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LBS proposes finance-led growth hypothesis to increase Nigeria’s financial inclusion

financial inclusion

Digital Financial Services in Nigeria- State of the market Report 2018, a financial inclusion report by the Lagos Business School (LBS) has point the way to go for Nigeria to include more of its citizens into the financial cycle.

The report which was launched yesterday on the side line of this year’s international financial inclusion conference proposes finance-led growth hypothesis to spur financial inclusion growth in the country.

“We propose a finance-led growth hypothesis or a supply–leading response which argues that financial sector development drives the real sector of the economy and causes growth,” LBS said in the report.

The report further said that “increase in capital financial infrastructure should increase financial inclusion and access to credit. Also, increase in investments should increase employment and job creation.”

The 2018 financial inclusion conference with the theme; Stimulating Sustainable Economic Development through Financial Inclusion was organized by the Lagos Business School in collaboration with BusinessDay.

Nigeria with the highest population in the African continent currently has about 40.1 million of its adult population not having access to financial services and product.

The LBS 2018 financial inclusion report took a broader approach to exploring financial inclusion as a national imperative and according to its figures, financial inclusion rate in 2017 inched up to 49 percent.

The banked and under-banked segments grew by 7.5 percent and 0.2 percent respectively, while the unbanked declined by 7.6 percent.

The report disclosed that the current financial inclusion rate of 49 percent after Nigeria’s eight years of growing the inclusion rate shows that the country still has a steep journey to attaining the 80 percent goal.

“Yet, this presents a formidable challenge for attaining the projected national target of 80 percent by 2020. DFS awareness and utilisation remain low or non-existent among the under-banked and unbanked. Even among the banked many remain in informal channels (thrift and group savings), especially women,” the report said.

The report therefore recommends that; Nigeria government should blend job creation policies at the grassroots level to stimulate and grow informal financial inclusion and that the government should also pursue strategies which complement the existing job creation framework, social support and conditional transfers, with a guard against leakages which can undermine expected and positive policy effects.

“The government should sustain credits to SMEs through development institutions – CBN, BoI, BoA and DBN,” it mentioned.

It also cited that the central bank should seek to curb the increase in cash holdings that may hinder price stability and enhance digital financial transactions to better manage liquidity.

Further explaining its proposed hypothesis, the 2018 state of the market report said an increase in government spending should lead to a rise in aggregate demand and thus increase financial inclusion.

However, it said fiscal policy interventions that lead to increases in the taxation rates on bank transactions will cause a rise in financial exclusion.

“Financial inclusion interventions that focus on socioeconomic activity which lead to outcomes like higher literacy levels, infrastructure improvements and higher levels of education amongst the youth will increase the access and use of credit, boost economic activity and job creation.”


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