At the recently concluded Nigeria Digital Economy Summit (NDES), leading international and local investors, experts and policymakers from across the globe gathered to discuss critical issues under the theme “Leveraging Digital Economy for Trade & Investment.” This took place at the Statehouse Banquet Hall, Abuja from November 14 – 15, 2019.
Supported by Mastercard, Facebook and the Government of Sweden including the Swedish Institute, a representative of the Swedish private sector; the Summit focused on how to galvanise local collaboration and investment from within the traditional sector into the rapidly growing Start-up Ecosystem.
During the event, Ventures Africa had a chat with Raghav Prasad, Division President for sub-Saharan Africa, Mastercard. In the course of the interview, Raghav Prasad shared some insight on leveraging digital solutions, how technology can help overcome the primary barriers that have long held back Nigeria’s economy and unlocking digital opportunities.
Ventures Africa (VA): Tech-based economic development has become a means for a thriving economy, how do you think Nigeria has fared in that regard compared to other developing nations?
Raghav Prasad (RP): So, Technology really is, we believe the ultimate enabler and frankly it’s an interesting multiplier on economic growth rates. The wonderful thing about Africa, Nigeria especially, is what I always like to call the late mover advantage. These are markets, which are not stuck in old infrastructure that they have to find ways to get around. We have the wonderful opportunity to leapfrog to the latest technology that is cheaper, faster can be easily scaled and are more secure. So I think Technology is going to be for the next five, ten, twenty years the basis that will drive Africa’s growth. That will allow Africa to transform itself. And we as a technology company are very proud to be part of that journey and we are investing heavily in Africa to facilitate that journey.
VA: How do you think we could leverage digital technology to promote trade and investment?
RP: Let me give you an example, what underlies trade and investment, for example, is the movement of funds, right. So if I’m trading with Ghana or Benin or Kenya or indeed China, I need to be able to pay quickly and safely. If you think about how payment works today across the border using swift, it’s a clunky mechanism right? You send out payment and for three days you have no idea where it is, you can’t track it, you can’t manage it, it costs a lot. However new technologies like what Mastercard offers makes the process seamless.
For instance, we have built something called Mastercard Send. We are already connected to 25,000 banks around the world directly and so we can transfer money from one bank to the other at a fraction of the cost, and in a fraction of the time. We’ve done tests out of Nigeria, we can transfer from here to London into a bank account and the other person will know about it within 40 minutes, at a very low cost. If those kinds of technology become pervasive. I think that will actually fundamentally support trading payment. Besides figuring out how to move funds, another key thing to consider for trade across the markets is to make sure that the payment systems are interoperable.
You shouldn’t create systems that are only designed to work between two parties or two countries, but you should create systems that can work anywhere to everywhere because that’s when the benefits of skill and innovation come through.
VA: While there has been a surge in tech-based solutions in Nigeria’s startup ecosystem, how do we get traditional firms on board to constantly innovate and maximize the use of technology?
RP: In today’s world, the system is more or less an ‘innovate or die’ situation, you don’t have a choice, because somebody else will disrupt you, and Nigerian entrepreneurs, tech entrepreneurs are building some of the most amazing programs, some of the most amazing platforms. What’s really interesting is we work with a lot of traditional players. They are actually very savvy. They understand the issues, and the need to innovate. For smaller companies, they are more nimble – you know if you’re a small start-up with five people you can make decisions over the breakfast table. However, with bigger companies, there’s a whole chain, and innovation takes a little bit of time. So I think the way large companies will succeed in this, is to think like start-ups, to be able to make decisions faster, to be willing to fail, and fail fast and move on. That’s the mindset shift that traditional companies need to make. And we’re of course supporting a lot of our partners in Nigeria and across Africa in making that shift.
VA: What strategies/policies can be put in place to foster economic development through tech advances?
RP: Well, actually I’m very encouraged by the summit; I think the summit speaks to the government’s commitment to encouraging digital investment and transformation. You know I had some conversations on the sidelines with some of the ministers, and I was very encouraged by the policy frameworks and things they are thinking about. You know the thing with government that one has always got to remember is that a policy cannot be designed for one item or one type of company. Once the government makes policy, it needs to be applicable to a wide audience. Therefore it needs a little bit of thinking. But we are very encouraged by this summit; we are hoping that the summit will result in some interesting action plans that we can support the government to take forward.
VA: How relevant do you consider state support in overcoming barriers to Nigeria’s technological drive?
RP: State support is critical; the state provides the policies and regulatory framework within which companies can operate. So the way I think about state support is not whether the state can provide funding. I think of state support in terms of providing the enabling policy frameworks and the enabling regulatory frameworks that will allow entrepreneurs to unleash their creativity. And you know, as I said, we are very encouraged by the summit, because it seems the thinking is moving in the right direction.
VA: How applicable is technology in improving political governance in Nigeria?
RP: Generally, technology does two or three things. One, technology provides efficiencies, so processes that take longer or that have convoluted ways of getting done, technology can automate them, make them go faster. In Kenya, for example, the e-government exercises the Kenya government has been rolling out has led to greater efficiencies. Today you can’t apply for a driving license in person, you have to do it online, which changes everything, make things go faster, right? So that’s one part, which is efficiency.
I think the other part is that technology also allows transparency. You know what’s happening with your application, you know where it is, you know what additional things are needed, what needs to be done, etc. which in turn make things go faster, reduces corruption and revenue leakage. I think generally technology is a great enabler, for making governments more efficient, effective, and for helping the government help us. I also think in terms of accountability, we are all accountable for everything we do. And you know I always like to say the government is not something that’s abstract the government is us.
VA: How can technology be leveraged in addressing micro-economy inefficiencies such as savings gap, inadequate capital/capital flight in the country?
RP: That’s a great question. The reason micro-economies have inefficiencies is that the cost of servicing is too high. The cost of acquiring customers is too high. And there is usually a dearth of data. So if you have somebody who’s got a tiny stall in the docks in Lagos and is selling jollof rice if they want to borrow money, there’s no way to lend to them, no bank can lend to them, because there is no tracking of what their businesses are like. We don’t know the capital they have got and we don’t know the asset they have got.
We don’t know what transactions they make and if I’m a bank, it costs me more or less the same amount of money to do a credit analysis of a company with a turnover of five million dollars versus a company with a turnover of five dollars. The cost is the same, it becomes difficult and it’s not economical. But technology can make it cheaper and faster and efficient. So technology then allows us to be able to understand the business of micro-economies, or micro businesses a lot better, and faster and lend to them.
We’ve got a pilot running in Kenya at the moment where there are 40,000 small micro SMEs on our platform and we enable the data capture so that one of the banks is now able to lend to them. We have seen scenarios where some of those micro SMEs have tripled their turnover in 18 months because they now have access to credit, so I think technology is the enabler for microeconomic efficiencies.