Feature/OPED
How Nigeria, Other African Countries Can Forge an Inclusive Economic Recovery
By Tolu Oyekan
As of this writing, the spread of COVID-19 in many African countries has been more contained, and the death toll lower, than some had expected in 2020.
The economic fallout of the pandemic for Africans, however, will be different and could be direr than for the rest of the world.
Sub-Saharan Africa accounts for more than half of the world’s populations living at or below the poverty line. A recent World Bank scenario estimates that COVID-19 could push up to 40 million people in Sub-Saharan Africa into extreme poverty, seriously eroding the progress that African countries have made to reduce deprivation during the past two decades.
When the pandemic was declared in April 2020, BCG counselled African governments to develop comprehensive plans in response to the health care crisis and take on broader economic and societal challenges.
We continue to believe that the best course for African leaders is to accelerate economic policy reforms and investments that accentuate inclusion and position countries for a stronger post-pandemic recovery.
Indeed, Africa’s economic recovery from the COVID-19 crisis depends on how effectively governments will be able to balance urgent actions to stabilize economies with the structural reforms needed to stimulate sustainable economic development initiatives. An inclusive approach to economic recovery can protect the most vulnerable populations in the short term and improve their prospects in the long term. Select initiatives in Nigeria present a case in point.
The Pandemic’s Economic Fallout in Nigeria
Nigeria is the largest economy in Africa and one of four African countries included on BCG’s Middle Billion list of rapidly transforming developing countries where local entrepreneurs attract global investment, especially in emerging tech-driven industries.
Yet, almost 83 million people—40% of the country’s population—live below the country’s poverty line of $381.75 per household, per year, according to the 2018–2019 living standards survey by Nigeria’s National Bureau of Statistics (NBS).
World Bank 2021 projections for Sub-Saharan Africa as a whole warn of protracted economic flux throughout the year. Even with a modest rebound from recession, there is a risk that a steep drop in per capita income could push tens of millions more people into poverty.
South Africa and Nigeria, the continent’s most populous country, face the most severe setbacks, according to the projections. Lower oil prices, combined with pandemic-related factors, add to the strains on Nigeria’s economy and the risks for its most vulnerable citizens.
These concerns prompted the Nigerian government to undertake a wide range of activities to stimulate economic growth with a focus on economic inclusion. Specifically, Nigeria aims to leverage public-private partnerships to create economic opportunities for marginalized populations.
In June 2020, Nigeria’s government revised its economic sustainability plan to double down on stimulus investments and policy interventions in order to revive the growth of bedrock industries (such as oil, tourism, and aviation), and accelerate growth in emerging businesses in other industries (such as small and midsize enterprises and alternative energy) that promote economic inclusion and opportunity.
Specifically, the government is focusing on expanding mobile smartphone service, digital financial services, and home-based solar electricity for low-income households.
Mobile Money and Telcos Connect
Using cash and paying bills in person have historically been the norm, especially among the unbanked populations. This has changed since COVID-19. From the early days of the pandemic, leading contactless payment startups in Nigeria launched initiatives to encourage consumers and merchants to sign up for their services. As BCG has written, financial institutions in Africa were the first to introduce mobile payments.
In Nigeria, the push for cashless transactions has prompted mobile money providers to leverage the networks of telecommunications companies in order to sign up mobile money customers. This is important because most poor Nigerians own a cell phone, but they don’t have a bank account.
The percentage of the adult population with access to financial services in Nigeria grew at a compound annual growth rate (CAGR) of 6% from 2008 to 2012 but by only 1% from 2012 to 2018, according to an annual survey by Enhancing Financial Innovation & Access, a financial-sector development organization. This low rate persisted despite meaningful reforms implemented by the Nigerian government before the pandemic to accelerate financial inclusion.
In 2018, for example, the government issued payment services guidelines for financial service providers and telcos seeking to expand their customer bases among the unbanked, especially in rural areas. However, it took some time for the Central Bank of Nigeria (CBN) to issue the licenses that telcos need to operate as a payment service bank (PSB).
In August 2020, the CBN licensed three new PSBs, which can now offer high-volume, low-value digital transaction services, such as remittances, microsavings accounts, and withdrawals. Extending the reach of mobile banking services to rural unbanked populations could also allow the government to deliver social welfare benefits directly to those citizens’ bank accounts.
Pay-as-You-Go Solar Service
The Nigerian government is aiming to install new home solar power systems and mini-grids for 5 million low-income households by the end of 2023.
Many of those households—which either rely on small, inefficient generators for electricity or have no power source at all—will need to use PAYGo, an instalment financing option offered with mobile money bank accounts, to purchase the installation kits for these systems. Customers with an existing mobile money account may apply and qualify for a PAYGo loan more easily than others.
Our analysis shows that a PAYGo loan would make solar kits affordable for about half of the 31 million households that do not have reliable electricity and may also be considered to be in a low-income bracket.
