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How the financial industry in Nigeria can adapt to the Covid-19 pandemic: Focus on Payments

02/01/2021 15:57:34

Approximately three months after the coronavirus pandemic became a national priority with wide ranging implications on various sectors of the economy, it is apparent that its effect on payment systems and financial institutions will be a factor in defining the direction of the financial services industry going forward. Changing consumer behavior, adjusted business models and emerging regulatory concerns are currently being analyzed in various organisations to determine appropriate strategies to capture market share in emerging opportunities and defend current positions.

The coronavirus pandemic has necessitated some drastic action from individuals, companies and the government. Some of this action has led to a decline in economic activity with some sectors experiencing significant shutdown of activity while other sectors are experiencing volatility of activity.

In June 2020, the International Monetary Fund (IMF) released a report on Nigeria signaling that it will face its worst recession in four decades due to the twin impacts of Covid-19 and low oil prices. The IMF recently revised its projection for the Nigerian economy to -5.4% in 2020 (from April’s estimate of -3.4%)1. The Nigerian government, through its recently announced Economic Sustainability Plan2, expects contraction in 2020 to be -0.59%. However, the current infection numbers being released with record daily record and volatility in oil prices may yet put a strain on these estimates.

The disruption brought on by the pandemic will lead to a significant decline in economic activity as the lockdown is focused on the major commercial centers in the country, Lagos, Abuja and to an extent Ogun State, even as the numbers of new infection as at early July shows that other states are now witnessing higher cases. The premise of this think piece is that the restrictions in certain activities, increased fear of contact with contaminated surfaces and heightened precaution in human interaction will persist even as easing of lockdown measures begins. This will bring about changes in end user preferences for payment methods which banks and other financial institutions must respond to. After all, an effective payment system is the lifeblood of the financial system.

This article is intended to provide additional insights and make recommendation of actions various stakeholders can take to drive positive outcomes.

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