The Managing Director/CEO, eTranzact International Plc, Mr. Niyi Toluwalope, in this interview, spoke to journalists on the attractiveness of the Nigerian economy, how the company has been restructured to play a major role in the financial technology industry, among others. Goddy Egene presents the excerpts:
Assessing the Nigeria economy
The Nigerian economy has the potential to be the biggest economy in Africa and also a source to reckon with globally. We have about 200 million people, which makes us the biggest black nation in the world population wise and what that translates to is an immense opportunity. We have people in country that will drive the economy but unfortunately if you look at the nation we have a huge poverty situation. We have huge infrastructure deficit, we have education deficit, we have job creation deficit, so why is all of this happening? If you scale it down, it is all about infrastructure we do not have.
Lack of infrastructure does not enable industry growth and if there is no industry growth it affects job creation; if there is no job creation, nothing to recycle into education growth and if there is no education, it leads to insecurity which we have consistently seen in the country. The people that have been denied to be trained over time are now getting arms, ganging up and causing havoc at all spheres within the nation. Now, all of them unfortunately is affecting the economy with a great potential. Recently, there was a World Bank release that showed that we are the biggest or the second biggest economy in the Africa with all the insecurity, infrastructure deficit, poverty situation and education deficit, we are still number one or two. Imagine if everything is tinkered right and is working, Nigeria will be a better place to be.
Investment landscape of the country
Last year alone, I think there were several billions of dollars that came into financial technology (fintech) industry across the world and Nigeria got her piece because the fundamentals are there. Savvy investors that understand developing market and how to manage investment return expectations in developing markets will also return. But the issue of insecurity and instability will always mar border line investors that are not risk averse in terms of making necessary investment in the country. However, Nigeria will always be an investment destination because businesses are coming up every day that need funding.
With 200 million people that need services, we are looking up to the government to help manage and balance the security. I believe if that one is sorted out, with the new aspiration of the recently sworn-in ministers, particularly the one on power that has talked about the N10 trillion investment that must happened to balance out the infrastructure, the environment will be more attractive for businesses to thrive and influence inflow of foreign investments. Just the fact that those ideas are coming and the action in place, it is already generating a lot of investments because people want to build businesses that will be available before the infrastructure comes out so that everything will be aligned and the country moves forward.
Readiness of Nigeria for the new digital economy
I believe that Nigeria does not have a choice, the global economy is completely going digital, that is the destination. It is either we align now or we suffer for it in future when we want to align, a lot of businesses, transactions are being digitalised as we speak, so we have to fall in the line, the global economy is fast becoming digital and have to be digital in order to operate there. I think Nigeria has already taken the digital stance. It is just a matter of having the right infrastructure, the right mind-set and the right regulation to ensure that this is done.
Challenges facing fintechs
The fintech industry in Nigeria is fast growing and there is a lot of innovations coming into it. What we need is proper guidance for smaller fintechs which e-Tranzact is doing by providing the platform for them to connect and raise funding. Funding is a challenge and regulation is also a challenge, we need proper regulation to ensure that fintech are properly regulated to promote them and not hinder them. We have to take transactions of banking services to the individuals. It is no longer going to work for banks to be waiting for you to come. No, new technology is changing as everything is becoming digitalised now, I should be able to push banking services directly to you because as far as we are concern you have a bank on the go. It is changing and regulation has to support fintech. It is one of the key challenges we have to surmount.
Prospects of fintechs in Nigeria
The biggest opportunity we see in Nigeria for Fintech is that the federal government, the Central Bank of Nigeria (CBN), the regulators, everybody is moving into digital platform. As of today, just about 30 per cent of transaction activities we do is digital, almost everything is still based on cash which is about 70 per cent. This 70 per cent that needs to come into digital platform has not come yet and that is the opportunity for Fintech industry. Now, rather than just creating payments solutions, people need to also understand how they can make money from the process, how can they be entrepreneur or merchants on the emerging technology. The agency banking model is a good prospects and the more people plug into the that kind of services, the more they increase the awareness and the more they increase transaction activities and bring in a lot of under banked and unbanked people into the financial ecosystem, that will grow the transaction activities and help the country realise digital payment strategy. That is a huge opportunity.
