Unlocking Financial Freedom, Economic Growth through Financial Literacy

By Adeoye Adewale

Financial literacy is the gateway to financial freedom and security. Yet, studies show that a significant portion of Nigerians lack basic financial knowledge, leading to poor financial decisions and mounting debt. The consequences of financial illiteracy have far-reaching implications for households and communities, perpetuating cycles of poverty and inequality. Nigeria has been variously referred to as the poverty capital of the world. It is not hard to imagine why. A World Bank report showed that the poverty rate in Nigeria increased to 46 per cent in 2023, representing 104 million poor Nigerians.

In a world where financial decisions have far-reaching implications, knowledge truly is power. Yet, across the globe, particularly in Nigeria, many individuals find themselves navigating the intricacies of personal finance without the necessary tools and understanding. Recognizing this gap, a whole month each year is dedicated to directing attention to the issue, while governments, organisations, and businesses are encouraged to step up to empower individuals and communities through impactful financial literacy initiatives.

In 2012, the Central Bank of Nigeria (CBN) developed the National Financial Inclusion Strategy, aimed at increasing “financial inclusion from 53.7 per cent in 2010 to 80 per cent in 2020… through the increase of financial literacy and coordinated national financial literacy initiatives that are complemented by consumer protection.”

At the heart of these empowerment initiatives lies a commitment to education. By equipping individuals with the knowledge and skills to make informed financial decisions, the door to their financial freedom can be unlocked. Banks have shown a strong commitment to ensuring they bridge the financial literacy gap. This they achieve through a series of workshops, seminars, and online resources they continue to deploy to demystify complex financial concepts and empower individuals to take control of their financial futures.

These initiatives by banks over the years such as Fidelity Bank’s Financial Literacy Day training in schools across Nigeria, the Fidelity Green Room, a masterclass-styled financial training for individuals and businesses, and the Fidelity SME Radio Forum, among others, are designed to be accessible to all, regardless of background or experience. Whether one is a recent graduate entering the workforce or a seasoned professional planning for retirement, there is something for everyone. From budgeting basics to advanced investment strategies, the financial literacy resources cater to a wide range of needs and experience levels.

The impact of financial education on poverty reduction is, unfortunately, often understated. By equipping individuals and communities with the necessary understanding of financial concepts, they can be empowered to break the cycle of poverty and build a more secure future.

For proper perspective, it is important to understand what financial literacy really is. Financial literacy goes beyond mere knowledge of basic arithmetic; it involves comprehension of financial concepts such as budgeting, saving, investing, debt management, and understanding financial products and services. These skills enable individuals to navigate the complexities of the financial world and make sound decisions regarding their money.

Poverty, it must be understood, is not just about the lack of income; it is also about the absence of resources and opportunities to improve one’s economic situation. Financial literacy addresses this by providing individuals with the tools to manage their finances effectively, thereby enabling them to make the most of their limited resources. Below, we examined a few ways financial literacy contributes to poverty reduction:

Financially literate individuals understand the importance of budgeting – allocating income towards essentials such as food, housing, and education while setting aside savings for emergencies and future goals. By sticking to a budget, individuals can avoid overspending and ensure that their income is used efficiently.

Saving money is a fundamental aspect of financial literacy. By cultivating a habit of saving, individuals can build a financial safety net to cushion against unexpected expenses and emergencies. Moreover, savings can be invested in income-generating assets such as businesses, education, or homeownership, which can create long-term economic stability.

Many individuals fall into poverty due to unmanageable debt burdens. Financial literacy equips individuals with the knowledge to understand different types of debt, such as loans and credit cards, and how to use them responsibly. By understanding interest rates, repayment terms, and debt consolidation strategies, individuals can avoid falling into debt traps that perpetuate poverty.

In many communities across the country, lack of access to basic financial services such as banking accounts and affordable credit exacerbates poverty.
Financial literacy initiatives can help individuals understand how to access and utilize these services effectively. This includes understanding the benefits of saving in a bank, accessing microfinance for small businesses, and using mobile banking for convenience and security.

Financial literacy fosters an entrepreneurial mindset by teaching individuals how to identify business opportunities, create business plans, and manage finances effectively. By empowering individuals to start and grow their businesses, financial literacy can create pathways out of poverty and stimulate economic development within communities.

To harness the potential of financial literacy in poverty reduction, it is essential to implement targeted initiatives at various levels. The financial services industry, tapping into the CBN financial inclusion agenda, has over the years implemented laudable initiatives to bridge the financial literacy gap and contribute to poverty reduction.

Every year, during the Global Money Week (GMW)/Financial Literacy Day, banks organize financial training workshops in schools across the country targeted at training young school children on the basics of financial literacy. The expectation is that empowering school children at such a young age with financial education will enable them to imbibe the culture of savings and investment that will eventually help them as they grow to break the circle of poverty prevalent in society. For instance, in this year’s GMW, Fidelity Bank, in collaboration with Junior Achievement Nigeria (JAN), trained 4,000 students in 36 schools across Nigeria on the value of managing financial resources effectively to improve their economic well-being.

Speaking about the school training, the Chief Executive of Fidelity Bank, Mrs. Nneka Onyeali-Ikpe, said: “Our children are the future and sharing such information with these young ones will help them develop into better adults. It will give them the ability to plan for their financial independence. For us as a bank, education and youth empowerment are major pillars of our Corporate Social Responsibility (CSR) strategy.”

Many experts believe that financial literacy is critical to Nigeria’s quest for a $1 trillion economy. The current administration has expressed a desire to transform the economy into a $1 trillion economy by 2026. This, it hoped to achieve through diversification, infrastructure development, investment in human capital, and public-private partnerships (PPPs). While commending such bold plans, Mr Gospel Obele, a Research and Development Economist, said that the country’s quest to rise above the challenging economic climate and fulfill this dream will be hinged on how well the government can mobilise the human resources at its disposal. And such mobilization will rest on a strong foundation in financial literacy among the populace. He said financial illiteracy and indiscipline at both individual and enterprise levels can have a damaging effect on the economy and is therefore important to address that.

Financial freedom, financial literacy, poverty reduction, and economic growth are intricately woven. Therefore, to achieve financial freedom and economic growth, both at individual and national levels, financial literacy must be ingrained in any economic plan. Financial literacy is a powerful tool for poverty reduction, offering individuals the knowledge and skills needed to make informed financial decisions and improve their economic well-being. By investing in financial literacy initiatives at the community, and national levels, individuals can be empowered to break free from the cycle of poverty, build assets, and create a brighter future for themselves and their communities.