Vision Achievable: 70% Financial Inclusion By 2020

The number of Nigerians who have been included in the financial system have over the years been on the increase with over 10 million new accounts opened in the last one year.

According to data on the website of the Nigeria Inter Bank Settlement System, total active accounts in the Nigerian banking industry at the end of last year stood at 59 million, higher than the 47.2 million active accounts which the country had at the beginning of 2015.

This supports the report of the Bankers’ Committee meeting held in Abuja, last week, in which the Central Bank of Nigeria (CBN)’s director, Banking Supervision, Tokunbo Martins, said that 66 per cent of the country’s adult population have been included in the financial system.

Martins, while addressing journalists at the end of the meeting said that 57 million Nigerians, which represent 66 per cent of the bankable population, now have access to financial services.

According to her, “It is very important for 170 million Nigerians to have some form of access to financial services and so I am happy to report that there has been substantial improvement. The target that we are working on is 68.5 per cent by the end of December 2016 and so if that target is achieved, I think we would have gone a long way in alleviating the sufferings of Nigerians,” she said.

Back in 2008, the number of financially-included Nigerians was less than half the bankable population as a report by the EFInA showed that more than 52 per cent of the Nigerian bankable populace was excluded from the financial sector. This means that in every six Nigerians sampled in 2008, only about four them had access to one form of financial service or the other. Financial services in this context, however, goes beyond commercial banking as it includes micro financing, insurance, mortgage, amongst others.

Many Nigerians, for numerous reasons, are unbanked and lack access to formal financial services.  Billions of naira circulate through the informal sector and this has a negative impact on the country’s economic growth and development.

The results of the EFInA Access to Financial Services in Nigeria 2012 survey showed that 34.9 million adults, representing 39.7 per cent of the adult population, were financially excluded. Only 28.6 million adults were banked, representing 32.5 per cent of the adult population. The 2012 survey also revealed that 23 million adults save at home, and if 50 per cent of these people were to save N1,000 per month with a bank, then up to N138 billion could be incorporated into the formal financial sector every year. This is one of the reasons the CBN and finial institutions in the country have continued to push forward in the drive to achieve financial inclusion in the country.

Mobile Money is one of the initiatives the CBN is using to drive financial inclusion and it does this by bringing in the unbanked segment of the society to the formal financial system. With the release of the Framework on Mobile Money in 2009, the stage was set to licence mobile money operators (MMOs). To date, 21 MMOs have been fully licenced, and are in operation in Nigeria while a few others are at the various stages of pilot.

According to the CBN director, Banking and Payment System, ‘Dipo Fatokun, “The average value of transactions the MMOs carry out is in the neighborhood of over N3 billion per month (inter-scheme), with about 100,000 agents scattered all over the country. The figure for January 2016 was over N4 billion.”

The apex bank is also driving financial inclusion through agent banking which refers to the provision of financial services through a third party contracted by a financial institution to offer services on its behalf, especially in locations not covered by the financial institution’s branch network. Banking agents can be pharmacies, supermarkets, post offices, kiosks, etc. The best suited are, however, businesses that  have built good customer relations and gathered experience in handling cash flows. Financial services that can be delivered by agents include payments, deposits, withdrawals, loan repayments, settlements of utility bills, taxes, and even individual transfers.

The framework for licencing super agents was released sometime in April 2015, and some organisations, including major telecommunication companies in Nigeria, have applied. Although much of this initiative has not been seen, it is expected that very soon, it will be embraced as the CBN has said that some licences for super agents would be issued before the end of the first quarter of the year.

These efforts by the CBN, in collaboration with financial institutions in the country, which have started to yield results, has not gone unnoticed as the Brookings 2015 Financial and Digital Inclusion Project (FDIP) report, which evaluates access to and usage of affordable financial services across 21 countries, has rated efforts by Nigeria to drive financial inclusion high. Nigeria got the first place for country commitment and was ranked 9th for the country’s overall financial inclusion efforts.

The report analysed the financial inclusion landscape in other countries such as Afghanistan, Bangladesh, Brazil, Chile, Colombia, Ethiopia, India, Indonesia, Kenya, Malawi, Mexico, Pakistan, Peru, the Philippines, Rwanda, South Africa, Tanzania, Turkey, Uganda, and Zambia. These countries received scores and rankings based on 33 indicators across four dimensions: country commitment, mobile capacity, regulatory environment, and adoption. On the performance chart, Nigeria was the 8th for mobile capacity; took the 12th place for regulatory environment; and 10th for adoption.

The report highlighted meaningful initiatives that Nigeria, led by the CBN, has undertaken to promote financial inclusion in Nigeria.They included the launching of a national financial inclusion strategy in 2012 and a Financial Inclusion Secretariat. Also the apex bank developed an extensive set of quantifiable goals which included increasing the percentage of the adult population, using formal financial services, to 70 per cent by 2020, and issued the 2013 guidelines on agent banking, which enabled banks to expand beyond the traditional brick-and-mortar infrastructure.

The report noted that about 44 per cent of adults, aged 15 and older, have an account with a formal financial institution or mobile money provider as at 2014, up from about 30 per cent in 2011 (World Bank’s Findex). Nigeria has clearly demonstrated progress towards deepening financial inclusion. However, it highlighted that further work remains to be done with respect to expanding access to formal financial services among the remaining adults who are largely excluded from the formal financial sector.