Complementing the Banking Sector with Efficient Postal Service

MailBox-iconWhile Nigeria is still on the verge of sustaining competition in banking reforms, the rescue of the nationalized banks by the Asset Management Corporation of Nigeria (AMCON) brought succor to the disaster that would have seen hundreds of thousand depositors lose half of their life savings and their trust in the country’s financial institutions. The banking sector is a vital sector in the Nigerian economy, second to the major provider of revenue to the nation, oil.

Several strenuous reforms and strategies had been put in place to safeguard it from suffering economic blows. However, the continuing storm in the global financial system and its severe impact in the banking sector may suggest an economic diversification that would complement the banking sector in salvaging the country’s financial system.

The Postal Service (NIPOST) was established to provide the postal savings system for depositors who did not have access to banks, a safe and convenient method to save money and to promote saving among the poor. Although with its 5,000 post offices, the postal service has increasingly faced financial problems due to structural drops in mail volume, the rise in competition from private delivery firms like Universal Parcel Service (UPS), DHL and FedEx, coupled with inadequate funding by the government as well as internet preference by Nigerians. However, even shutting down the NIPOST today would not insulate taxpayers from further challenges in terms of high cost and charges; a rigorous restructuring could give the post the necessary rebirth to aid the ongoing strives to deliver financial services to the many poor.

Although today’s Postal Service provide many facilities like general or registered mail, parcel post, speed post, express post, and special courier service known as EMS-speed post, it can be re-engineered to complement banking services with “petty” financial services like National Savings Certificate, Recurring Deposits and Term Deposits. This will encourage the many out-of-bank poor in rural areas into the financial realm, and thus improve the efficiency of the post office in terms of funds availability and its efficiency in mail and financial delivery to the country. What is more? The Postal Service can also provide retirement fund for civil servants and non-government employees to plan and save ahead of the future. In India where the post held a success story, a Public Provident Fund, popularly known as PPF, a savings cum tax saving instrument, was initiated to match the services of Pension Fund Administrators (PFAs) in rural areas. This, to a very large extent, limits the economic concentration in urban areas.

A research walk through some country’s financial constituents indicated that the Postal Service plays a very vital role in suppressing the global financial crisis as well as aiding banking reforms over the years. In Japan, the post office was the world’s largest savings bank with 198 trillion yen (US$1.7 trillion) of deposits as of 2006, much from conservative, risk-averse citizens. It also serves as a retirement planning tool for many of those who do not have any structured pension plan covering them. Germany has, like Japan, a postal banking system: Deutsche Postbank was a subsidiary of Deutsche Post until 2008, when 30% of Deutsche Post’s shares were sold to Deutsche Bank. Postal banking services are still available at all branches of Deutsche Post and Deutsche Postbank. Brazil instituted a postal banking system in 2002, where the national postal service formed a partnership with the largest private bank in the country (Bradesco) to provide financial services at post offices. These ventures had paid off and transformed the rural areas into commercial hub, contributing to growth, and thus shielded the possibility of massive crack down of the financial system.

A virile postal service can also ease the risk of fraud in Foreign Currency transactions; when backed by law and plausible framework, the system can help curtail the fluctuating exchange rate and high market indices and margin associated with the “black market” operators. In Israel for instance, currency exchange is best done either at Change places or at the Post Office as they don’t charge commission. Banks either don’t offer a foreign exchange service for tourists, or they charge a lot for the service, thereby strengthening the Post Office to carry on petty financial services throughout its network of branches spread across the country, including the rural areas. Nigeria could buy from this experience to make quasi-banking services available to the more populated rural areas. This effort, through the Post Office can consolidate the government’s reform policies in creating employment, empowerment, and boost agricultural production as the post can also offer mini agricultural credits to peasant farmers.

The dearth in the efficiency in services of the Nigerian Postal Service may not be unconnected to the growth in digital and communication technology, however, digitalization of communication and information disseminating had boosted postal services in many countries across the globe, giving it the required itch to compete with related industry like the banking sector. The Post Office, before the advent of online money transfers in banks in Nigeria had provided customers with guaranteed cash money transfers through telegrams, stamps, and cash post cards. In fact, customers would become more comfortable with digital devices and online technologies in reaching and transacting with the rural dwellers through the Post Office than banks whose presence and dominance is akin to urban areas or cities. What is needed is a careful examination of the required framework and personnel while incorporating elements that reflect these trends into direct mail campaigns that could make the initiative achieve its desired goal.

Aside its plausible benefits in complementing the banking sector and financial reforms, the Postal Service wide spread, when given its painstaking review can partner with organizations in their advertising trends to educate and create product and services awareness customers and consumers. Further, the Postal Service could be the needed step in long-term strategy to ensure mail remains relevant as a key element in the overall advertising mix for an increasingly interactive marketplace; this will also avail producers, marketers, and prospective investors with a compelling way to reach the non internet-savvy customer base.

As it stands today, there are numerous challenges facing the Postal Service delivery in Nigeria; the most vital challenge for the Postal Service leadership and lawmakers is to figure out how to adapt and also wind down some Postal Services in acknowledgement of the new digital age – all the while working to ensure that as few costs as possible are passed down to taxpayers. If the Postal Service’s long-run fundamentals don’t change, it will be unable to meet future cash flows to finance existing business operations, long term expansion drive and pension obligations and taxpayers will be on the hook. Sadly, the lawmakers apparently believe that it is the government’s responsibility to bail out every struggling but politically potent constituency. This sort of short-term political populism relies on its own sort of faulty accounting: offer promises today at the expense of future generations.

While one postal-bailout is not enough to drive the federal government to bankruptcy, it is endemic of a broader problem that will only worsen as the population ages and more people demand the benefits they were promised. The government’s reform programs without the involvement of the rural populace may be
perceived as another “symphony of destruction” to the Nigerian economy. One quick drive is the revitalization of the rural areas in the financial transformation drive with efficient Postal Services with the aim of igniting banking and saving culture among the poor; opening business opportunities that will, in turn, improve economic growth; forestall the continuous rural-urban drift in search for employment and economic services; provide even development, which is a key indices of the vision 2020; etc. As it was with the banking sector, a plausible postal-bailout is a requisite economic framework that should be considered by the country’s Economic Team as the nation’s drive its way towards listing itself as the top 20 economies by 2020.


Salim Salihu Muhammed
[email protected]

 

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