It is the 21st century and it is time for a digital revolution towards the new economy. Nigeria is far behind the developed world, but technology can help us in catching up, just like it helped China, writes Chidi Alabi
The new economy was a term coined by economists in the late 90s to describe the emerging influence of Information and Communication Technology. It is usually associated with the arrival of the internet, social media, and nanotechnology. Economics has become globalized while access to information has become limitless. The evolution of the new economy has necessitated an adjustment in the way governments and corporate entities do things. In terms of policy for developing economies, it marks a departure from resource-dependency to knowledge and technology-dependency.
In Nigeria, it is 58 years since independence and the exportation of crude oil still accounts for over 90% of the country’s exports and about 80% of the Federal Government (FG’s) revenue. This mono-economy and reliance on resources is an albatross on development. We are in the 21st century and it is time for us to rethink and change our habits. Nigeria is far behind the developed world, but technology can help us in catching up, just like it helped China.
In China, a country that was once crude and archaic, economic reforms by the government has led to rapid technological development. Today, China is one of the most powerful countries in the world and the second largest economy. The Chinese society has evolved from a peasant-agrarian community to large middle-class-dominated and highly literate culture, maximising the internet for use in communication, transportation, and financial technology. In all these, the emergence of Chinese technology, especially in Information and Communication Technology (ICT) has played a dominant role. The Chinese have built famous technology brands that have been exported across the world. These include Huawei, Alibaba, Weibo, Xiaomi, Baidu, etc. By embracing technology and changing some of its most conservative policies, China is launching itself into the new economy.
Just like China, technology offers Nigeria a golden opportunity to leap and catch up with other countries ahead. Speaking to journalists on the side-lines of the Lagos-Kano Investment Summit in March 2018, the Managing Director of SystemSpecs, one of the oldest Financial Technology firms, John Obaro stated that, “for Nigeria to build a strong, vibrant knowledge economy in the twenty first century, the political class must be information communications technology (ICT) friendly”. Obaro believes that ICT, especially Fintech, can speed up Nigeria’s recovery from the recent recession through the optimization of processes for better efficiency.
While the Chinese Government has been supporting local technology with incentives and adopting Chinese products for use in its operations, the Nigerian government and its private sector have continued to rely largely on foreign software. To fast-track the country’s march towards the new economy, the Federal Government of Nigeria has to look inwards at the myriads of Fintech solutions that are being churned out and support them with adequate incentives. McKinsey Global Institute says that some of these fintech initiatives, especially those involving the use of mobile phones, could rapidly drive inclusion and add up to $3.7trillion to the GDP of an emerging economy within a decade. On their own, Nigerian consumers are now adopting digital payment systems for shopping, utility payments, and even tax.
We have already caught a glimpse of the impact of Fintech on the Nigerian economy. With the adoption of the Treasury Single Account (TSA) by the Federal Government, which has increased financial efficiency and plugged revenue leakages. Through the TSA, over N3.9 billion is now being saved monthly from bank charges that would have been paid by government on different accounts. Remita, the software operating the TSA was developed by SystemSpecs, a totally indigenous company. Flutterwave, a more recent company than SystemSpecs is building a universal payment gateway that will make facilitate Nigerian payments to any foreign company account in any currency. Renmoney is facilitating digital access to loans without collaterals, with payments collected through another Fintech product; Paystack. Piggybank is making it easier for Nigerians to save through a daily donation done on their mobile phones.
In order to maximize these opportunities and position these Fintech initiatives to drive the new economy Nigeria needs to learn from the Chinese. The Federal Government must deliberately seek to enhance and promote indigenous Fintech initiatives through a process of investment, adoption, and research.
Between 2014 and 2016, FinTech investment in Africa increased from $198 million to $800 million. In Nigeria, the bulk of investment into Fintech is coming from outside the country while the government looks on. Paystack secured $1.3M Seed investment from both international and homegrown investors in December 2016. In July 2017, Flutterwave raised over $10 million in a Series A round of funding, led by Greycroft Partners and Green Visor Capital. In May 2018, Fintech start-up, Lidya, raised $6.9 million in a Series A investment round led by Omidyar Network from India and Alitheia Capital, based in San Diego, USA while online savings platform, Piggybank, got $1.1 million.
Foreign investors have seen opportunities in these companies and buying into them so as to own them in the future. The Nigerian government should be able to protect these companies and provide policies that will help them access capital and export. The government also needs to adopt these products for use in its operations. Just like the Chinese, Nigerians should be proud to say the country’s banks are using Nigerian-made software and investors are trading using Nigerian-made software. Also, just like the Chinese, the government needs to own and promote these local initiatives for export. Lastly, Government needs to provide a support framework for these budding companies by funding research into developing processes and data that will help them.
Chidi Alabi writes from Lagos