What’s more, we found that 3.2 million out of 17 million households currently using kerosene and candles as their lighting source could afford the monthly PAYGo payments based on their current spending on lighting, plus about 10% of their nonfood budget.
We expect that the scaling of mobile money accounts, along with home solar power kits financed with instalment loans, will have a sustained economic impact on low-income populations well beyond any 2021 recovery.
A recent USAID research brief estimates that 15% to 30% of PAYGo solar customers will create a credit history for the first time when they purchase a solar home system with a PAYGo plan. That credit history could, in turn, lead to other loans for large expenses, such as school fees, which can consume up to 40% of a family’s annual income. Credit histories are also a critical driver of growth for small-business enterprises and first-time business entrepreneurs.
The USAID brief also noted advantages for providers: PAYGo solar customers generate more than twice as much revenue per user for a mobile money provider than the average customer.
A Stronger Recovery and Future
While increases in poverty and economic inequality are possible, they are not inevitable. As we see it, the economic hardships caused by the pandemic give governments a chance to examine the strengths and shortcomings of past policies and strategies and address the current structural inequities in their economies.
Linking economic inclusion initiatives across several industries could also have positive, and enduring multiplier effects. Time will tell whether Nigeria’s inclusive recovery plans succeed. All African governments, and the policymakers who are working with them, must look beyond the crisis to ensure that the resources deployed today build a better foundation to achieve a more equitable future.
Tolu Oyekan is a partner in BCG’s Lagos office. He leads the firm’s work on total societal impact across West Africa and is a core member of BCG’s Corporate Finance & Strategy practice
By Luke Kyohere
The global payments landscape is undergoing a rapid transformation. New technologies coupled with the rising demand for seamless, secure, and efficient transactions has spurred on an exciting new era of innovation and growth. With 2025 fast approaching, here are important trends that will shape the future of payments:
1. The rise of real-time payments
Until recently, real-time payments have been used in Africa for cross-border mobile money payments, but less so for traditional payments. We are seeing companies like Mastercard investing in this area, as well as central banks in Africa putting focus on this.
2. Cashless payments will increase
In 2025, we will see the continued acceleration of cashless payments across Africa. B2B payments in particular will also increase. Digital payments began between individuals but are now becoming commonplace for larger corporate transactions.
3. Digital currency will hit mainstream
In the cryptocurrency space, we will see an increase in the use of stablecoins like United States Digital Currency (USDC) and Tether (USDT) which are linked to US dollars. These will come to replace traditional cryptocurrencies as their price point is more stable. This year, many countries will begin preparing for Central Bank Digital Currencies (CBDCs), government-backed digital currencies which use blockchain.
The increased uptake of digital currencies reflects the maturity of distributed ledger technology and improved API availability.
4. Increased government oversight
As adoption of digital currencies will increase, governments will also put more focus into monitoring these flows. In particular, this will centre on companies and banks rather than individuals. The goal of this will be to control and occasionally curb runaway foreign exchange (FX) rates.
5. Business leaders buy into AI technology
In 2025, we will see many business leaders buying into AI through respected providers relying on well-researched platforms and huge data sets. Most companies don’t have the budget to invest in their own research and development in AI, so many are now opting to ‘buy’ into the technology rather than ‘build’ it themselves. Moreover, many businesses are concerned about the risks associated with data ownership and accuracy so buying software is another way to avoid this risk.
6. Continued AI Adoption in Payments
In payments, the proliferation of AI will continue to improve user experience and increase security. To detect fraud, AI is used to track patterns and payment flows in real-time. If unusual activity is detected, the technology can be used to flag or even block payments which may be fraudulent.
When it comes to user experience, we will also see AI being used to improve the interface design of payment platforms. The technology will also increasingly be used for translation for international payment platforms.
7. Rise of Super Apps
To get more from their platforms, mobile network operators are building comprehensive service platforms, integrating multiple payment experiences into a single app. This reflects the shift of many users moving from text-based services to mobile apps. Rather than offering a single service, super apps are packing many other services into a single app. For example, apps which may have previously been used primarily for lending, now have options for saving and paying bills.
8. Business strategy shift
Recent major technological changes will force business leaders to focus on much shorter prediction and reaction cycles. Because the rate of change has been unprecedented in the past year, this will force decision-makers to adapt quickly, be decisive and nimble.
As the payments space evolves, businesses, banks, and governments must continually embrace innovation, collaboration, and prioritise customer needs. These efforts build a more inclusive, secure, and efficient payment system that supports local to global economic growth – enabling true financial inclusion across borders.
Luke Kyohere is the Group Chief Product and Innovation Officer at Onafriq
In a heartfelt statement released today, the Conference of Nigeria Political Parties (CNPP) has extended its warmest congratulations to Ghana’s President-Elect, emphasizing the importance of learning from Ghana’s recent electoral success as Nigeria gears up for its 2027 general elections.
