Elections and the never-coming revolution: Things to learn from the fintech explosion in Nigeria

On Monday, 29^th March 1920, the first-ever elections in Nigeria took place, with contestants vying for elective rights into available seats in the then British-led Lagos Town Council. It was a monumental occasion, as this was the first time anything of this nature ever happened in the colony recently christened Nigeria just six years prior in 1914.

Three years later, the first General Elections in Nigeria took place on Thursday, September 29^th 1923, for seats in the Nigerian Legislative Council, with the New Nigerian Democratic Party (NNDP) winning three of the four seats available at such a historical event. This marked the beginning of a representative democratic experiment in Nigeria.

Since that faithful Thursday a hundred years ago, elections in Nigeria have come and gone, with virtually every instance being bedevilled by claims and counter-claims of umpire unfairness, voter disenfranchisement, ballot snatchings, resulting fixings etc. Elections in Nigeria have been so endlessly conflictual that the only one widely adjudged free and fair was when the acclaimed winner eventually died in jail without being sworn in.

This never-ending river of ‘hail and wail’ has continued for a century until last Saturday, the 26^th day of February 2023, rolled by. The seventh edition of Nigeria’s general election since the commencement of the 4th Republic in 1999.

It is interesting to note that the current electoral commission – INEC has been around for twenty-four years, managing the electoral cycle and overseeing the conduct of the elections.

Read also: 2023 elections: the BVAS question and why Nigeria can’t afford to lose in the age of tech

Even more, the government of the day had been in power non-stop for eight years, with the Head of government – President Mohammadu Buhari – having participated in the general elections uninterrupted the last twenty years – since 2003.

The police and Armed forces, who are the protectors of democracy as well as the electorates, who are its heartbeats, have seemingly familiarised themselves with the rituals of successful conduct and participation in such exercises.

Still, the February 2023 Presidential and Legislative elections left much to be desired.

The leading issues were not just about the results and the inevitability of unfair claims by some parties. It was more around the stark deficiencies in the process. From Voter Registration and PVC collections to Voter Accreditation and BVAS effectiveness, to actual votes and counting, to results documentation, collation and transmission to wards and local governments and INEC servers, this year’s election exposed the cracks in our electoral system more than ever before.

It must be said that Nigeria’s social-political and economic situation heightened tensions and interest in the elections. With record-level registration of over 93 million voters, a 10% increase on the 84 million voter registration from 2019. About 37 million of those numbers are between the ages of 18 and 34 years, with another 36% between the ages of 35 and 49 years. This clearly shows that almost 80% of voters in the current election are under 50.

We also have to admit that the size and stature of the leading candidates elicited increased interest and participation at this year’s ballot, with three of the leading candidates all former governors in leading states across different regions and the fourth, a former Vice President of two tenures with up to 40 years of active political experience in Nigeria. All four leading candidates are political bigwigs with long-standing reputations and followership across Nigeria.

So with a hundred years of electioneering experience in Nigeria – though frequently punctured by intermittent military incursion; and mass mobilisation of youth involvement and interest, why was it difficult to deploy technology to deepen democracy and guarantee better outcomes?

The Fintech Explosion in Nigeria

Indeed, Nigeria has deepened Financial Technology adoption with record-level transaction digitisation and process automation. There are multiple award-worthy achievements in the payments and financial technology industry, so much so that many of our national achievements have attracted mind-boggling investments from partners and venture capitalists worldwide, making our country the envy of nations today. 

Indeed, according to the 3rd edition of Prime-Time for Real Time 2022, published by ACI Worldwide, Nigeria is Africa’s undisputed real-time and digital payments leader with an estimated 3.7 billion real-time transactions recorded in 2021 – ranking it 6th in the league table of the world’s most developed real-time payments markets – closely behind India, China, Thailand, Brazil, and South Korea.

