To give Nigeria’s adult population access to useful and affordable financial products and services the Central bank of Nigeria (CBN) through its collaboration with industry stakeholders came up with the National Financial Inclusion Strategy (NFIS) in January 2012.
The NFIS is a tool the central bank said it was going to use to ensure 80 percent of Nigeria’s adult population get access to formal financial services by 2020.
Eight years after, the probability that the central bank will achieve its 20 percent financial exclusion target remains low due to the following reasons.
Population growth rate
Even though Nigeria’s 2018 inclusion data revealed that more people were beginning to have access to financial services, the pace of inclusion rate was however lower than the country’s population growth rate, a survey by industry players shows.
“What we saw between the 2016 and 2018 data was that more people were becoming financially included but not at the same pace as the population growth rate,” Dayo Odulate-Ademola, Head of innovation at EFInA said.
For this reason, EFInA believes the “80 percent financial inclusion target for this year or is unlikely to be met.”0
The 2018 data by EFInA put Nigeria’s financial inclusion rate at 63.2percent, meaning that as much 36.8 percent or about 40 million adults still lack access.
If the apex bank is to achieve its objective through the strategy launched seven years ago, it would have to bridge the 16.8 percent inclusion gap before year-end.
But 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.
Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved 60.3 percent 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.
To achieve a more inclusive financial inclusion at an affordable rate, industry experts have advised that Nigeria would need to leverage technology to give access to its excluded population.
“To achieve financial inclusion target that the CBN financial inclusion strategy has set up of 80 percent inclusion rate by 2020 technology has to play a massive significant role and what I see technology doing in terms of Nigeria’s financial inclusion is actually to democratize access that is the first thing it does,” Wole Adeniyi, executive director at personal & business banking, Stanbic IBTC Bank said during a panel session at the Social Media Week on Monday in Lagos.
Policy roadblocks
According to the consumer division of Citigroup, a multinational financial services provider Nigeria is among the countries that should grow fast in mobile money but have faced policy roadblocks.
“We now flag Nigeria as the market most likely to see rapid growth in the short term as we foresee an industry transformation following regulatory changes that will allow telco-led mobile money models,” New York-based lender 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 focused on an independent bank-led model that would supplement and support the existing banking system.
According to a report by the World Bank, mobile money drove financial inclusion in Sub-Saharan Africa.
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.
Kenya has about 60 percent mobile money service penetration, while Ghana has about 40 percent service penetration, and Nigeria with a lot more population numbers, remains at 1 percent owing to its bank-led model.
Ghana’s decision to have a Telco led model resulted in a 73 percent increase in registered mobile money customers in just one year, according to World Bank data, and has helped lift financial inclusion rates in Ghana to 58 percent in 2017 from 41 percent in 2014.
This was not different for Ivory Coast who has experienced a mobile money revolution. As a result, there are now more adults with mobile money accounts of 24.3 percent than with bank accounts of 15 percent.
Nigeria decided to eventually follow the footsteps of its African peers in 2019 as the largest economy in Africa loosed its policy to accommodate the mobile money-led financial inclusion model.
Telecommunication operators’ push to offer mobile money service officially got a nod by the central bank of Nigeria with the issuance of guidelines in October 2018 for players to apply for the licence to operate as payment service banks (PSB).
“The roll-out of Payment Service Banks guidelines that allows licensing of telco subsidiaries is welcome and should be implemented,” International Monetary Fund (IMF) said in April 2019.
Before October 2018, only banks and licensed financial institutions were allowed to provide financial services in Nigeria.
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.
“We now flag Nigeria as the market most likely to see rapid growth in the short term as we foresee an industry transformation following regulatory changes that will allow telco-led mobile money models,” Citigroup aid.
But after almost one year and a half since the apex loosened its policy to accommodate new players in Nigeria’s financial services industry; the direction of the mobile money initiative remains unclear.
Since October 2018 when the apex bank requested that industry players should apply for the licence to operate as a Payment Service Bank, only three firms; Hope PSB a subsidiary of Unified Payment, Globacom’s Money Master and 9Mobile’s 9PSB have been issued Approval-in-Principle (AIP).
A PSB license will allow the companies to among other things; maintain savings accounts and accept deposits from individuals and small businesses, which is covered by the deposit insurance scheme; carry out payments and remittance (including cross-border personal remittance) services through various channels within Nigeria; issue debit and prepaid cards, and operate an electronic purse or wallet.
According to London based Group Special Mobile Association (GSMA), “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).
