Digitising government payments is a major catalyst in driving financial inclusion in Nigeria in 2025

The digitisation of government payments is increasingly recognised as a critical mechanism for advancing financial inclusion in Nigeria. The COVID-19 pandemic exposed the inefficiencies and security risks inherent in cash-based transfers, underscoring the need for more reliable and scalable systems. In response, several states, including Kaduna, implemented digital payment solutions between 2021 and 2024, offering early evidence of how technology can improve access to financial services and strengthen the formal economy.

Addressing the rollout of digitised payments required confronting deeper systemic challenges, including the fragmentation of federal and state identity infrastructures and the limited reach of agent networks. By resolving these bottlenecks, the system not only ensured the timely delivery of payments to recipients but also removed significant barriers to financial inclusion. As a result, over 800,000 individuals were brought into the formal economy, driving financial inclusion from 46 percent to 66 percent.

Tackling user reluctance

Registering residents’ identities is a fundamental prerequisite for issuing digitised government payments, as eligibility must be clearly established to ensure resources reach intended recipients. A significant challenge in developing the state-level identity management database, overseen by the identity agency KADRIMA, was overcoming widespread scepticism. Many residents viewed registration as intrusive, raising concerns about government overreach.

To address this reluctance, registration was paired with tangible incentives by linking access to essential government programmes, such as health cards and conditional cash transfers, to identity verification. This approach demonstrates a practical model for other states seeking to expand financial inclusion, showing that residents are more likely to participate when the process offers clear, immediate value.

Overcoming identity management issues

Identity registration is just the first hurdle to overcome in terms of establishing the necessary infrastructure for digitised payments. In Nigeria, federal and state-level identity management agencies are siloed, which means the relevant systems rarely talk to each other.

Repeated identity registration across multiple agencies creates frustration for residents and constitutes a significant barrier to financial inclusion. The challenge is compounded by the need to integrate state and federal identity infrastructures with bank verification numbers (BVNs) and banking databases to facilitate digitised payments. Field observations revealed vulnerabilities in the system: some individuals were able to use their National Identification Numbers (NINs) to open multiple bank accounts for others, highlighting a critical know-your-customer (KYC) loophole.

In response, Kaduna State developed an integrated platform linking the NIN and KADRIMA databases and connecting them with banks through APIs for BVN verification. This approach addressed a major infrastructure gap, enabling more secure and efficient digital payments. Between 2021 and 2024, approximately 2.5 million bank accounts were opened and 7.9 million NINs registered, the highest per capita registration rate among Nigeria’s 36 states.

Leveraging the influence of agents

Agents are a key tool in bringing access to digitised payments within reach for residents. Physical bank branches and identity registration points are often located far from where people live, which adds unnecessary friction to the registration process. Research by Enhancing Financial Innovation & Access (EFInA) found that the top barriers to financial inclusion were distance to service points (37%) and lack of trust in banks (29%).

A strong agent network can address both challenges by bringing services closer to where people live. By 2024, Kaduna had more than 2,800 active agents, who operated in urban areas and tracked any gaps in rural areas via public maps. According to SANEF, agents now exceed the combined number of bank branches and ATMs as Nigerians’ primary access point, underscoring that agents offer not only practical coverage but also trusted channels for financial and identity services.

A catalyst for change

Overcoming the technical and behavioural challenges of digitised state payments has already delivered clear gains. Kaduna State now has a dedicated identity management agency, integrated systems linking identity platforms with banks, and an expanded agent network supporting residents on the ground.

Most importantly, digitised payments have triggered a positive flywheel of new behaviours and benefits for Kaduna residents. By the end of 2024, major government-to-person payment streams had been digitised, including pension disbursements, farmer subsidies, and conditional cash transfers.

In one initiative, the cash transfer programme, 41 percent of recipients invested funds in business inputs. Six months on, 73 percent of participants were still actively using their digital accounts, as compared to the national baseline of 30-40 percent. More generally, residents with digital accounts are building up their savings, with auto-save features helping account holders save 3.2x more.

Much work remains to be done, despite the progress made so far. The gender gap remains an issue, with only 53 percent of women financially included, as compared to 71 percent of men. Our overall goal for the next phase of Kaduna’s financial inclusion is to turn access into consistent usage that brings everyday value, especially for women. Key targets going forward include adding over 1 million more active users by December 2026, digitising 100 percent of pensions and other key public services, and reaching the most excluded via no-phone or basic-phone processes.

The next phase of financial inclusion efforts should continue to follow a structured, three-pronged approach. First, delivering immediate and tangible value is essential, giving residents a clear incentive to participate. Second, practical barriers that hinder usage must be systematically reduced. Third, robust systems need to be established and tested prior to broad deployment, ensuring a seamless experience that encourages sustained engagement with digital wallets. This framework not only strengthens local initiatives but also provides a practical model for other states seeking to expand financial inclusion through digitised government payments.

The author is Hon. Ibrahim Tanko Mohammed, Commissioner of Finance for Kaduna State.