The Central Bank of Nigeria (CBN) has an overwhelming capacity to help rural communities in Nigeria that do not have access to electricity get connected to clean renewable electricity quickly and cheaply, experts from the Nigerian Office of the Power for All have indicated.
According to a policy brief prepared by the two experts – Ifeoma Malo, the country director of Power for All, and Chibuikem Agbaegbu, the Nigerian lead for market access of Power for All Nigeria, the CBN could do this if it allowed payment for clean off-grid electricity supplied to rural communities or consumers who do not have access to electricity through licensed Mobile Network Operators (MNOs).
Malo and Agbaegbu, explained in the policy brief that the CBN had a lot of roles it could play to make sure electricity reach about 80 million Nigerians reported to have no access yet to any form of electricity.
Titled – ‘the need for mobile money in Nigeria’s off-grid energy sector’ – the policy brief stated that if the CBN permitted MNOs to provide electricity payment services as value-added services under their mobile money license, it could become a win-win for it, in that, it would help to push its desire for comprehensive financial inclusion as well as get electricity to rural communities for productive ventures.
“In 2012, the CBN launched a cashless policy to curb excesses in the handling of cash as well as insisting that mobile money operations be bank-led due to the perceived threat to retail banking in Nigeria if extended to MNOs. However banks have limited mobile money to just mobile banking as an add-on service to already existing customers with lesser focus on financial inclusion for the unbanked population particularly in rural areas. This limits the provision of payment-related services to these areas.
“The CBN should permit MNO-driven mobile money solutions by granting mobile money licenses to MNOs and regulated by the CBN through a strong mobile money regulatory framework. Under the MNO-driven model, the MNO provides electricity payment services as a value-added service under its mobile money license enabling subscribers to make payments for electricity in the form of electronic money which are settled through the MNO’s established agent network,” said Malo and Agbaegbu.
Both further explained: “A clear distinction from the bank-led model is that the subscribers do not need to have a bank account. The electricity ‘payment-in-transfer’ in principle could be a deposit held in an account with a bank, as such the MNO serves to execute and facilitate electricity payments without performing the basic roles of a bank.”
“Payments are maintained in a trust account in a bank and cannot be used by the MNO as funds for its business. This ensures the MNO acts purely as a payment facilitator and not carrying out the roles of a bank. This will be effective for organising such informal electricity payments into a formal financial system required by off-grid companies, and expanding energy access to communities.
“The CBN can also explore a hybrid model – combination of the bank and MNO model – in the context of perceived competition between banks and MNOs. Through this model, banks and MNOs work together in extending mobile money transfer and mobile banking services to off-grid customers. The MNO’s mobile money service handles the electricity payments with cash in or out through its agent network, which is linked to formal banking services such as savings, credit extension, insurance and bank account extension to the MNO’s subscribers,” they noted.
They further stated that this will provide a win-win for all parties, adding that, “the off-grid company easily gets payments for its electricity service; it serves the MNO’s objectives in facilitating digital payments, churn reduction, customer acquisition and increased average revenue per user.”
“It also serves the bank in terms of outreach, customer acquisition, and cost reduction. Various banks are already providing mobile operator USSD codes as services to their customers for money transfer, bills payments, and even for opening bank accounts,” the experts said.
Buttressing their confidence with the proposal, the experts counselled that: “The CBN should see the extension of mobile money services to MNOs not as a threat to retail banking for commercial banks but as a win in the provision of services such as electricity and financial inclusion for the millions of unbanked Nigerians.”
“By enabling energy access to off-grid communities and encouraging digital transactions, the CBN will be facilitating economic development to the thousands of off-grid communities across the country. With electricity access comes socio-economic development, improved standard of living, and increased income outcomes, job creation through productive uses of electricity, and various other energy dividends,” they further indicated.