In a statement signed by its Deputy National Publicity Secretary, Comrade James Ezema, the CNPP highlighted the need for Nigeria to reclaim its status as a leader in democratic governance in Africa.
“The recent victory of Ghana’s President-Elect is a testament to the maturity and resilience of Ghana’s democracy,” the CNPP stated. “As we celebrate this achievement, we must reflect on the lessons that Nigeria can learn from our West African neighbour.”
The CNPP’s message underscored the significance of free, fair, and credible elections, a standard that Ghana has set and one that Nigeria has previously achieved under former President Goodluck Jonathan in 2015. “It is high time for Nigeria to reclaim its position as a beacon of democracy in Africa,” the CNPP asserted, calling for a renewed commitment to the electoral process.
Central to CNPP’s message is the insistence that “the will of the people must be supreme in Nigeria’s electoral processes.” The umbrella body of all registered political parties and political associations in Nigeria CNPP emphasized the necessity of an electoral system that genuinely reflects the wishes of the Nigerian populace. “We must strive to create an environment where elections are free from manipulation, violence, and intimidation,” the CNPP urged, calling on the Independent National Electoral Commission (INEC) to take decisive action to ensure the integrity of the electoral process.
The CNPP also expressed concern over premature declarations regarding the 2027 elections, stating, “It is disheartening to note that some individuals are already announcing that there is no vacancy in Aso Rock in 2027. This kind of statement not only undermines the democratic principles that our nation holds dear but also distracts from the pressing need for the current administration to earn the trust of the electorate.”
The CNPP viewed the upcoming elections as a pivotal moment for Nigeria. “The 2027 general elections present a unique opportunity for Nigeria to reclaim its position as a leader in democratic governance in Africa,” it remarked. The body called on all stakeholders — including the executive, legislature, judiciary, the Independent National Electoral Commission (INEC), and civil society organisations — to collaborate in ensuring that elections are transparent, credible, and reflective of the will of the Nigerian people.
As the most populous African country prepares for the 2027 elections, the CNPP urged all Nigerians to remain vigilant and committed to democratic principles. “We must work together to ensure that our elections are free from violence, intimidation, and manipulation,” the statement stated, reaffirming the CNPP’s commitment to promoting a peaceful and credible electoral process.
In conclusion, the CNPP congratulated the President-Elect of Ghana and the Ghanaian people on their remarkable achievements.
“We look forward to learning from their experience and working together to strengthen democracy in our region,” the CNPP concluded.
By Kenechukwu Aguolu
The proposed tax reform, involving four tax bills introduced by the Federal Government, has received significant criticism. Notably, it was rejected by the Governors’ Forum but was still forwarded to the National Assembly. Unlike the various bold economic decisions made by this government, concessions will likely need to be made on these tax reforms, which involve legislative amendments and therefore cannot be imposed by the executive. This article highlights the purposes of taxation, the qualities of a good tax system, and some of the implications of the proposed tax reforms.
One of the major purposes of taxation is to generate revenue for the government to finance its activities. A good tax system should raise sufficient revenue for the government to fund its operations, and support economic and infrastructural development. For any country to achieve meaningful progress, its tax-to-GDP ratio should be at least 15%. Currently, Nigeria’s tax-to-GDP ratio is less than 11%. The proposed tax reforms aim to increase this ratio to 18% within the next three years.
A good tax system should also promote income redistribution and equality by implementing progressive tax policies. In line with this, the proposed tax reforms favour low-income earners. For example, individuals earning less than one million naira annually are exempted from personal income tax. Additionally, essential goods and services such as food, accommodation, and transportation, which constitute a significant portion of household consumption for low- and middle-income groups, are to be exempted from VAT.
In addition to equality, a good tax system should ensure equity and fairness, a key area of contention surrounding the proposed reforms. If implemented, the amendments to the Value Added Tax could lead to a significant reduction in the federal allocation for some states; impairing their ability to finance government operations and development projects. The VAT amendments should be holistically revisited to promote fairness and national unity.
The establishment of a single agency to collect government taxes, the Nigeria Revenue Service, could reduce loopholes that have previously resulted in revenue losses, provided proper controls are put in place. It is logically easier to monitor revenue collection by one agency than by multiple agencies. However, this is not a magical solution. With automation, revenue collection can be seamless whether it is managed by one agency or several, as long as monitoring and accountability measures are implemented effectively.
The proposed tax reforms by the Federal Government are well-intentioned. However, all concerns raised by Nigerians should be looked into, and concessions should be made where necessary. Policies are more effective when they are adapted to suit the unique characteristics of a nation, rather than adopted wholesale. A good tax system should aim to raise sufficient revenue, ensure equitable income distribution, and promote equality, equity, and fairness.
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