If it had taken the world an entire century to achieve 50% financial inclusion, then attaining the 70% mark only six years afterwards is quite a remarkable feat. Today, global financial inclusion is almost 70%, standing at 69% in the Global Findex Database 2017 report released two months ago. It went up from 62% in 2014 and 51% in 2011. This global progress is more remarkable when viewed against the backdrop of an ever increasing global population especially in the regions with the highest incidence of financial exclusion. Essentially, between 2014 and 2017, the world added another 515 million people to the financial system, recording an increase of 7%. It follows the about 700 million people added between .2011 and 2014, translating to a reduction in the number of those financially excluded to 1.7 billion, from 2 billion.
As expected, the global progress and averages masks the marked regional differences. The 2017 data, more than ever, further demonstrated that financial exclusion is an African problem. Whereas in high-income economies, almost all adults, about 94 percent own an account, only 63% do in developing economies. Its peculiarity to developing nations has effectively contextualised financial inclusion as a development issue, and a Sub Saharan Africa (SSA) problem, though significant progress has been made. In SSA, two-thirds of the adult population was still financially excluded as at 2014 with a financial inclusion of 34%. However, by 2017 there is a 9% growth from 34% to 43%.I n absolute numbers, Sub-Saharan Africa added about 57 million people to the financial system reducing its financially excluded population to 330 million from the previous 360 million in 2014.
However, against the background of the upward trends of both global and Sub-Saharan Africa in financial inclusion, Nigeria’s record is rather poor. Compared to the global average growth of 7% and SSA’s 9%, Nigeria recorded an insignificant national increase of 1%. In terms of numbers, Nigeria merely added a paltry population of about 480,000 adults only over the period. It is a reversal of the progress made between 2011 and 2014. Then, Nigeria surpassed both global and Sub-Saharan Africa’s growth by three percentage points with a 14% growth, against the global and SSA averages of 11%.
The performance, given the progress made between 2011 and 2014 and the divergence from the progress made buy the rest of the world suggests that the recent economic crisis and the economic recession of 2016 to 2017 would have had debilitating impact on the country’s march toward financial inclusion.
Though complex, it is expected that the economic crisis would affect the growth in financial inclusion, In 2016, he Nigerian economy recorded its first full year of negative growth in 25 years, with growth for the year at -1.58%, after experiencing four consecutive quarters of negative growth. Although the economy emerged from recession in 2017, it only grew by 0.82% compared to population growth of about 2% – indicating a decline in real GDP per capita. Nigeria’s poor economic performance in the past two years has also led to a rapidly increasing unemployment rate and an increase in poverty in the country. Millions of people lost their jobs while new entrants to the labour force were unable to find new jobs causing the number of unemployed Nigerians to soar from 8 million at the end of 2015 to 11.5 million by the end of 2016 and 16 million in the third quarter of 2017. In addition to the impact of job losses on Nigerian earnings, inflation was above 15% during most of 2016 and 2017, causing a large decrease in the real (inflation-adjusted) spending power of Nigerians, as wage growth did not generally keep up with inflation for those who were lucky to keep their jobs.
No doubt, declining economic activity, increasing unemployment, and significant rises in the price of goods and services would have combined to lower the rate at which financial inclusion could expand. The linkages include lowering of the ability of those at the very low end of poverty spectrum to save, and reducing the need to open bank accounts. Thus, as savings rates have dropped, many of those who had bank accounts are likely to have withdrawn their funds from those accounts while those who might have opened one will no longer be able to do so.
Given the increase in unemployment, many of those who would have entered the work force and had to open salary accounts will no longer have to do so as they have been unable to find jobs. Furthermore, given that many of the rural poor rely on money transfers from urban relatives with higher incomes, the reduction in incomes has reduced such transfers, thereby reducing the incentive for people in rural areas to open bank accounts.
Another factor that has contributed to the decline in financial inclusion in Nigeria is the closure of bank branches after 2015. Banks have had to close a number of branches as their profits have fallen and it is likely that most of those branches would have been in rural areas where people who lose a bank branch near them are unlikely to have access to another bank branch, leaving them unbanked. Additionally, the costs of operating a bank account in Nigeria, which includes many account maintenance charges might be too high for some.
In conclusion, it is expected that the nascent economic recovery of the last year will contribute the growth of financial inclusion. Notwithstanding, the growth will not be sufficient if not complemented by other measures. So far, as a matter of policy, we have not followed a combination of policy measures that some other countries have followed that delivered significant growth in financial inclusion, such as the telecoms led banking. Therefore, while the ongoing recovery will help improve financial inclusion before the next survey of the Global Findex, it will not be adequate. It is time for a policy revamp.
Dr Okiti, an economist has served as an analyst at the UK’s office of national statistics and in the office of the Chief Economic Adviser to the Nigerian President.
