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COVID 19: Impact and Opportunities for Financial Services Agents in Nigeria

April 22, 2020

COVID-19 has had a significant impact on the global economy, with surging infections, cities in lockdown, businesses shutting down, travel restrictions and staff layoffs. Forbes report the impact in four basic ways. First, supply chain failures because of the impact of the pandemic on China. The second harm results from the direct effects of illness in lost work by those who are sick or attending to the sick. The third and biggest impact to date is the indirect effect of quarantines, travel restrictions, restaurant and store closures, and so forth. These are weighty and trigger the fourth implication which is a surge in demand shocks as the incomes of many people diminish. According to a recent report by the United Nations Development Programme, the socioeconomic impact of COVID 19 on poor and developing countries will take years to recover from, with income losses in developing countries forecast to exceed $220bn. It estimated that nearly half of all jobs in Africa could be lost.

In Nigeria, people began the year 2020 with high hope of measuring increased financial inclusion by the end of the year.  The effect of the pandemic has hit hard on the federal government as the country is now facing U.S dollar shortages due to the crash in oil prices. It has also impacted low-income households and businesses due to government measures to curb the spread of the virus. Most states have banned all public gatherings and closed major markets and schools. The federal government recently announced lockdowns in commercial hubs, including Lagos, Ogun State and the nation’s capital, Abuja. These measures are having sweeping implications on the low income and financially excluded population with high reliance on their informal day-to-day business transactions for survival.  According to the EFInA Access to Financial Services in Nigeria 2018 survey, 44.3 million adults own businesses and about 23 million adults earn their income daily or weekly.

What does this mean for financial services agents?

Financial services agents are also being affected as they are experiencing diminishing transactions and income due to the closure of a significant number of businesses and low economic activity. Other challenges faced by agents as a result of the pandemic include limited support from the financial service providers that hired them, as most financial institutions have implemented working remotely. Agents now rely on rebalancing through ATMs where they face cash withdrawal charges, increasing their cost to serve. They are also coping by rebalancing through accessing funds from family and friends, a method that can be unreliable. Financial services agents are faced with more threat of harassment by law enforcement agents including the police and local council officials who lack knowledge of agent banking during the lockdown. Upon this realisation, some providers have offered special banners which read ‘Approved Essential Financial Institution’ to minimise agent harassment during this crisis.

The Central Bank of Nigeria in its recent press release excluded super agents from the list of financial institutions exempted from government lockdown restrictions. This has triggered conversations among industry stakeholders about whether agents should operate during this period. Because transacting at an agent location requires some in-person engagement, some suggest that allowing agents to continue to operate is not worth the risk. On the other hand, agents can serve as critical access points for financial services that are essential, such as sending money to family members whose income has suddenly been interrupted due to restricted movement. Countries such as the U.S., UK, Italy, Spain, China and South Korea are opting to quarantine potentially contaminated cash to reduce the risk of spreading the coronavirus. The World Health Organization has not said that coronavirus can be transmitted through cash; however, they are advising consumers to switch to contactless payments to reduce risk. It is important for the financial services agents to be enlightened on precautionary measures to protect themselves, customers and reduce the risk of spreading the virus.

Call to Action

Agent banking is an important rail for providing financial services, especially in hard to reach areas. Both the federal and state governments are coming up with various palliative stimulus measures such as cash transfers and distribution of foodstuffs to cushion the effect of the pandemic. Agent networks should be a veritable channel to distribute these palliatives to households. Although exact figures are difficult to determine, there may be approximately 300,000 financial services agents spread across the country. The Nigerian government can use financial services agents to drive account opening among beneficiaries of cash transfer programmes, which will not only cushion the effect of the pandemic but also contribute to Nigeria’s financial inclusion drive.

Financial service providers (FSPs), on the other hand, should come up with measures to support agents during this pandemic period. This could be through the provision of soft loans, equipping agents with personal protective equipment (PPE), and online training on precautionary measures that agents can take to reduce the risk of infection. FSPs also need to seek business collaboration that can stimulate transaction flow at agents’ locations to help agents remain active and profitable.

For years, financial services agents have played an important role in their communities by extending access to financial services to underserved Nigerians. They can now play a critical role in helping those communities through the COVID pandemic. We must work together to support agents in operating safely and to identify ways in which agent networks can help us weather the coming storm.


Written By

Henry Chukwu

Agent Networks Specialist

Follow our journey on promoting financial inclusion in Nigeria.

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