Resumption of VAT on capital market transactions
It is not unique to Nigeria, you find this kind of taxes across the globe, the government needs money, somebody has to fund it we cannot keep taking loans, the government can’t continue to take Paris club loans and World Bank loans to finance our growth and development. Nigerians has to finance their growth and development. I guess the problem has been if I am paying that five per cent per cent in every transaction I undertake, is it going to the actual used? If am paying that five per cent and I know that tomorrow government is going to reduce my diesel cost because the government has improved on power infrastructure, it is worthwhile activities and I will be happy to drop that. The problem in Nigeria is not about paying taxes, the problem is what are the taxes used for because as a private individual, you have to get diesel to provide electricity for yourself, you have a borehole to provide water for yourself, you have security outfit to provide security for yourself and so on, you are already a mini company and you are paying taxes.
These are things the taxes supposed to help you achieve, the government supposed to provide security, water and electricity, you pay taxes but you still provide these infrastructures for yourself, that is one of the challenges the country is facing that the current government needs to address.
Impact of VAT charges on capital market, economy
At some time, we have to see beyond the immediate and think about the long term effect of this. Some of the investors pulling back are only thinking about the immediate impact of this. What is the long term effect of creating a Nigeria that leverages on growth opportunities and create more investment opportunities should be our thinking? I don’t support taking loans to develop the country, if the people that generate businesses in Nigeria are able to pay a portion of their returns as taxes and government judiciously use this to fix the infrastructural deficit we have, am all for it and I think any investor that think long term will support that because we want a Nigeria that is built to be able to extract the opportunities that is therein, that’s not going to happen today, and for us to extract that a few years to come, we need to develop the Nigeria today. No pain, no gain, the higher the risk the higher the gain. Investors need to take a step to properly evaluate their risk appetite and think long term.
What government should do differently to advance financial inclusion in Nigeria
The government has already done it. If you look at the aspirations of the CBN governor on digital payments and financial inclusion, the shared agents network enhancement facility programme they have done, already they have seen how it worked for the six institutions they appointed initially. They have put more funding and regulatory frame work behind it and have been supporting it by pushing specific payments through those channels. I believe that the strategies of the regulator are very clear over the next five years. They have already made it public on how they are going to drive financial inclusion through the shared agent network enhancement programme. They have already set an agency that is going to manage 500,000 agents that were created, that agency is managed by a very experienced banker, so all the signs are there that this is going to be successful.
eTranzact’s readiness to advance the new digital economy
We have gone through a significant management restructuring, we are completely a new management, driving the strategy of the company going forward.We have just concluded a restructuring and board reorganisation exercise that would enable it to focus on improved governance and proper structure. We have done a lot since the last one year, we have invested in our people, our infrastructure and our products . We have reviewed and streamlined our strategy so that it allies properly with our future focus in the role we want to place in fintech space and electronic payment generally in the future. Some of which are new focus on developing block chain technology and developing new big data strategy.
As you see and some us already know, data now rules the world. As a financial technology institution, switching and payment processing infrastructure by the apps we see a lot of transactions. Last year we did over N30 trillion in transaction value process and that was processed by over 400 million specific transactions. The company would create a platform to empower and position upcoming fintech institutions and other smaller players in the industry that did not have the capital structure to establish a platform.
We have built an infrastructure that would enable these start-ups to plug into eTranzact platform and consummate their transactions seamlessly at any given time. We are already positioning ourselves in the centre so that any fintech that raises money to build a product can use our platform to consummate their transactions. As a licenced CBN switching company, we have the ability to move money from any bank account and that is what financial transaction is all about. Also, a critical part of our strategy is to continue to empower the unbanked and the underbanked under our financial inclusion strategy, as you know we are one of the licenced mobile money operators in the country.