Empowering Unbanked Nigerians through Financial Inclusion
Finance
James Emejo writes on the milestones so far recorded in efforts to deepen financial inclusion, which is regarded as a veritable means of empowerment for Nigerians, particularly the vulnerable and the unbanked
The Enhancing Financial Innovation & Access (EFInA) defines financial inclusion as the provision of a broad range of high-quality financial products, including savings, credit, insurance, payments, and pensions that are relevant, appropriate, and affordable for the entire adult population, especially the low-income segment.
Amidst increasing poverty and vulnerabilities among Nigerians, financial inclusion is believed to be a viable instrument for empowerment and financial independence.
According to EFInA, evidence worldwide has demonstrated that access to financial services contributes both to economic growth and wealth creation and is, therefore, the key to tackling the poverty trap in Nigeria.
It is, therefore critical for regulators and policymakers to create an enabling policy environment to actively promote both the demand for and the supply of financial services to the unbanked and under-banked.
Nigeria through the Central bank of Nigeria (CBN) had committed to deepening financial inclusion over the years, an ambition that has recorded both milestones and challenges, amidst efforts to meet set targets.
For various reasons, many Nigerians remained unbanked and lack access to formal financial services.
The results of the EFInA Access to Financial Services in Nigeria 2012, revealed that 34.9 million adults, representing 39.7 per cent of the adult population were financially excluded, and only 28.6 million adults were banked, representing 32.5 per cent of the adult population.
Taking Stock
Nigeria was privileged to host the 2022 International Financial Inclusion Conference themed: ‘Financial Inclusion for All: Scaling Innovative Digital Models’ in Abuja recently.
The event presented an opportunity for the country to take stock of its drive to deepen financial inclusion in the country, a few days after official statistics showed that over 133 million Nigerians are living in poverty.
It was an occasion where President Muhammadu Buhari showered accolades on the Governor of the Central Bank of Nigeria (CBN), Mr. Godwin Emefiele, and other stakeholders for their contributions towards promoting and deepening financial inclusion in the country.
The CBN governor chairs the National Financial Inclusion Steering Committee, which had worked tremendously to achieve a 65 per cent financial inclusion rate over the past few years, and further targets 95 per cent inclusion by 2024.
Buhari, who further unveiled five important financial inclusion artefacts which are to provide direction for financial inclusion in Nigeria in the coming years, said the federal government believed that achieving financial inclusion goals would further boost the country’s economic fortunes.
Represented by the Minister of the Federal Capital Territory (FCT), Muhammad Bello, the president also gave marching orders to all implementing agencies in Nigeria to take advantage of the rare occasion to better deliver on their mandate for inclusive growth and development, noting that the Digital Financial Services (DFS) remained one key component of the digital economic strategy which holds the potential to improve the country’s GDP and provide access to finance to underserved areas.
Remarkable Milestones
According to Emefiele, the Financial Inclusion Steering Committee is the apex body responsible for implementing the Nigerian Financial Inclusion Strategy and ensuring the alignment of financial inclusion policy objectives to the inclusive development objective of the federal government.
Chronicling the steps so far taken to bring Nigeria from almost nothing to 65 per cent financial inclusion over time, the CBN governor said the global meltdown in 2008 made financial services regulators focus on improving the financial system’s stability and mitigating risks that could lead to a future recurrence.
According to him, Nigeria implemented a tighter prudential regime to respond to the meltdown, adding that while these efforts improved financial system stability, they inadvertently undermined access to finance as entry barriers to the financial system became a disincentive for many economically active Nigerians.
Emefiele, however, noted that the response to the global event in 2008 was not entirely responsible for the low access to finance for the underserved in Nigeria, but rather, infrastructural deficit including low broadband penetration, lack of a functional national identity system, and high cost of delivering financial services through bank branches to the underserved as contributors to Nigeria’s financial exclusion situation.
He said as of 2008, 52.2 per cent of Nigerian adults were financially excluded which implied that one out of every two adults had no access to financial services.
