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Why financial exclusion rate is highest in Northern Nigeria, way forward

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Despite the increase in Nigeria’s financial inclusion rate, the Northern region of Africa’s most population retained its position of highest excluded hub in the country, EFInA’s bi-annual 2018 figures shows.

The percentage of financially-excluded people in 2018 dropped by 4.8 per cent from 41.6 per cent in 2016 to 36.8 per cent in the review year, although, millions still lack access to financial services and the North East, North Central and North West take the large share of the rate.

According to EFInA Survey (A2F) for 2018, Nigeria adult population who are both formally and informally excluded from the financial market stood at 36.6 million.

Compared to other regions of Africa’s largest economy, the northern part of the country reported more unbanked people owing to high illiteracy level, insurgency in some parts of the region coupled with high poverty rate, as compiled from BusinessDay survey.

According to a recent data from the National Bureau of Statistics (NBS), Yobe State has only 7.23 per cent literacy level, the lowest in the country.

The dismal record of Yobe is followed by Zamfara (19.16 per cent); Katsina (10.36 per cent); Sokoto (15.01); Bauchi (19.26); Kebbi (20.51); and Niger (22.88), of which only Taraba state is an exception with 72 per cent literacy rate.

Ayo Akinwunmi, Head of Research, FSDH Merchant Bank said that the issue of insecurity and the high unemployment rate in Nigeria are factors contributing to the decline in financial inclusion.

“A lot of banks that are located in these areas where there is high level of insecurity are already shutting down .If there is peace there will be more bankable adults,” Akinwunmi said.

Out of the 22 million total adult population in the South West, 64 percent are formally included into the financial cycle, this compares with North East with the same total adult population but has only 34 percent of its adult population included.

North West, with total adult population of 23 million also has only 27 percent inclusion rate.

While South South with less population of 16 million has 60 percent of its adult populations formally included and South East with adult population of 12million has the same percentage of inclusion as South South.

“The weak purchasing power that we are experiencing is why the bankable adults are dropping,” akinwunmi mentioned.

BusinessDay survey revealed that there is strong relationship between job creation and financial inclusion, considering when people are employed, they have high tendency to own a bank account, as in some case are mandated by their employers.

Proximity to financial institutions and cumbersome requirement by banks are some of the challenges as researched by BusinessDay that damps the morale of people in some northern part of the country.

For example, BusinessDay learnt that banks ask rural farmers to bring utility bills, identifications cards among other requirements before a basic bank account can be opened, this encourage most of the rural dwellers to continue with their conventional way of stashing money under their pillow.

The result of  EFInA Access to Financial Services in Nigeria 2018 survey revealed that 39.50 million (39.70 percent of the adult population) have access to a formal bank account, while a further 8.9 million (9 percent) are banked formally through other means while some 14.6 million (14.6 percent) use informal means for financial access.

According to the financial sector development organization, of the total adult populations, 46.10 percent (22.7 million) are male while 33.30 percent (15.60 million) are female.

This recent survey shows that the nation is still far from the 80 per cent financial inclusion target of the National Financial Inclusion Strategy, but has significantly increased from the previous inclusion rate recorded in 2016.

“The aim of the report is to engage policy makers and the regulators to come up with the right regulations that will ensure the actualization of central bank’s vision of achieving 80 percent financial inclusion by 2020,” said Esaie Diei, Chief Executive Officer of EFInA.

“The report will let us where we are and what we need to do,” said Diei.

On the way forward in including more Nigerians into the financial sector and especially in the Northern part of the country, Rafiq Raji, chief economist at Macroafricaintel said may be if mobile money really takes off it can help grow inclusion in the north.

“Mobile money could be the enabler,” Raji suggested.

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, the Nigeria’s CBN was rather focused on an independent bank led model that would supplement and support the existing banking system.

“I think there is still a wide communication gap between the telecoms and the banks which can only be addressed by the CBN. In the case of Kenya (Safaricom), every bank in Kenya integrated with Mpesa (mobile money app) for ease of transfer,” Ayodeji Ebo, MD, Afrinvest Securities limited said.

In furtherance of its mandate to promoting a sound financial system in Nigeria and the need to enhance access to financial services for the unbanked rural segments of the society, the Central Bank of Nigeria (CBN) has proposed Payment Service Banks (PSB).

Industry experts  says  CBN’s move to open the banking system to non-financial companies and register mobile money operators could be the biggest innovation to hit Nigeria’s beleaguered financial services industry in decades, and it is attracting a lot of takers.

No less than 30 business names are currently undergoing registration as payment service banks at the Corporate Affairs Commission (CAC), in a move that could prove a game changer for tens of millions of financially excluded Nigerians.

For non-banks, registering a subsidiary unit is the first step in applying for a payment service bank license under a new set of mobile money guidelines launched by the CBN in October, as it attempts to replicate a system that has succeeded in bringing large swaths of people from Kenya to India into the formal financial fold.

According to data obtained from the Abuja-based CAC, the thirty business names undergoing registration include financial technology companies, Verve, Quick teller, Interswitch, Paga and Paystack.

But since the last month of 2018, no information has been made available to the general public as the level of registration attained by the firms.

 

BALA AUGIE & Endurance Okafor

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