As many Nigerian adults continue to rely on different types of financial service providers to carry out transactions, EFINA said they require a range of useful, affordable, and accessible financial services to meet all of their needs.
According to EFINA’S 2020 survey on Access to Financial Services in Nigeria, the use of banks, as well as unregulated financial service providers like savings groups and village associations, increased in 2020.
Largely been driven by growth in banking as 45 percent of Nigeria’s 106 million adults were banked in 2020, up from 40 percent in 2018, EFINA’S report showed that 51 percent of the population used formal financial services, such as a bank, a microfinance bank, mobile money, insurance, or pension accounts in 2020, up from 49 percent in 2018.
However, the lack of tailormade financial services products and the high cost of financial services amid low disposable income on account of the sluggish economic growth in Nigeria are top among the reasons for the country’s high financial exclusion rate.
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With a tepid 0.9 percent growth, Nigeria’s financial inclusion rate improved to 64.1 percent in 2020 from 63.2 percent in 2018. This means that its financial exclusion rate slowed marginally from 36.8 percent in 2018 to 35.9 percent in 2020. However, the excluded adult population of 38.1 million reported in 2020 was higher than the 36.6 million recorded in 2018, meaning 1.5 million adults fell into the excursion circle in the last two years to 2020.
Financial inclusion means
that people have access to basic financial services like a savings account, credit and insurance. It can benefit individuals, families, and businesses while supporting key outcomes such as GDP growth.
A higher exclusion rate in Nigeria could lead to a poorer population as lack of access to credit and insurance puts them at an economic disadvantage.
With Nigeria’s per capita income which has been on the decline since 2015 following the weak economic growth by Africa’s top crude producer, high cost of financial products is a luxury for many of the population in Africa’s largest economy that has failed to lift its poor population in the last five years.
According to EFINA’S report, only 26 percent of Nigerian adults are considered financially healthy as 44 percent said they were financially coping as of 2020.
A breakdown of the report showed that Nigeria failed to meet its National Financial Inclusion Strategy target for 2020 to include 80 percent of its adult population into the financial system. Only 64.1 percent were financially included by the end of last year.
This means that 36 percent of Nigerian adults, or 38.1 million of the country’s 106 million adults, remain completely financially excluded. This is a shortfall by 16 percentage points from the desired target of a 20 percent exclusion rate.
The 2012 strategy by the Central Bank of Nigeria (CBN) had also aimed to reach 70 percent of Nigerians with formal financial services by 2020; the actual figure reported by the EFINA’S Access to Financial
Services showed it was 51 percent. A shortfall by 19 percentage points.
“At our current rate of progress, we will not reach the 2020 financial inclusion targets until around 2030,” Ashley Immanuel, CEO of EFINA, said.
Nigeria did not only miss its overall financial inclusion target, but it was unable to also achieve other sub-targets outlined by the Central Bank of Nigeria.
Africa’s largest economy planned to ensure that its adult population that has a transaction account with a regulated financial institution and/or has made an electronic payment through a regulated financial institution in the last 12 months will be 70 percent at the end of 2020 but only 45 percent was achieved, leaving 25 percent points gap.
It was the same for savings, as only 32 percent was achieved, 28 percent short of its 60 percent target.
The 40 percent target for credit was also not achieved as a 37 percent gap was reported in 2020, meaning only 3 percent of the target was achieved.
Out of the 40 percent target set for the insurance inclusion, only 2 percent was achieved, meaning 38percent of the target was unreached.
“We can reach these targets much faster if we follow paths taken by other African countries that have seen rapid financial inclusion growth due to mobile money,” Immanuel cited.
Analysis of the EFINA report revealed that Nigeria’s financial inclusion gender gap persisted in 2020 as the difference between men with access compared to women remained in the review period.
While there was a slight reduction in the exclusion rate for both male and female by a paltry 0.7 percent and 1 percent respectively, the number of banked male adult was put at 50.6 percent as against the 39.1percent reported for female, a gap of 11.5 percentage points. Slightly slower than the 24 percentage points gap reported in 2018.
Rural adults are still more excluded because banking services are not getting to the communities. While the data, however, showed there was a slight increase in inclusion among the rural population as informal financial services continued to be dominant in the rural areas, 44.2 percent were reported to be financially excluded as compared to the 19.9 percent in the urban areas.
The use of digital financial services and agent networks, according to EFINA’S Access to Financial Services Surveys, started to grow significantly between 2018 and 2020. Phone ownership has also increased, with 81 percent of Nigerians now owning mobile phones.
“Now is the time to build on this initial progress and drive faster financial inclusion growth through digital financial services such as mobile money,” Immanuel said.
According to her, “Nigeria can do this by creating an open and level playing field for a wide range of providers, creating the right environment for Fintech to thrive, and encouraging partnerships between different providers.”
Compared to its African peers, Nigeria has a fairly large banked population (45%) but also has the highest proportion of financially excluded adults at 36 percent.
Rwanda in 2020 reported a 36 percent banked population but has far lesser excluded adults at 7 percent. With a banked population above 40 percent Kenya has about 83 percent of its adult population financially included leaving only about 17 percent out of the financial system.
Hastening the licencing of the much-anticipated payment service bank (PSB) to help deepen access, especially in the rural communities, where the majority of Nigeria’s excluded population live is one of the ways analysts believe Nigeria can grow its financial inclusion rate.
More than two years after the CBN 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.
Only two Telcos have been given the mobile money permits. The country’s largest mobile operators, MTN and Airtel are yet to receive the licence.
