking. The closure of banks during the pandemic and the hesitation to use
cash because of its capacity to serve as a form of virus transmission brought
to the fore the importance of using alternative mode of banking like
online banking and mobile banking. Nigeria's premier bank, FirstBank
recorded in the first week of the lockdown a record 38.5
million transactions from alternative modes of banking. This is an
indication that the future lies in alternative mode of banking. There is no
doubt that the perception of Financial Literacy and Financial Inclusion after
the COVID-19 pandemic will no longer be the
same. Governments in the Post COVID-19 Era need to treat
targets for financial inclusion more seriously and also campaign
aggressively for financial literacy.
*Otunba (Mrs) 'Debola Osibogun is the President of the Consumer
Awareness and Financial Enlightenment Initiative (CAFEi)
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