In 2008, a survey conducted in Nigeria by a development finance organisation, the Enhancing Financial Innovation and Access, revealed that about 53.0 per cent of adults were excluded from financial services.
The development, which painted a rather poor picture of Nigeria’s financial inclusion drive, generated reactions among stakeholders in the financial inclusion ecosystem at the time. This necessitated several initiatives driven by both the government and private sector to ensure that more Nigerians are captured into the ecosystem.
Due to the centrality of inclusion to economic development, some of the efforts yielded results and in 2010, Nigeria’s adult inclusion figures recorded a fall from 53.0 in 2008 to 46.3 per cent.
Meanwhile, despite the relative improvement, a major issue raised by stakeholders was the absence of a defined financial inclusion strategy in Nigeria.
Hence, in October 2012, the Central Bank of Nigeria (CBN) in collaboration with stakeholders launched the National Financial Inclusion Strategy, and it was aimed at further reducing the exclusion rate to 20 per cent by 2020.
The CBN’s NFIS also seeks to ensure that adult Nigerians with access to payment services increase from 21.6 per cent in 2010 to 70 per cent in 2020. Similarly, those with access to savings are also expected to increase from 24.0 to 60 per cent; Credit from 2 to 40 per cent, Insurance from 1 to 40 per cent and Pensions from 5 to 40 per cent, within the same period.
The CBN noted that the channels for delivering the financial services were equally targeted to improve, with deposit money bank branches targeted to increase from 6.8 units per 100,000 adults in 2010 to 7.6 units per 100,000 adults in 2020.
It is also expected that microfinance bank branches would increase from 2.9 units to 5.5 units; ATMs from 11.8 units to 203.6 units, POSs from 13.3 units to 850 units, Mobile agents from 0 to 62 units, all per 100,000 adults between 2010 and 2020.
The major tools for driving the Strategy, according to the CBN, are: Agent Banking, Tierred Know-Your-Customer Requirements, Financial Literacy, Consumer Protection, Linkage Banking, Implementation of the MSME Development Fund, and Credit Enhancement Programmes.
How far thus far?
The CBN in its financial inclusion newsletters of 2016 identified the primary data source to gauge overall nancial inclusion rates as the Access to Financial Services in Nigeria Survey, a nationally representative survey which is carried out every two years by the Enhancing Financial Innovation and Access (EFInA).
In 2016, four years after the NFIS was launched, results from the survey showed a constant formal adult financial inclusion rate of 48.6 per cent between 2014 and 2016. The overall adult nancial inclusion rate, which includes adults who use formal and informal nancial services, decreased by 2.1 percentage points from 60.5 to 58.4 per cent during the same period.
Meanwhile, in 2017, a World Bank report on financial inclusion—the Global Findex 2017—showed that ownership of an account with a financial institution or a mobile money provider in Nigeria stood at 40 per cent in 2017, which represented a decrease from 44 per cent account ownership in 2014.
The gender gap in account ownership widened by 24 points, the report said, just as 51 per cent of men owned an account, while only 27 per cent of women owned an account.
“Globally, about 1.7 billion adults remain unbanked—without an account at a financial institution or through a mobile money provider,” the report noted. “Because account ownership is nearly universal in high-income economies, virtually all these unbanked adults live in the developing world. Indeed, nearly half live in just seven developing economies: Bangladesh, China, India, Indonesia, Mexico, Nigeria, and Pakistan.”
Financial Inclusion, Global Goals
According to the United Nations Capital Development Fund (UNCDF), financial inclusion is positioned prominently as an enabler of other developmental goals in the 2030 Sustainable Development Goals. It is at the heart of about ten of the 17 goals, with evidences showing that its models can support overall economic growth and the achievement of broader development goals.
A report by the McKinsey Global Institute said that digital finance alone could benefit billions of people by spurring inclusive growth that adds $3.7 trillion to the GDP of emerging economies within a decade.
Given these positive effects of increased access to finance, building inclusive financial systems has become an important objective for policymakers around the world.
In 2010, the G20 produced a set of recommendations known as “The Principles for Innovative Financial Inclusion”. By 2011, the Alliance for Financial Inclusion (AFI), a global network of concerned policymakers and supervisors, issued the “Maya Declaration”, the first set of global and measurable commitments to financial inclusion.
The declaration has been endorsed by over 80 countries, including Nigeria. Part of its mandates include creating an enabling environment that increases access and lowers costs of financial services, implementing a proportionate regulatory framework that balances financial inclusion, integrity and stability, integrating consumer protection and empowerment as a pillar of financial inclusion, among others.