He said even though Nigeria had a sizeable number of banked populations, “our financial inclusion rate was one of the lowest in the sub-region. More worrisome was the fact that many adults were financially excluded. Youth, aged 18-35 years, and MSMEs (which employed over 60 per cent of Nigerians), were disproportionately excluded from access to financial products and services.”
As a result, the CBN governor said stakeholders undertook the onerous task of driving access to finance for the benefit of the hitherto excluded segments through the National Financial Inclusion Strategy.
He stated that as of end-2020 the financial exclusion rate had reduced to 35.9 per cent.
“While this remains high when considered as absolute numbers, it is a huge improvement when compared to the position as of 2008. This change did not happen by accident but resulted from the decisive and concerted approach by National Financial Inclusion stakeholders to address key pain points and bottlenecks that were deterring financial inclusion,” he said.
Emefiele maintained that financial inclusion remained key to economic development and inclusive growth, stressing that there is a positive correlation between the financial inclusion rate of a country and its GDP growth.
He said while stakeholders in Nigeria were exploring ways to address the high financial exclusion rate, the Alliance for Financial Inclusion (AFI) outlined the Maya Accord in 2010.
According to him, the Accord is a global initiative for responsible and sustainable financial inclusion that aims to reduce poverty and ensure financial stability for the benefit of all.
He said as part of its commitment to that Accord, Nigeria developed its first financial inclusion strategy in 2012, where it set a goal of achieving a financial inclusion rate of 80 per cent by 2020.
The CBN governor said the 2012 strategy provided a platform to facilitate a concerted approach by stakeholders to address financial exclusion in Nigeria.
He noted that while the 2012 strategy was fundamental in many respects, it was prescriptive and looked to scale traditional financial services models to address financial inclusion, which made it slow and expensive to meet our growth aspiration.
Significant Leap, More Tasks Ahead
Also recounting the progress achieved in the country’s financial inclusion drive, and the future ambitions, CBN Deputy Governor, Financial System Stability Directorate, Mrs. Aishah Ahmad said the bank is assiduously working towards achieving its 95 per cent financial inclusion target by 2024, going by the Revised National Financial Inclusion Strategy (NFIS 3.0) and some other important policy frameworks.
Other targets include the National Strategy for Leveraging Agent Networks for Women’s Financial Inclusion; National Fintech Strategy; Nigeria Payments System Vision 2025 (PSV 2025); Nigerian Financial Services Maps (NFSMaps); the CBN Regulatory Sandbox as well as the Central Bank of Nigeria – Central Bank of Egypt Fintech Bridge.
Ahmad said, “notwithstanding these successes, some of which were spurred by the COVID-19 pandemic, certain segments such as youth, rural dwellers, women, north-east and north-west regions and MSMEs/Farmers remain relatively excluded (11 per cent, 24 per cent, eight per cent, 32 per cent (NW) and three per cent (access to formal loans) respectively compared to the national averages.”
She also said progress in credit, insurance, and pensions has also been slow, noting that these segments remain key target priority areas for the NFIS 3.0.
She said, “Agent banking network growth was significant, increasing from 38,416 agents in December 2018 to 1.4 million by October 2022, primarily driven by the Shared Agent Network Expansion Facility (SANEF) initiative of the CBN and the Bankers Committee.
“This expansion of agent network is an important lever to expand the number of financial access points per 100,000 of the population – thereby boosting access to affordable financial services by those in the more dispersed rural areas and certain urban centres.
“The growth in agent networks which has been significant also in the North-east (67 per cent in 2020) will be important for improving financial inclusion in the north. While the 2022 A2F survey is being awaited, it is anticipated that the financial inclusion rate would have improved by another five percentage points, drawing on the momentum of Digital Financial Services spurred by the COVID-19 pandemic, and leveraging the myriad of financial services solutions in the dynamic financial system.”
Furthermore, she listed future priorities for accelerating financial inclusion for the CBN to include consolidating interagency and policy–innovation collaboration; deepening digital financial services penetration in excluded segments through the e-Naira offline solution; enhancing and harmonising digital identity for financial inclusion, and leveraging NIN foundational ID for further financial inclusion.
However, EFInA had further warned that Nigeria could lose opportunities for business growth except the financially excluded are brought into the formal financial system.
