While COVID-19 pandemic gave rise to online transactions in Nigeria and resulted in a boost to digital financial services, the impact of the virus outbreak brought more harm than good to the country’s financial inclusion drive.
Nigeria’s failure to meet its 80 percent financial inclusion target of 2020 is one of the direct impacts of the pandemic as it broadened the inequality gap and displaced the financially underserved population.
Financial inclusion means that people have access to basic financial services like a savings account, credit and insurance. A higher exclusion rate in Nigeria could lead to a poorer population as lack of access to credit and insurance puts them at an economic disadvantage.
Through its National Financial Inclusion Strategy (NFIS) of 2012, the Central Bank of Nigeria (CBN) set a target to ensure 80 percent of Nigeria’s adult population have access to financial services by the end of 2020.
But the January 2021 data from the Nigeria Inter-Bank Settlement System Plc (NIBSS) shows Nigeria had 46 million Bank Verification Numbers (BVN), meaning more than half of the country’s adult citizens are still without bank accounts.
While EFiNA is yet to publish the 2020 financial inclusion figures for Africa’s most populous country, its last report shows that over 36.6 million Nigerian adults were without bank accounts in 2018.
Financial inclusion analysts blame the Nigerian Government for the country’s slow inclusion rate as it delayed in implementing policies like mobile money, a telco-led financial inclusion initiative that helped to boost access in Ghana and Kenya and for failing to tap into the COVID-19 induced opportunity to onboard its excluded population.
During the peak of the pandemic, Brazil, the South American country with almost the same population size as Nigeria onboarded about 10 million of its unbanked population in less than 24 hours of launching ‘Coronavoucher’ an emergency aid programme set up to give support to 54 million of its citizens who became financially vulnerable as a result of the coronavirus crisis.
“Longer-term, we run the risk of more Nigerians becoming financially excluded as a result of this crisis, at the exact moment when they as individuals and the overall economy would need their participation the most,” Ashley Immanuel, head of Programmes at Enhancing Financial Innovation & Access (EFiNA) said.
The Good
The COVID-19 pandemic was a catalyst to Nigeria’s e-commerce industry as it induced lockdown and social distancing forced a lot of consumers to shop online.
This resultantly presented an opportunity for a push to more digital solutions, including digital financial services. Data from NIBSS and other sources shows that the volume and value of electronic financial transactions increased following the pandemic, and some financial service providers reported increased uptake of their digital services.
“This is likely driven largely by people who are already banked using some new digital financial services or using digital channels more,” Immanuel said.
On how the pandemic deepened Nigeria’s digital financial inclusion, especially with the underserved segment of the cycle, Immanuel said, for example, someone who was previously banked but still travelled to the market to purchase goods with cash may have started using an online delivery service and making payments electronically, or that person may have taken a loan from a FinTech for the first time.
“When banked Nigerians start using more or additional digital financial services, that is beneficial for the Nigerian financial system and economy but does not drive financial inclusion in the sense of helping unbanked or financially excluded adults access formal financial services for the first time,”. She said.
The Bad
Even though EFInA is currently conducting a nationwide Access to Financial Services in Nigeria Survey to provide more specific data about the impact of the pandemic on financial inclusion, findings have shown that the pandemic has likely exacerbated existing inequalities.
According to the World Bank’s data, 51 percent of Nigerian males had bank accounts in 2017 compared to the 27 percent recorded for females. This shows a 24 percentage gap between the male and female, bigger than the 20 percentage points gap that was recorded in 2014 when the total male with account was at 54 percent with females was at 34 percent.
When women participate in the financial system, they are better able to manage risk, start or invest in a business, and fund large expenditures, according to analysts.
With the pandemic, the inequality gap is expected to have increased. This means more woes for many low-income households, most especially at a period when Nigeria’s economy has been described as one that is stagflated.
According to EFiNA, women in Nigeria are more likely to be financially excluded than men and as a result, the pandemic is likely contributing to more gender inequality generally and may lead to a setback in driving women’s financial inclusion.
The ugly
Nigerians who were already in underserved groups, such as youth, Northern Nigerians and those living in rural areas, are likely to have been harder hit by the economic effects of the pandemic, and progress in expanding financial inclusion for those groups will likely have stagnated or regressed.
Compared to other regions of Africa’s largest economy, the northern part of the country reported more unbanked population in 2018, owing to high illiteracy rate, the insurgency in some parts of the region and high poverty rate.
The challenges faced by residents and groups in these regions have increased since 2018, not only because of the pandemic but due to the high level of insecurity in the country which has displaced many and led to poor harvest.
Solutions
Analysts recommend that the CBN considers policy review to enable more financial service providers to contribute to deepening access, especially for the underserved rural communities where the exclusion rate is highest.
Conditional Cash Transfer (CCT) Programme Policy reviews in favour of digitization for improved effectiveness, proportionate licensing and requirements for large scale and early-stage fintech firms to provide an open and level playing field for DFS deployment and clarification of legal frameworks to promote the uptake of digital platforms by MSMEs are some of the solutions recommended by EFiNA.
More than two years after the CBN gave an official node to non-financial companies to apply for mobile banking licences to assist in deepening access to financial services, not much has changed.
While two smaller Telcos and a payments company have been given mobile money licences, the country’s largest mobile operators, MTN and Airtel are yet to receive the licence.
