The significance of financial literacy in today’s fast-paced and increasingly interconnected global economy cannot be emphasised. The foundation of both individual and group economic empowerment is financial education, which gives people the know-how and abilities needed to handle their money wisely. This is particularly relevant in emerging countries such as Nigeria, where distinct economic opportunities and problems exacerbate financial complexity. To promote inclusive growth, decrease poverty, and promote economic stability, Nigeria must urgently improve financial education and literacy.
The Nigerian economic landscape: Opportunities and challenges
The economy of Nigeria, the biggest economy in Africa in terms of GDP, is vibrant but unstable. Oil earnings, a growing tech industry, agriculture, and the millions of people who labour in the informal sector all contribute to the country’s economic structure. Nigeria still has a lot of problems, such as high rates of poverty, unemployment, inflation, and a sizable unbanked population, despite its varied economic activity.
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Nigeria’s economy heavily depends on the informal sector, which encompasses artisanal labour, small-scale trading, and agriculture. However, those working in this industry frequently overlook development prospects and handle resources inefficiently due to a lack of formal financial education. The formal economy is mostly dependent on the oil sector, which is volatile. This emphasises the necessity for a financially savvy populace that can adjust to changes in the economy and deal with uncertainty.
The state of financial literacy in Nigeria
Nigeria’s financial literacy is still shockingly low. Only a small portion of adults have a basic understanding of financial concepts like interest rates, inflation, risk diversification, and personal budgeting, according to a report shared by the Enhancing Financial Innovation and Access (EFInA) organisation in 2021. People’s capacity to make wise financial decisions is significantly hampered by this lack of financial understanding, which eventually affects their financial well-being.
“To promote inclusive growth, decrease poverty, and promote economic stability, Nigeria must urgently improve financial education and literacy.”
The effects of financial illiteracy on society as a whole are not limited to individuals. The economy is negatively impacted when a sizable section of the populace lacks financial literacy. Individually poor financial decisions can increase debt, decrease savings rates, and diminish financial security, all of which exacerbate economic instability. The increased reliance of individuals on government assistance during financial crises may put pressure on social welfare institutions.
The lack of adequate access to high-quality financial education is one of the main obstacles to financial literacy in Nigeria. Many Nigerians lack access to formal schooling and specialised financial skills, especially those who live in rural areas. Young Nigerians are also ill-prepared to handle the intricacies of the financial world since the current educational system does not sufficiently integrate financial literacy into the curriculum.
The role of education in bridging the gap
A comprehensive strategy is needed to address financial illiteracy, with education at the forefront. Financial education must be incorporated into the curriculum at all educational levels, from universities to basic schools. A solid foundation can be created by early exposure to financial concepts, allowing people to form wise financial practices at an early age. Education systems ought to include core subjects like comprehending credit, investing, saving, and budgeting.
Ongoing financial education is crucial for grownups. Employers, neighbourhood associations, and internet platforms can all offer financial literacy initiatives that can serve as excellent resources for lifelong learning. These programmes must be created with individuals’ varied backgrounds and degrees of prior knowledge in mind, meeting them where they are.
The role of technology in financial education
In the era of digitalization, technology provides creative ways to improve financial literacy. Among many people, mobile technology can potentially reach individuals living in distant and underdeveloped locations. Programmes for financial literacy that are offered via mobile platforms can be quite successful because of Nigeria’s high mobile penetration rate.
Interactive and captivating financial education modules covering subjects like credit management, investing, saving, and budgeting can be found in mobile apps and online platforms. Furthermore, social media and digital marketing can be used to point consumers towards existing resources and raise awareness of the value of financial literacy. Agencies from the government, banks, and digital firms may work together to scale these projects and make sure they are seen by as many people as possible.
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Government and institutional initiatives
The Nigerian government has launched several measures to address the issue of financial literacy after realising the need for better financial literacy across various financial institutions. The objective of the Central Bank of Nigeria’s Financial Inclusion Strategy is to enhance financial literacy throughout the nation and decrease the proportion of financially excluded Nigerians. Initiatives like financial education campaigns, microfinance institution marketing, and the creation of financial products customised to the needs of underprivileged people are all part of this strategy.
Also, NGOs and businesses in the private sector are making a big contribution to the promotion of financial literacy. Financial resources and information are being made available to a wider range of Nigerians thanks to efforts like the MasterCard Foundation’s financial inclusion programmes and the EFInA Financial Literacy Programme.
The impact of financial literacy on economic growth
Improving financial literacy may significantly affect Nigeria’s economic expansion. Individuals who possess excellent financial literacy are inclined to participate in prudent financial activities, including saving, investing, and borrowing responsibly. Increased productivity, increased capital accumulation, and increased economic stability can result from this.
For instance, increased financial literacy can have a significant positive impact on small and medium-sized firms (SMEs), which are the foundation of Nigeria’s economy. Entrepreneurs who possess a strong grasp of financial management are more capable of handling cash flow, obtaining loans, and making strategic business decisions. This may result in the expansion and growth of SMEs, fostering economic growth and the creation of jobs.
Additionally, financial awareness might help to lessen poverty. Financially literate people are more likely to invest, save, and accumulate money over time. They are also more likely to guard against sudden drops in the economy. Families’ general quality of life can be raised, and their poverty can be lifted by doing this.
In conclusion, Nigerians must receive better financial literacy and guidance. Giving the people of the nation the financial literacy and skills they need to manage the nation’s complicated economic environment is crucial for establishing economic stability, lowering poverty, and accelerating inclusive growth. Effective financial literacy programmes require collaboration between government agencies, financial institutions, educational institutions, and technological companies. Nigeria may enable its people to take advantage of economic possibilities, make wise financial decisions, and advance the prosperity of the country as a whole by doing this.
About the author:
Adesuwa Lilian Edokpolor is an experienced Banking Professional and Management Executive with over 15 years of extensive experience working in roles across corporate and commercial banking, investment banking, sales, marketing, and client relationship management. She has worked with leading financial institutions across Africa including Nova Merchant Bank, UBA Group, and Zenith Bank PLC. Adesuwa is currently the Managing Partner at SEOLAHM Consulting – a boutique financial consultancy firm offering financial advisory, training, and portfolio development services.
