‘Trust me, I'm a bank’: Restoring trust in Nigeria’s formal financial institutions

Trust is the lifeblood of any financial system. It underpins consumers’ decisions to deposit money, adopt financial services, or invest in their future. Yet, trust in financial institutions has been severely eroded globally, particularly in Nigeria. This isn’t just a crisis of confidence; it’s a systemic issue threatening financial inclusion, stability, and the broader economic landscape.

The fragile foundation of trust

Trust in financial services is a consumer’s willingness to accept vulnerability based on the belief that institutions will act in their best interest. It is multi-dimensional, ranging from confidence in a bank’s ability to protect savings to fairness in customer treatment and belief in the financial system’s role in supporting economic growth. Trusting a specific bank, formal financial institutions in general, and the banking system are all different if interrelated. The components that influence trust in each of these will differ. It may be based on personal or family experiences, media reports, or how well someone understands the banking system. For example, someone may choose to open an account at a bank recommended by a relative because they know and trust the bankers or loan officers personally; that person may not want to engage with the larger, traditional bank system because they do not trust that it will serve them well.

However, trust is not a one-size-fits-all concept in the financial sector; it manifests differently across various financial products depending on the nature of the product, its time horizon, and the level of perceived risk. Each product requires consumers to place unique confidence in the financial institution. For pensions, trust lies in the institution’s long-term stability, transparency about fees and investments, and strong regulatory oversight. Distrust arises from mismanagement or failures to honour retirement payouts. Savings and deposit accounts demand confidence in fund security, immediate accessibility, and fair practices, with distrust often rooted in fraud or hidden charges. Trust depends on clear terms, ethical lending, and supportive repayment options for loans and credit, while distrust emerges from predatory practices or opaque agreements. Insurance products require trust in the reliability of claims processing, clarity in policy terms, and the insurer’s financial stability; distrust typically stems from disputes over denied claims or hidden exclusions. In investment products, trust is built on the institution’s expertise, transparent reporting, and aligned interests, but mismanagement or conflicts of interest erode this confidence. Lastly, remittance services demand speed, accuracy, and fee transparency, with delays or unexpected charges undermining trust. Across all products, institutions that consistently prioritise these trust factors can secure consumer confidence and loyalty.

Yet, trust remains elusive for many Nigerians, rooted in historical experiences of fraud, poor customer service, and the slow pace of innovation. The EFInA Access to Financial Services in Nigeria (A2F) 2023 survey revealed that only 64 percent of Nigerian adults have a formal financial institution account. Among those who remain unbanked, about two million cited a lack of trust in banks as the primary barrier. This distrust is particularly pronounced among low-income individuals and rural populations, where informal savings mechanisms like ajo or esusu are perceived as more reliable and community oriented.