Nigeria has successfully improved its world ranking in financial inclusion, thanks to policy support and government reform.
The country moved up to 30th position in the Global Microscope 2020, a report that assesses the enabling environment for financial inclusion across five categories and 55 countries – when compared to last year’s index when it ranked 36.
“Changes since 2019 were driven by improvements in Nigeria’s strategy to reduce the gender gap including a partnership with the Alliance for Financial Inclusion to develop a national woman’s financial inclusion strategy,” the report said.
Nigeria scored 64 points under the government and policy support category, the highest the country with a 36.8 percent financial exclusion rate attracted from the six categories considered in the ranking. Sub-saharan Africa and lower-income regions scored 59 and 58 points, respectively, when they were graded under the same window.
Despite attaining the new financial inclusion ranking with an overall score of 53 points in the Global Microscope of 2020, Nigeria is crawling behind South Africa and Ghana as they scored 64 and 59 points, respectively. This helped the countries to secure the 13th and 20th position in the global financial inclusion ranking.
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Africa’s most populous nation which has over 40 million adult population outside the formal financial cycle was rated poorly in terms of financial inclusion stability, integrity and infrastructure. Lower income region scored 62 points in financial inclusion infrastructure category but Nigeria scored 57.
Even though the population of Africa’s largest economy is 2.6 percent of the total world population, the World Bank Global Findex Report 2017 estimates that 3.4 percent of Nigerians are among the global 1.7 billion adults who are unbanked and financially excluded.
“While there was a 300% increase in mobile money sign-ups in the second quarter, there is no evidence of measures to support digital financial services,” the report said.
To broaden inclusive financial inclusion through affordable products, analysts have recommended the use of mobile money, a telco-led financial inclusion model that has helped countries like Kenya and Ghana in deepening financial access.
“From a regulatory perspective, one basic requirement for mobile money to succeed is to create an open and level playing field that includes non-bank mobile money providers such as Mobile Network Operators (MNOS),” London-based Group Special Mobile Association (GSMA) said.
Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more population remains at 1 percent owing to its bank-led model.
Ghana’s decision to have a Telco-led financial inclusion model resulted in a 73 percent increase in registered mobile money customers in just one year, according to World Bank data, an initiative that lifted financial inclusion rate in the West African country to 58 percent in 2017 from 41 percent in 2014.
This is not different for Ivory Coast who has experienced a mobile money revolution. There are now more adults with mobile money accounts of 24.3 percent than with bank accounts of 15 percent.
“If Nigeria wants to deepen financial inclusion with the right oversight, then the banks and Telcos should work together to drive it,” Yewande Adewusi, a Lagos-based financial inclusion consultant said.
Adewusi says it is “obvious that what the country has been doing in the past is not working.”
With a customer base of over 200 million and a combined presence in the 774 local government areas in Nigeria, the telco industry in Africa’s most populous country which has the largest subscription for any sector in the country shows it has the facility to take financial services to the hard to reach areas in rural communities.
In its quest to achieve the 20 percent financial exclusion target by the year 2020, CBN on the 5th of October 2018, released an exposure draft guideline in which it proposed payment service bank (PSB), a payment service initiative which can allow Banking agents, Mobile Money Operators (MMOS), Retail chains (Supermarkets), Telecommunications companies to have a license to operate under the structures and guideline specified by the bank.
But, more than two years after the Central Bank of Nigeria gave an official node to nonfinancial companies to apply for mobile banking licences to assist in deepening access to financial services, not much has changed.
While two smaller telcos and a payments company have been given mobile money licences, the country’s largest mobile operators, MTN and Airtel are yet to receive the licence.
Targeted at Nigeria’s over 40million unbanked population who are mostly in the rural communities, the payment service bank by the apex bank would enable telcos and other non-financial institution to offer financial services while deepening the country’s financial inclusion rate.
Before now, only banks and licensed financial institutions were allowed to provide financial services ( bank-led financial inclusion model). Although telecom operators and other fintech companies indicated interests to operate in the market, the CBN policy would not allow them.
The regulator eventually shifted because of the increasing rate of financially excluded people in Nigeria and the lack of progress in getting banks to provide financial services to people living in areas that lack access.
Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved a 60.3 percent financial inclusion rate in 2012, it declined to 58.4 percent in 2016 against a target of 69.5 percent, translating to financial exclusion of about 41.6 percent.
The apex bank has a target to ensure that 80 percent of the country’s adult population is financially included in the financial cycle by the year 2020. The CBN had in a circular on July 2018, lamented that Nigeria was not meeting any of the financial inclusion targets agreed and contained in the 2012 Financial Inclusion Strategy.