In fact, on the real-time transaction side alone, Nigeria is forecasted to rise to 8.8 billion transactions in 2026, a 5-year CAGR of 18.6%, which is expected to help unlock $US 6 billion of additional GDP in 2026, representing 1.01% of the country’s GDP.

This will bump Nigeria’s ranking to 4th place among the world’s economies, realizing the maximum economic benefits of real-time payments.

Furthermore, with the deployment of NIBSS Instant Payments (NIP); an account-number-based, online-real-time Inter-Bank payment solution and a subsequent customer validation technology deployment of BVN – The Bank Verification Number; the Nigerian payments and financial technology eco-system have continued to thrive and grow in leaps and bounds.

Undeniably, deepening digitisation and growing inclusion have continued to make Nigeria an attractive destination for investment whilst also making it a leading innovation terminus for global technology and Financial services players.

The questions are: What powered the growth and progress in the payments and financial technology landscape? Are there things to learn and adapt to improve and digitise electioneering in Nigeria? Are there parallels that we can link to drive growth, increase participation and foster growth in our democratic system? 

How the electoral process can learn from the success of the fintech

I will not try to simplify the issues by subsuming the many inter-related progressive ideas and policies that have defined the payment and financial eco-system the last twenty years, but what I will attempt to do is to build a case for three critical enablers which has – in my view accounted for the pace of growth and sustainable progress we continue to witness today.

A Strategic Vision

The first and perhaps most strategic for me is the Vision for what payment should be. After the appointment of Charles Soludo in 2003 and the Banking consolidation exercise in 2004, perhaps the most consequential policy action of the then CBN Governor was constituting the Payment Systems Vision 2020, first conceived In 2007.

That Vision-casting exercise conducted across multiple years brought in participants from industry, regulators, and even academia, with participation from critical stakeholders as they worked tirelessly to design a detailed picture of what the future can and should be.

The PSV2020 vision document, again reviewed in 2013, has been the guiding framework for the growth and development of the payment and financial services industry. The CBN reviewed the document further in 2018 and developed an updated PSV 2030 vision document until it was considered disadvantageous to plan for ten years in a fastly evolving and highly disruptive industry. A 5-year review period was arrived at.

The electoral context

Do we have a similar strategic vision? Are we clear as to the ultimate destination of this democratic experiment? Do we want to keep spending hundreds of billions every year to prosecute error-strewed elections, or do we want to drive efficiencies that will encourage inclusion, promote automation and offer unimpeachable transparency?

Is it impossible to call critical stakeholders together and give them an 18-month mandate, with representatives from civil societies, political parties, INEC, Political class, constitutional lawyers and even the electorates?

Can we not arrive at a clearer vision of what successful elections represent so that we can strive to drive, deliver and deepen democracy in Nigeria?

Structured Framework

Another critical driver for growth in Nigeria’s payment and Fintech eco-system is the nature and structure of the industry designed by the CBN to spur growth. Some of the earliest structural changes were the Banking reforms of the early 2000s, which created the Microfinance Banking scheme in 2005 to take financial services to the unbanked and underbanked, driving inclusion and deepening penetration.

This allowed the commercial banks to focus on large retail customers of the urban areas and business/commercial banking, while the Microfinance Banks focused on the bottom of the pyramid segment across the hinterland. Much later in the late 2000s, the CBN licensed Paga, eTranzact PocketMoni, Interswitch’s Quickteller and others to roll out their wallet mobile-money type solutions, which was the emergence of this fintech experiment.

Virtually every player had a minimum license fee condition and settlement banking obligations. Store-of-value operators were also expected to provide substantial capital requirements that raised entry barriers for only the most genuine and interested players. Whilst many weren’t thrilled at the licensing and re-licensing of the different services and their associated humongous fees, the structure created order in a near-chaotic space.

More than order, it encouraged good competition, and great innovation stifled monopoly and drove growth.

The electoral context

In the electoral environment, the critical players are usually political parties. However, the new electoral act can help refine and restructure our political space with defined functions and limits for critical players. Stakeholders include Civil Society, Political Action Committees, Media, Government, Government-appointed officials and Nigerians.

