For Nigeria’s 94.4 million extremely poor people, having a bank account may be a luxury many cannot afford due to the cost of maintaining a basic savings account.
To maintain a basic bank account in Nigeria, the account holder spends an estimate of N500 per month as Account maintenance fees, ATM card maintenance charge, SMS notification fee, stamp duty, and fees charged on transactions with other banks.
“Is it not someone that has enough money that will be thinking of banking it? All I think of every day when I come to this park is how I am going to sell and use the money to buy food for my family. I pray God blesses me so I too can have a bank account,” a petty trader by the name Ajoke told BusinessDay at the busy Ojuelegba under bridge.
Available data from the World Poverty Clock analysed by BusinessDay revealed that that with the current level of Nigeria’s extremely poor people, the country has more people living in extreme poverty than India and China combined.
The latest figures from the World Data Lab put Nigeria’s extremely poor people at 94.4 million, this is 54.6 million higher than India and China combined with 39.8 million poverty population.
The World Bank defined the new international poverty line as $1.90 a day in 2015 from $1.25 a day previously used in 2008, indicating any individual who lives below $1.90 or less per day is poor. The same benchmark was regarded as the internationally agreed poverty line by the United Nations.
“People will remain financially excluded because they are financially disempowered,” Yele Okeremi, MD/CEO of Precise Financial Systems (PFS), a Lagos-based financial software company said.
“We still have a large population living below $2 a day, how do you want to include them financially?” he questioned.
Checks by BusinessDay revealed that since 2015, Nigeria’s economy expanded by an average of 2 percent, a rate lower than the country’s 2.6 percent population growth rate. Meaning in the last four years, Africa’s most populous nation has been producing more people than it can feed.
Most recent data by EFInA put Nigeria’s financial inclusion rate at 63.2 percent, meaning that as much 36.8 percent adults still lack access to financial services.
“I opened an account last year, and the small money that was inside has been debited by the bank for different reasons and now there is almost nothing in it,” a customer of a Nigerian tier-one lender said on the condition of anonymity.
According to the World Bank, financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs; transactions, payments, savings, credit, and insurance -delivered in a responsible and sustainable way.
“Access to a transaction account is the first step toward broader financial inclusion,” the Washington-based institution said.
The Central Bank of Nigeria (CBN) plans to ensure that 80 percent of Nigerian adults are included in the financial net by 2020. The apex through its collaboration with industry stakeholders launched the National Financial Inclusion Strategy (NFIS) in January 2012 with the aim to help achieve the set target.
If the industry regulator is going to achieve its 20 percent exclusion by next year, it would have to bridge the current 16.8 percent inclusion gap.
“Apart from encouraging the collaboration between the telecoms and banks, through mobile money to spur financial inclusion, there is a need to reduce the cost of financial transactions, as mobile money is more expensive than core banking,” Wale Okunrinboye, head of research at Lagos-based Sigma pension, said.
According to Uzoma Dozie, the last Group Managing Director of defunct Diamond Bank, and Founder/CEO of Sparkle, for a large number of the country’s population to be financially included, “we would have to leverage technology, for millions of Nigerians to have access.”
In the quest to achieve its set target, the central bank on the 5th of October 2018 released an exposure draft guideline in which it proposed Payment Service Banks (PSB) aimed at deepening financial inclusion.
Since inviting Telcos and other industry players to apply for the mobile money licence in more than a year ago, the industry regulator has only granted Approval-In-Principle (AIP) to Hope, Money Master, and 9PSB to operate as payment service banks.
According to Oghogho Osula, financial expert and former MD/CEO of Coronation Trustees Limited, Nigeria has a large mobile market, and the huge number provides an opportunity to use it in deploying easy-to-use technology that can improve access to financial services.
Data by Nigerian Communications Commission (NCC) analysed by BusinessDay revealed that the total number of subscribers per individual telecoms operator as of August 2019 stood at 176.89million.
“With a very well-developed mobile market, and many tech-savvy consumers, there are exciting opportunities for mobile-based digital identity solutions in Nigeria,” Calum Handforth, Senior Consultant at GSMA said.
As at the time Nigeria was considering the optimal approach needed to leverage new, innovative technology to deliver financial services to its people, the Central Bank analysed in some detail how to structure the guidelines and the regulatory environment to deliver the benefits on offer, without compromising the integrity of the financial system.
Africa’s largest economy needed to see how the regulation of mobile money could evolve owning to significant volumes of currency that could be circulating in mobile wallets, and may not be visible to the regulatory authorities.
As such it was clear that a better balance between the market and the regulatory structures was required.
Meanwhile, since then there has been an explosion in mobile money wallet usage in Kenya and other Africa peers, Nigeria’s CBN was rather focused on an independent bank-led model that would supplement and support the existing banking system.
“The fundamental obstacle to the rapid expansion of financial inclusion in Nigeria is the failure of the private sector actors in the telecoms and financial services ecosystem to collaborate effectively,” an analyst said in a statement.
According to the World Bank report, mobile money drove financial inclusion in Sub-Saharan Africa, as only eight countries in Africa which included Burkina Faso, Côte d’Ivoire, Gabon, Kenya, Senegal, Tanzania, Uganda, and Zimbabwe recorded 20 percent or more adult using only a mobile money account.
Between 2014 and 2017, the World Bank noted that there has been a significant increase in the use of mobile phones and the Internet to conduct financial transactions which contributed to a rise in the share of account owners sending or receiving payments digitally from 67 percent to 76 percent globally, while developing countries recorded 57 percent to 70 percent.
Globally, about 1.7 billion adults remain unbanked, yet two-thirds of them own a mobile phone that could help them access financial services, the study noted. It concludes that digital technology could take advantage of existing cash transactions to bring people into the financial system.
“In the past few years, we have seen great strides around the world in connecting people to formal financial services,” World Bank Group President Jim Yong Kim said.
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