Nigeria failed to meet its National Financial Inclusion Strategy target for 2020 to include 80 percent of its adult population into the financial system. EFInA data show that only 64.1 percent were financially included by the end of last year.
This means that 36 percent of Nigerian adults, or 38.1 million of the country’s 106 million (18 years and above) adults, remain completely financially excluded. This is a shortfall by 16 percent points from the desired target of a 20 percent exclusion rate.
The 2012 strategy by the Central Bank of Nigeria (CBN) had also aimed to reach 70 percent of Nigerians with formal financial services by 2020; the actual figure reported by EFInA’s Access to Financial Services in Nigeria 2020 Survey released on Thursday showed it was 51 percent, a shortfall by 19 percent points.
With a tepid 0.9 percent growth, Nigeria’s financial inclusion rate improved to 64.1 percent in 2020 from 63.2 percent in 2018. This means that its financial exclusion rate slowed marginally from 36.8 percent in 2018 to 35.9 percent in 2020. However, the excluded adult population of 38.1 million reported in 2020 was higher than the 36.6 million recorded in 2018, meaning 1.5 million adults fell into the exclusion circle in the last two years to 2020.
“At our current rate of progress, we will not reach the 2020 financial inclusion targets until around 2030,” Ashley Immanuel, CEO of EFInA, said.
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.
A breakdown of the EFinA report showed that Nigeria did not only miss its overall financial inclusion target, it was unable to also achieve other sub-targets outlined by the Central Bank of Nigeria.
Africa’s largest economy planned to ensure that its adult population that has a transaction account with a regulated financial institution and/or has made an electronic payment through a regulated financial institution in the last 12 months will be 70 percent at the end of 2020 but only 45 percent was achieved, leaving a gap of 25 percent points.
It was the same for savings, as only 32 percent was achieved, 28 percent short of its 60 percent target.
The 40 percent target for credit was also not achieved as a 37 percent gap was reported in 2020, meaning only 3 percent of the target was achieved.
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Out of the 40 percent target set for insurance inclusion, only 2 percent was achieved, meaning 38 percent of the target was unreached.
“We can reach these targets much faster if we follow paths taken by other African countries that have seen rapid financial inclusion growth due to mobile money,” Immanuel said.
Analysis of the EFInA report revealed that Nigeria’s financial inclusion gender gap persisted in 2020 as the difference between men with access compared to women remained in the review period.
While there was a slight reduction in the exclusion rate for both male and female by a paltry 0.7 percent and 1 percent, respectively, the number of banked male adults was put at 50.6 percent as against the 39.1 percent reported for female, a gap of 11.5 percentage points and slightly slower than the 24 percentage points gap reported in 2018.
According to the result of EFInA’s survey, rural adults are still more excluded because banking services are not getting to the communities. While the data showed there was a slight increase in inclusion among the rural population as informal financial services continued to be dominant in the rural areas, 44.2 percent were reported to be financially excluded as compared to the 19.9 percent in the urban areas.
The use of digital financial services and agent networks, according to EFInA’s Access to Financial Services Surveys, started to grow significantly between 2018 and 2020. Phone ownership has also increased, with 81 percent of Nigerians now owning mobile phones.
“Now is the time to build on this initial progress and drive faster financial inclusion growth through digital financial services such as mobile money,” Immanuel said.
“Nigeria can do this by creating an open and level playing field for a wide range of providers, creating the right environment for Fintech to thrive, and encouraging partnerships between different providers.”
Compared to its African peers, Nigeria has a fairly large banked population (45 percent) but also has the highest proportion of financially excluded adults at 36 percent.
Rwanda in 2020 reported a 36 percent banked population but has far lesser excluded adults at 7 percent.
With a banked population above 40 percent, Kenya has about 83 percent of its adult population financially included, leaving only about 17 percent out of the financial system.
A further breakdown of the report showed that regional differences in financial access persist, with troubling regression in the North West.
While South West passed the target of 20 percent national exclusion, South-South was closer to meeting target and North Central and South-East were within the range to reach exclusion target of 20 percent. Both regions have seen a significant reduction of excluded population by 5 percent and 4 percent, respectively.
However, North East and North West, the regions with most security challenges in the country, are unlikely to reach the exclusion target anytime soon. The latter has recorded an increase in the excluded by 5.4 percentage points.
According to the report, adults residing in communities with financial access points (FAPs) are more likely to be financially included. These FAPs include banks, ATMs and microfinance institutions.
The EFInA data revealed that 46 percent (25 million) adults living in communities where there are no FAPs or no FAPs in or around them are financially excluded.
Fifty-one percent of Nigerian adults are using formal financial services, such as banks, microfinance banks, mobile money, insurance, or pension accounts, up from 49 percent in 2018. This is largely driven by growth in banking, with 45 percent of Nigerians banked in 2020, up from 40 percent in 2018.
Hastening the licensing of the much-anticipated payment service bank (PSB) to help deepen access, especially in the rural communities where the majority of Nigeria’s excluded population live, is one of the ways analysts believe Nigeria can grow its financial inclusion rate.
More than two years after the CBN gave an official nod to non-financial companies to apply for mobile banking licences to assist in deepening access to financial services, not much has changed.
Only two telcos have been given the mobile money permits. The country’s largest mobile operators, MTN and Airtel, are yet to receive the licence.
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