Coronavirus in Nigeria catalyst to changes in financial sector

In depth
This article is part of the dossier: Corona Chronicles: 6 April – 10 April

By Oluwatosin Adeshokan, in Lagos
Posted on Monday, 6 April 2020 09:47

Branch-based loan applications in Nigeria raise costs beyond what can be justified for many small loans. REUTERS/Afolabi Sotunde

Nigeria's Lagos, Abuja and Kaduna have announced lockdowns and other restrictions to movement. In these cities, retail banking operations are expected to grind to a halt.

Around the country, banks are announcing that branches outside of locations already on lockdown will be running skeletal operations.

In the case of Standard Chartered Bank and a few other banks, they will be closing by 3pm daily.

While Nigeria has one of Africa’s largest economies, large portions of the economy are in the informal sector and depend on cash. Although the central bank has touted a ‘cashless’ policy for years, several new policies have made that policy muddled.

But, in countries like Kenya where mobile money has helped in digitising minor transactions, the informal nature of Nigeria’s economy is not exactly an excuse.

READ MORE: Nigeria encouraged to let naira fall further as currency market locks up

Kings of the country

The Nigerian government has not embraced mobile-money solutions. Instead, the old brick-and-mortar banks remain kings in the country. But as the lockdown goes on, there will be a shift in how retail banking in the country will run and be seen.

As banking is seen as an essential service, several banks – even in the locked-down cities – are running with just essential staff members. The majority of bank staff are now running on shifts and rota systems while pushing their online and mobile channels as primary means of transactions.

Change for the better

For Okikiola Amosun, an Abuja-based banker, when the crisis is over, the Nigerian banking system will change for the better.

“Banks are having to deploy their services and maintain efficiency while running lean teams. The innovation right now in how to run banks will change the way banks operate especially as regards staffing in the future.”

The industry could see widespread changes over the next few months. “But this is the time for a new type of banking in Nigeria. We will see more banks and more customers move over to online and USSD banking. Digital banking might just get its M-PESA style revolution,” says Amosun.

Oluwatosin Ajani, a Lagos-based economist agrees: “We will see new conversations and changes in behaviour. More people will start to use other digital banking platforms or begin to heavily rely on the Paga shops.

This might be the beginning of the end of your brick-and-mortar bank in Nigeria.”

READ MORE: Nigeria introduces stimulus package to ease coronavirus hit

Paga shopping

Armed with point-of-sale machines, stacks of cash and run-of-the-mill shops, kiosks or stalls, Nigerians have begun entering financial services as partners to banks and fintech companies.

Initially popular to augment Nigeria’s very low bank numbers and spread with around 23 commercial banks spread across 5,000 bank branches in Nigeria, ‘Paga shops’ as they are known are now a part of the banking system in the country. Paga is a Nigerian payments company.


For Henry Ogbonna, the ease of banking provided by the kiosks around him prove that banks are no longer as necessary. “Because of the lockdown, we can’t visit the banks, but there is a woman with an ATM [terminal] at the end of my street. She is now my bank.”

Ogbonna says that he trusts banking transactions more than non-bank ones. However, he uses Paga shops to avoid running the risk of extrajudicial punishment from the police or army out on patrol.

READ MORE: Nigeria’s banks face direct hit from geared-up oil producers

Big winners

Ajani argues that the money kiosks might become the biggest winners.

Amosun agrees: “This pandemic has shown what the most essential banking services are and how it is up to the banks to determine how to run operations better while maintaining their efficiency. Retail banking in Nigeria has changed permanently and perhaps for the better, but Nigerians will definitely get better banking services.”

Bottom line: It is expected that over the next few months, mobile money in Nigeria will grow exponentially, especially if the pandemic and lockdowns carries on.

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