Why e-Naira app fails to include Nigeria’s unbanked population

The requirement needed to sign up for the recently launched e-Naira has by default excluded Nigeria’s over 40 million unbanked population, checks by BusinessDay has shown.

This is contrary to the claim by the Central Bank of Nigeria (CBN) that the ‘e-Naira Speed Wallet’ will deepen Nigeria’s financial inclusion.

The e-Naira wallet cannot onboard Nigerians without existing bank accounts. The app requires users to either, input their Bank Verification Number (BVN), an 11 digit number that is created for bank customers before they are assigned a bank account, or link the e-wallet to an existing bank account before they can have access.

This means that people without existing bank accounts cannot be granted access to the e-Naira. Industry players said they expected that the unbanked will be able to use their phone numbers to gain access and be included in the financial system.

“Deploying e-Naira alone is not going to include Nigeria’s financially excluded population,” Ashley Immanuel, CEO of EFInA, said. Financial inclusion means that people have access to basic financial services like a savings account, credit, and insurance, according to the World Bank.

A higher financial exclusion rate in Nigeria could lead to a poorer population as lack of access to credit and insurance puts them at an economic disadvantage.

Among other things, the CBN said in the ‘design paper for the e-Naira’ that it “believes the e-Naira will make a significant positive difference to Nigeria and Nigerians in encouraging financial inclusion.”

Read More: Explainer: What you did not know about the e-Naira

The CBN governor, Godwin Emefiele said the e-Naira would support a resilient payment ecosystem, encourage rapid financial inclusion, reduce the cost of processing cash; enable direct and transparent welfare intervention to citizens and increase revenue and tax collection.

“CBDCs can also help increase remittances, foster cross border trade, improve financial inclusion, make monetary policy more effective, and enable the government to send direct payments to citizens eligible for specific welfare programs,” President Muhammadu Buhari said during the launch of the Central Bank Digital Currency, also known as e-Naira, in Abuja.

Chimezie Chuta, coordinator, blockchain Nigeria User Group explained that the e-Naira will not solve Nigeria’s financial inclusion problem.

“I don’t think it will drive financial inclusion, it won’t drive that. You need to have money, a source of income to have a bank account. An average Nigerian will not buy into e-naira because of banking services,” he said.

While the CBN said it views the e-Naira as an opportunity to further its goal of achieving its National Financial Inclusion Strategy target of 80.0 percent, which it was unable to meet in 2020, EFInA’s Immanuel said “expand mobile money offering by giving more licenses to PSB applicants that have the existing infrastructure to onboard the unbanked population” will help in deepening Nigeria’s financial inclusion drive.

While Nigeria went late to the mobile money party as the central bank only gave an official nod to telecoms and other non-financial companies to offer financial services in 2018, its slow licensing pace and scarce permits have delayed the industry’s take-off.

The industry regulator gave its first set of licenses to three players in August 2020, two years after it received applications. Even so, the country’s largest mobile operators, MTN and Airtel, are yet to receive the license more than three years after they applied to help deepen access to financial services in a country where almost 40 million adults do not have a bank account.

Largely driven by mobile technology, Kenya’s financial inclusion expanded from a low base of 26.7 percent a decade ago to 83 percent in 2020.

With Kenya’s 83 percent mobile money-led financial inclusion rate, eight in ten adults in the East African country have access to formal financial services. This mirrors the potential of Nigeria’s payment service bank (PSB), but for licensing challenges, the most populous nation in Africa has continued to lag African peers.

Nigeria failed to meet its National Financial Inclusion Strategy target for 2020 to include 80 percent of its adult population into the financial system. EFInA data showed that only 64.1 percent was 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 (18 years and above) adults, remain completely financially excluded. This is a shortfall by 16 percent points from the desired target of a 20 percent exclusion rate.

“At our current rate of progress, we will not reach the 2020 financial inclusion targets until around 2030,” Immanuel said.

Targeted at Nigeria’s almost 40 million unbanked population who are mostly in the rural communities, the payment service bank by the CBN would enable telecoms and other non-financial institutions 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 interest 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.