Wednesday, May 27, 2020 / 04:00 PM / Otunba (Mrs) 'Debola Osibogun*

The COVID-19 pandemic is generating an unprecedented global healthcrisis which in turn has critical implications on the the financial system bothin content and context. The entire global population which has becomevulnerable due the health crisis would also be mostly affected by thebrewing financial crisis if not properly managed and protectedthrough deliberate and conscientious financial education and enlightenment. As someparts of the world celebrate world financial literacy month, ConsumerAwareness and Financial Enlightenment Initiative (CAFEi) uses thisopportunity to assess the implication of the COVID-19 pandemic on FinancialInclusion and Financial Literacy.

Financial Inclusion is undoubtedly an integral component of theSustainable Development Goals which is a cliche to enhance the growth standardsof the developing world. However, the breakout of COVID-19 pandemic hasshown the importance and necessity of financial Inclusion in theworld of governance and business of financial services, today.

At the beginning of the COVID-19 pandemic, the Nigerian governmentexperienced difficulties in planning and segmenting its citizenry qualified tobenefit from its social support programs. This challenge was majorly as aresult of an absence of financial data on the entire population whichgreatly affected the impact of various government interventionschemes at both the State and Federal Levels. The Federal government activatedthe conditional Cash Transfer Scheme and the Food Distribution scheme asmeasures to cushion the effect of the lock down on the population. In thecase of the Conditional Cash transfer scheme, the lack of comprehensivefinancial data created a problem in identifying the poorest of thepoor while in the case of food supply, it was difficult to plan for thosewho are in actual need of this palliatives. Nigeria though has anambitious financial inclusion strategy to include 70% of the population in theformal financial system by 2020 (Central Bank of Nigeria, 2012, and Box 1, andTable 1) the country is yet to meet this target.  Financial Inclusiontherefore needs to be taken more seriously by the government during and inthe post COVID-19 Era to guarantee a sustainable growth and development.

It was also obvious that Financial Literacy was paid less attentionto, than Financial Inclusion in the Pre-COVID-19 Era. The COVID-19pandemic has however brought key financial literacy issues such as savings,taxation, access to credit and use of digital platformsback as topical and germane for debates and implementation. The Pandemichas exposed government resources as dwindling and unlikely to be able tosupport in any future crisis. This is because the government is facedwith an increasing debt profile and bloated expenditure. Consumer Awareness andFinancial Enlightenment Initiative (CAFEi) before the advent of the COVID-19pandemic attempted to bring to the fore the importance of Saving bypublishing articles on the subject matter and celebrating World Savings daywith the international community. We often highlighted theimportance of savings before spending rather than spending before saving.Somehow during the current pandemic majority of households that were unable tosave were lucky and able to rely on food banks and generous donors ofpalliatives to survive. The next emergency may be worse and so there is a needfor proper re-orientation and education on the importance of savings. TheCOVID-19 experience has taught us that we must now prioritize our spendingand save more for an uncertain future. 

Furthermore, the effect of the COVID-19 pandemic has put astrain on government sources of revenue as evident in the decline incrude oil prices. The government is therefore likely to take issues suchas taxation more seriously as it seeks to diversify its revenue basefrom crude oil. Taxation as a financialliteracy issue needs to be given a refocus in the postCOVID-19 era. People need to understand their obligations as individualsand their expectations from government.

In addition to the points earlier raised, anotherkey area in financial literacy that needs to be looked into is accessto credit. Small businesses are the engine room of theeconomy, but majority of them are struggling. The directivegiven by the Central Bank of Nigeria (CBN) to increase loan todeposit ratio of Banks to 65% has increased theopportunity to lend to SMEs and in turn save the economy. Smallbusinesses therefore need to understand terms and conditions on creditcontracts and also when to and when not to borrow. There needs to be moreawareness for SMEs on their obligations, expectations andavenues for dispute resolution in loan agreements.

Lastly, another key aspect of Financial Literacy that needs moreconsciousness is the importance of familiarizing with alternative means ofbanking. The closure of banks during the pandemic and the hesitation to usecash because of its capacity to serve as a form of virus transmission broughtto the fore the importance of using alternative mode of banking likeonline banking and mobile banking. Nigeria's premier bank, FirstBankrecorded in the first week of the lockdown a record 38.5million transactions from alternative modes of banking. This is anindication that the future lies in alternative mode of banking. There is nodoubt that the perception of Financial Literacy and Financial Inclusion afterthe COVID-19 pandemic will no longer be thesame. Governments in the Post COVID-19 Era need to treattargets for financial inclusion more seriously and also campaignaggressively for financial literacy.

*Otunba (Mrs) 'Debola Osibogun is the President of the ConsumerAwareness and Financial Enlightenment Initiative (CAFEi)

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