Policy and Financial Institutions: A Boomerang Effect?

There are diverse effects of government policies across multiple sectors in Nigeria. This post will take a look at how each sector is affected, how this, in turn, affects other sectors and the overall impact on payment structures in Nigeria.

Policy and Financial Institutions: A Boomerang effect

There are levels of this boomerang effect.
Policy - Telecommunications – Financial Institutions

The Nigerian Telecommunications Sector: The Road so Far

The Nigerian telecommunications sector was liberated almost 2 decades ago and that served as a catalyst and key contributor to economic growth in Nigeria.

This sector generated over $68 billion as at November 2016 from both local & foreign investments and also created over 2.5 million jobs over the last 10 years while having an outstanding impact across sectors and industries.

This sector was seen as a high flyer, rapidly growing and contributing to about approximately 10% of Nigeria’s GDP but this changed around June 2016.

Experts believe that the growth in this sector has stalled and is at a strategic crossroad for which, there are several factors responsible.

nigerian telcos market share

Nigerian telcos internet subscriber data 2018

Telecommunications in Nigeria

Telecommunication facilities began in Nigeria in 1886 and it was set up by colonial administrators and the sector itself has grown significantly making it a better tool for economic growth.

Telecommunications is a vital engine of any growing economy; it is an important infrastructure that promotes the development of other sectors like banking, transportation, agriculture, education, industry, health and tourism.

Therefore, there is a need for an efficient, reliable and affordable telecommunications system which serves as a key ingredient to promoting rapid socio-economic and political development of a country and such, systems would have regulations and policies set in place to monitor, check and balance it which brings us to the governmental policies that affect this sector in Nigeria.

Telecommunications Policy in Nigeria

The general objective of the National Telecommunications Policy in Nigeria is to achieve fast modernization and rapid expansion of services and networks throughout the country, which would increase national income, social development and position Nigeria on the global telecommunications space.

Services should be efficient, affordable, reliable, accessible and available to everyone in the country.
The Nigerian Communications Commission (NCC) was established to monitor and regulate the telecommunication industry in Nigeria.

Government policies that affect Telecommunications

  • Tariff regulations
  • Weak Naira
  • The high cost of importation of equipment
  • Outdated Nigerian Communication Act 2003
  • The importance placed on voice calls over data-centric activities

Tariff Regulations

NCC provides tariff regulation rules for operators providing basic and essential services to the public and what this means is that in all cases, tariff prices will be cost-oriented, reflecting the actual cost required by operators to provide the service in question.

Weak Naira

The much-needed telecom equipment aimed at increasing the overall quality of network and services in Nigeria is important but the weak Naira has affected the purchase of such equipment because most of them are bought in foreign currencies.

High Importation Costs

Have you ever tried importing an item before? It can be a hellish experience because after paying foreign currency to purchase your item, shipping costs can be well over the purchase price which makes things difficult for telecoms to upgrade their towers and networks.

The importance placed on voice calls over data-centric activities

Latest data from NCC shows that the industry has witnessed a significant loss of mobile voice subscriptions from 155 million in December 2016 to 139 million currently.
This ties directly into updating the Nigerian Communication Act 2003 to reflect the importance of data over voice. Data-centric activities have increased exponentially with the introduction of WhatsApp voice and voice calls, Skype, Facebook calls have made customers move away from legacy voice services to over the top services like WhatsApp calls.

central bank of Nigeria

Financial Institutions in Nigeria

We have 9 categories of financial institutions in Nigeria and these financial institutions are regulated by Central Bank of Nigeria (CBN) which creates policies that influence how they do business.
  • Bureaux-de-Change (BDCs)
  • Commercial Banks
  • Development Finance Institutions (DFI’s)
  • Discount Houses
  • Finance Companies (FCs)
  • Merchant Banks
  • Micro-finance Banks (MFBs)
  • Non-Interest Banks
  • Primary Mortgage Banks (PMBs)

Policies that affect financial institutions influencing Payment Systems

Cashless Policy

Cash payment systems dominated all transactions in Nigeria before 2010 - 2012. Nigeria operated in a cash-heavy environment and the Central Bank of Nigeria (CBN) introduced the cashless policy in 2012 with the objective of promoting electronic online payments instead of manual cash payments. The aim is to provide a payment system that is secure, convenient and affordable.

Development in Payment Systems

The Central bank of Nigeria initiated a payment system vision 2020 back in 2009 and this policy influences financial institutions to create options for e -payment transactions giving rise to online banking, mobile banking and online payments in Nigeria.
This policy also gives rise to the development of debit cards that facilitates online payments in Nigeria.

Do you feel this a boomerang effect? Share your thoughts, opinions and comments below.


TechAdvance is a payment application development company with a strategic focus in developing and deploying niche payment companies to serve the needs of large public and private sector organisations in Nigeria.

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