Capital markets can boost financial inclusion in Nigeria — EFInA

Market costs, investor education, product diversity, technology enablement and strategic partnerships are ways capital markets can boost financial inclusion in Nigeria, Enhancing Financial Innovation and Access (EFInA) has said.

According to the firm, a well-functioning capital market can play a vital role in supporting inclusive economic growth in the country.

“In the advent of the COVID-19 pandemic, there was a spotlight on the importance of diversity in building sustainable capital markets and the need to advance an objective financial inclusion initiative that gives individuals and businesses better access to affordable financial products and services that meet their needs,” EFInA said.

The financial inclusion firm noted that with cost being a key consideration, depositories and exchanges have taken strong measures to improve operational efficiencies and reduce fees, improving entry into the market.

“Exchanges, supported by government agencies and regulators, are leading this charge. Young people are a crucial demographic, and infrastructure providers are fueling their interest with initiatives that involve gaming, coding, and film-making,” it added.

Capital markets bring buyers and sellers together to trade stocks, bonds, currencies, and other financial assets. The firm highlighted that exchanges typically encourage participation for product diversity by offering products and services that serve a broad range of investors.

The firm noted that the capital market infrastructure landscape has grown to include fintechs and start-ups that offer products and services across the value chain. “Trust remains a critical factor in driving financial inclusion. Hence, the safety and stability of mass market investment platforms are critical to increasing financial inclusion,” it added.

According to the World Bank, financial inclusion is when individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit, and insurance – delivered responsibly and sustainably.

The importance of financial inclusion, which is a key enabler to reducing extreme poverty and boosting shared prosperity, has made it to be identified as an enabler for 7 of the 17 Sustainable Development Goals 2030.

In 2012, Nigeria developed its first financial inclusion strategy to bring 80 percent of its population into the financial system by 2020, according to EFInA. The country failed to meet the target as financial inclusion grew to 64.1 percent in 2020.

“Although the inclusion rate dropped marginally from 36.8 percent in 2018 to 35.9 percent in 2020, the excluded adult population of 38.1 million in 2020 was higher than the 36.6 million in 2018, meaning 1.5 million adults fell into the exclusion circle in the last two years to 2020,” EFInA explained.