To key into these targets and measure the performance of the NFIS, in October 2018, Nigeria released a revised version of the NFIS document.
The CBN in the new document noted that although Nigeria has made significant efforts in overcoming the inertia in the implementation of various initiatives in NFIS, more still needs to be done to strengthen coordination with states; to incorporate women, disadvantaged groups, MSMEs and geographical variations; and to strengthen existing monitoring and evaluation (M&E) processes.
More importantly, the document noted that there have been changes in the Nigerian socio-economic sphere since 2012 and there was the need to reflect the outcome of lessons learnt.
In the revised document, the CBN noted that the South-west geopolitical zone had reached 18 per cent exclusion rate while South-east and South-south recorded 28 and 31 per cent, respectively. The exclusion rate for North-central geopolitical zone, the document said, stood at 39 per cent while that of North-east and North-west were 62 and 70 per cent, respectively.
Not yet Uhuru
In the Enhancing Financial Innovation and Access (EFInA) 2018 survey, results showed that actual insurance uptake stood at 2 per cent, which implied that a very high proportion of adult Nigerians were financially excluded and more drastic effort need to be taken to reverse the trend.
The report also found that there was an increase of 1.4 per cent in the banked population from 2016 to 2018, a decrease of 2.2 per cent in remittances between in two years, and another decrease of 6.7 per cent in saving with a bank within the period.
The report found, however, a decrease of 1.6 per cent (from 30.1 per cent in 2016 to 28.5 per cent to 2018) in the non-bank indicators of pension, savings through other formal institutions, mobile money; mobile money agents, remittances, and loans with other formal institutions.
It indicated also that N15,000 was the median income of the 99.6 million adult Nigerians, even as 71.3 per cent of that number did not have access to mobile money accounts, and a mere 17.5 per cent as the borrowing rate among Nigerians.
The 2018 EFInA revealed that 36.6 million Nigerians are financially excluded against 56.3 million in 2016.
A breakdown revealed that the exclusion by gender stood at 55.9 per cent for female and 44.1 per cent for male. The exclusion rate of 34 per cent among Nigerians aged between 18 and 25 is the highest, while the exclusion rates in the rural and urban areas were given as 78.5 per cent and 21.5 per cent, respectively.
According to the report, the Nigerian labor market was not absorbing enough graduates while reduction in formal employment has had its ripple effect on reduced disposable income and savings.
Although the Nigerian government through the CBN and other regulators often claim to have done much to capture more Nigerians into the ecosystem especially in rural areas, the reality on the ground shows that much needs to be done if the nation would meet its 2020 targets, especially in rural Nigeria.
Part of the revelations from the 2018 Access to Financial Services (A2F) Survey showed that rural areas had a higher financial exclusion rate of 78.5 percent. More startling is the revelation that about 95.9 per cent of the survey respondents reported not being aware of mobile money services and 89.4 per cent were unaware of the presence of banking agents in their communities.
Also, mobile money usage was predominant amongst already financially included populations while cash transaction continued to hold sway among subsistence farmers and business owners in rural areas, as a PREMIUM TIMES report recently showed.
These, among other concerns, are issues government, private sector and other stakeholders are expected to tackle, according to the revised NFIS document.
A former Deputy Governor of the CBN, Adebayo Adelabu, captured this when he spoke to an audience at the retreat organised by CeBIH in 2017, arguing that the National Financial Inclusion Strategy placed greater emphasis on availability of payments services for the extension of financial service.
“The expectation of the strategy is to have 80 per cent of adult Nigerians have access to payments services by the year 2020 in order to reduce the exclusion rate to 20 per cent by year 2020,” he said. “While this may appear daunting, it is not beyond your reach. In fact, it opens the industry up to opportunity of having more customers, diversifying its deposit base and increasing revenues.”
While efforts are being made to strengthen the operations of financial technology (FinTech), operators such as Paga, Gona, Quickteller, Paydirect, Alert, eTransact, among others in urban centres, it must be noted that access remains a major concern in most rural areas. Efforts must be made by all stakeholders to deepen it.
Some of the risks identified as impediment to the 2020 target are timing delays in passing required regulation and legislation, Nigeria’s power and network failure, client apathy in adopting financial inclusion initiatives, insecurity, among other challenges.
The CBN’s revised NFIS document proposed various methods to address the challenges including provision of alternative power sources for ATMs, POS and other access points, increased financial literacy, review of policies, among other mitigation strategies.