Nigeria’s financial inclusion target faces old foes

Nigeria has the plan to have 95 percent of its population financially included by 2024, while efforts have been made by the government, regulatory agencies of the financial system and the private sector, lingering challenges may however serve as pushbacks in the short to medium term.

Nigeria developed its first financial inclusion strategy in 2012, where it set a goal of achieving a financial inclusion rate of 80 percent by 2020, Godwin Emefiele, CBN Governor said at the 2022 International Financial Inclusion Conference (IFIC).

However, by the set time, Nigeria had achieved only a 64.1 percent financial inclusion rate which is a marginal improvement from the 63.2 percent it had in 2018, according to data from Enhancing Financial Innovation & Access (EFInA).

EFInA also stated in its report that the 80 percent target that was set for 2020 may not be met until 2030 with the current stage of progress, noting that stubborn access gaps have persisted since 2008.

“The main barriers to financial inclusion remain institutional exclusion, affordability, low awareness, limited access to banks, irregular or little income, unemployment, lack of trust, too much-required documentation, high maintenance charges, etc,” the report stated.

These challenges have continued to linger in Nigeria’s financial system thereby limiting chances of achieving the set financial inclusion target as the report notes that Nigeria has a higher rate of financial exclusion than many other countries in Sub-Saharan Africa.

Chinasa Collins-Ogbuo, Head, Inclusion for All Advocacy Initiative told BuisnessDay in a chat that, the government has done a significant job in bridging the financial inclusion gap in terms of creating policies, an enabling environment, and providing a regulatory framework within and outside the financial services ecosystem.

She said however there is a need to sensitise those in the underserved communities so they understand the benefits of being integrated into the formal financial system.

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Data from the Nigeria Multiple Indicator Cluster Survey (MICS) carried out by the National Bureau of Statistics (NBS) shows that only 39 percent of men and women aged between 15 and 49, surveyed have bank accounts.

In addition, only 59.7 percent of households have a bank account and 81.5 percent of these bank account owners are urban dwellers while rural dwellers constitute 40.5 percent as responses from the questions asked signify an awareness and accessibility gap.

“We need to get data on who they are, where they are and what their challenges are, this information can be leveraged to create a more strategic and intentional framework developed to address their challenges which brings us closer to achieve our target,” Collins-Ogbuo said.

With over 35 million Nigerians lacking access to telecommunications services and digital financing services according to the Nigerian Communications Commission, she said some of these underserved people are in communities that require the necessary digital and physical infrastructure to integrate them into the formal financial system.

Some infrastructural deficits identified include low broadband penetration, lack of a functional national identity system, and high cost of delivering financial services through bank branches to the underserved as contributors to Nigeria’s financial exclusion situation.

“Out of the 59 million unbanked adults, 73 percent do not have the required documents to open a Tier 3 bank account; furthermore, only 38 percent of adults in rural areas are within proximity of financial access points/financial service providers and 84 of these adults are Financial Services Agents,” EFInA said.

As of November 2022, 92.63 million Nigerians had registered under the National Identity Number however, the VerifyMe digital ID report estimates that over 100 million Nigerians are not captured in the ID system out of a population of over 200 people.

This raises concerns of accessibility for the underserved and financially excluded Nigerian.

“Banks have always been profit driven hence their reluctance in considering or serving the unbanked population because they cannot recognise the economic importance; fintechs are perceived as the messiah expected to bridge the gap because of their operating model but it seems they are still focused on profit,” she said.

She said currently, there is a need for more channels and agents in the underserved communities to provide a digital footprint for them which will commence their onboarding process into financial exclusion, however this will require a significant amount of investment.

According to EFInA, only 27 percent of Nigerians are financially healthy, 39 percent are financially coping while 34 percent are financially vulnerable, which raises concerns as there is a direct correlation between financial health and financial inclusion.

Olayinka David-West, Professor of Information Systems, Lagos Business School said the 95 percent target by 2024 aims to achieve a better and more stable financial market however banks and fintechs need to collaborate get play on their strengths to bridge the financial inclusion gap rather than trying to compete with each other

“There are issues around financial literacy, digital literacy, and for the supply side, how do we ensure that we are building the right indigenous products in different languages that will address the needs of local users,” she said.