There is a rhetoric that low-income Nigerians cannot afford to be burdened by financial inclusion. But here is a consideration: Imagine two people driving on the same busy road. One is a high-income executive driving a luxury car with a substantial savings account and health insurance. The other is a street vendor, using a motorcycle to transport goods with little savings and no insurance. Both face the same risk of an accident; who will significantly benefit from accident insurance coverage if an accident happens? Financial literacy gives both individuals equal opportunities to make informed decisions, protect themselves from shocks, and preserve their hard-earned money. An important point to note is that financial inclusion is not the one easy fix to global poverty – there is no such thing – but it is an extraordinary tool that empowers individuals, promotes economic resilience, and creates pathways for sustainable development.
Here is a fundamental truth: financial literacy is the key to unlocking Nigeria’s economic potential as it goes beyond awareness to encompass the ability to plan—only 31% of Nigerians engage in financial planning— with 33% actively budgeting. It also involves the skills to evaluate financial products, make informed choices, and know how to seek redress when dissatisfied with a product (46% of Nigerians reported possessing these skills) (A2F 2023). Together, these components of financial literacy form what is known as financial capability. While access to financial services has increased to 74% in 2023 (A2F 2023), many Nigerians still lack the essential knowledge to make the most of these offerings. According to the EFInA Access to Financial Services in Nigeria 2023 survey, only 42% of Nigerians understand numeric literacy and the terms and conditions of contracts with financial institutions. This gap isn’t just academic; it directly affects both banked and unbanked individuals, preventing them from fully utilizing available financial services that could improve their financial well-being.
Over the past 15 years, the adoption of micro-pensions, insurance, and credit have remained at single digits, with only 9% and 12% of Nigerians aware of micro-pensions and microinsurance, respectively. Despite efforts to expand access, the core issue remains: Nigerians cannot make informed decisions about these products without financial literacy. As we advocate for 95% financial inclusion and a $1 trillion economy, financial literacy remains a bridge between access to financial services and financial inclusion. By empowering Nigerians with the knowledge to make informed financial decisions, we can reduce their vulnerability to economic shocks and lay the foundation for sustainable economic growth.
The Burden of Financial Illiteracy
Why does financial literacy matter? It has been evidenced across several literatures that financial literacy is important because financially illiterate people (1) incur higher financial costs and assume higher debts, (2) are exposed to exploitation by devious financial service providers, (3) are less likely to seek investment advice and as a result more likely to make investment mistakes and (4) are more likely to experience difficulty paying their debts or report credit arrears. They fall prey to high-interest loans, miss investment opportunities, and often suffer from inadequate financial protection; in Nigeria, where many live paycheck to paycheck, financial education can help people build resilience against inflation or currency devaluation, fostering long-term stability.
However, financial literacy alone does not guarantee financial health. It’s about financial capability—applying that knowledge to control expenses, save, invest, and plan for unexpected financial challenges. People who understand their finances but cannot manage them effectively remain financially vulnerable.
Financial Literacy as a Public Good
Financial illiteracy is not just an individual problem—it’s a public issue that impacts the entire economy. When large segments of the population are unable to make sound financial decisions, the ripple effects are felt throughout society. Financial illiteracy leads to inefficiencies in economic participation, as individuals are less likely to save, invest, or engage in formal financial systems. This results in a larger informal economy (of missed opportunities for business growth) and reduced capital inflows into local markets. Financial literacy can be the key to resilience in Nigeria, where inflation and rising living costs put households under pressure.
Offering financial literacy as a public good means ensuring everyone, even those outside the formal banking sector, has the knowledge to manage their economic lives. With 62% of Nigeria’s formally excluded population (A2F 2023) residing in rural areas, many are unaware of the financial products available to them. By empowering individuals with financial literacy, we bridge this divide, offering accessible education and resources to those who may never enter a formal banking institution. We reduce personal financial stress and strengthen the broader economy, making it more resilient to economic shocks, inflation, and other economic uncertainties.
The Way Forward
Financial literacy is a game-changer for financial inclusion. EFInA’s 2023 survey notes that Nigerians with higher financial literacy are more likely to use formal financial services. To bridge the gap in financial literacy, several initiatives have been launched across Nigeria, including the Nigerian government’s integration of financial education into school curricula and the establishment of the Financial Literacy Portal SabiMoni to provide accessible resources for managing personal finances. NGOs have played a key role through community-based workshops, offering practical demonstrations and localized financial education. Collaborations between financial institutions and NGOs have also enhanced outreach, while the rise of digital platforms has opened new avenues for delivering financial education, particularly to younger Nigerians.
Despite these efforts, several challenges persist. Limited awareness, inadequate outreach, and funding constraints hinder the effectiveness of these programs. Therefore, expanding and sustaining these efforts requires a greater collaboration between government, financial institutions, and the private sector. This is essential to achieving the 95% financial inclusion target and a resilient economy. Limited awareness of the importance of financial literacy remains a significant hurdle, particularly in rural areas where outreach efforts are still insufficient. Language barrier is another barrier, as many financial resources are unavailable in local languages, hindering effective communication of financial concepts. Translating materials into widely spoken regional languages would be a step forward in ensuring inclusivity. A long-term commitment from government agencies (political will), financial institutions, NGOs, and the private sector is critical to ensuring the success of financial literacy initiatives. Government and regulators should increase funding for digital literacy initiatives and mandate financial literacy to be taught at all levels. Fintech companies could improve user education within their platforms, especially for people in rural or underserved areas. Localized community-based financial education programs should be scaled up to reach populations that don’t have regular access to digital tools.
As global economic challenges rise—inflation, geopolitical tensions, and supply chain disruptions—Nigeria faces its financial struggles: rising fuel costs, currency devaluation, and widening inequality. Financial literacy becomes even more essential. It is not just an individual responsibility but a national imperative that can bridge the gap between access to financial services and true financial inclusion.
As Nigeria strives toward a $1 trillion economy, financial literacy must be prioritized as the cornerstone of financial inclusion. By empowering individuals with the knowledge to make informed decisions, we improve personal financial resilience and ensure the long-term stability and growth of the national economy.
Chioma Nwaiwu is a Research Officer working with EFInA (Enhancing Financial Innovation and Access)
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