Clear-cut limits should be defined on funds raised, political donations, last-minute cross-carpeting by politicians, people participation and even conditions for independent candidacy. INEC, working with the Legislature, Executive, and strategic stakeholder groups like the Judiciary and Civil society, needs to develop a framework that standardises practice and activities within the electoral space.

Super-Structure

Perhaps the most significant investment that has driven the sustained year-on-year growth in the Nigerian FinTech space is in deploying technology infrastructure that underpins payments and financial services in Nigeria. Three significant core ones are the rise of the Switches in the early 2000s, first powered by Interswitch, Unified Payments, eTranzact and others.

They primarily are the trust providers that allowed Nigerian banks to collaborate and provide trusted real-time interoperable services to customers, shaving off many hours and days of settlement and reconciliation headaches that banking used to be known for in the 90s and earlier.

Since Banks primarily provide the rails for FinTechs to thrive, this was the first significant technology infrastructure driving growth. The next was the explosion of Real-Time Payments with the unveiling of NIBSS Instant Payments (NIP) in 2013.

This has primarily enabled Banks, Fintechs and Non-Bank players to make a foray into the payment space to drive new-age transaction use cases that have continued to power the growth we are witnessing currently. The third and final for this piece is the Identity Management solution deployed in Bank Verification Number (BVN), which serves as a critical KYC requirement for entrenching trust, weeding out bad actors and limiting the possibility for fraud in the eco-system.

The electoral context

Today in Nigeria, INEC maintains perhaps the most extensive database size, with about 93 million Nigerians registered for this year’s elections. However, the register largely keeps dumping data, without sufficient technology deployed to validate that data against other government-approved databases like the BVN. The data does not also allow for periodic review and data updates unless during elections.

More critically, electorates are not allowed to vote digitally, and such votes faced severe handicaps when electronic transmissions were considered using the BVAS machines during the last elections.

We need to deploy a robust and trusted structure that will electronically transmit election results and vote counts as undertaken in some leading countries globally, particularly in the United States, Australia, India etc. We need to improve the database technology currently used by INEC and validate it against leading databases to weed out underaged voter registration, which bedevilled current exercise.

We also need to align party registers and provide tools that allow them to digitally annotate and validate their membership numbers without resorting to the current manually untrusted process.

Finally, perhaps the most far-reaching is ensuring valid vote counts. Where results are contested, votes can be audited for provenance, and legal audit resolution can be easily binding on all players with an evidentiary basis.

Bottomline

It is important to state that no single factor has accounted for the exciting industry that FinTech players all claim today. Its been a combination of many factors working in synergic flow to deliver the explosive growth we are witnessing.

It has been the alignment of a Mandate Owner (CBN) that pushes forward-facing Policies (License Regimes, Policy framework, Compliance Oversight) with an aggressive deployment of Technology (BVN, eNaira, NIP etc.) and the promotion of a Liberal playing turf that encourages diversity of players to step in and build out their assumptions.

INEC must take a more leading position, particularly during the out-of-election season. They need to do more in the policy, engagement and awareness creation space to drive inclusive representation of stakeholder input. They need to work with the Legislature and Judiciary to include forward-facing directives in the upcoming versions of the Electoral Act.

The commission must provide guidelines stipulating players and their monetary limits within the electoral space. They also must continue exploring how technology can provide more trust in Voter validation, authentication, and Vote-authentication and recognition.

We are certainly not going to stumble into growth and development in Nigeria. It needs to be planned for, and such plans must be owned and executed to near perfection by clear-minder officers who know the limits of their powers without compromising the substance of such responsibilities.

Indeed, there are a few things INEC and the Nigerian electoral stakeholder bodies can learn from the ongoing FinTech explosion in this country.

This article was contributed by Lanre Basamta. He is an experienced tech-business and marketing professional with years of experience in the Nigerian Fintech industry.