In August 2015, barely three months after he was sworn in, President Muhammadu Buhari ordered government agencies to harmonise the collection and usage of biometric data in the country. However, less than six months to the end of his second and final term, those data still lie with the different government agencies that collate them.
This has left the financial services industry in the same murky credit waters it has been since this administration began.
Researchers led by Olayinka David-West, dean of Pan African University, identified in 2019 a harmonised identity system as one of the market-enabling policies to improve financial inclusion.
According to the researchers, the inability of citizens to establish identity is a major inhibitor to accessing financial services.
Nigeria has a plethora of identity systems sitting with the National Population Commission (NPC), the National Identity Management Commission (NIMC), the Federal Road Safety Commission, the Independent National Electoral Commission and the Nigerian Immigration Service, among others.
The lack of proper verification led to the bank verification number (BVN) system for the financial services industry. First-time account openers in the country are expected to go through a Know-Your-Customer (KYC) verification, according to the Central Bank of Nigeria’s (CBN) guidelines. Among the requirement for KYC is proof of identity and address.
“The inability of a significant segment of the citizenry to offer proof of identity despite being cash-rich is one of the causes of high exclusion numbers and also the slow growth of mobile money adoption. In spite of the provision of tier-1 accounts, which do not need any form of identity, the transaction limits imposed are constraining,” David-West said.
The number of unique bank account holders has grown from 31.4 million in 2017 to 56.4 million in 2022, according to the CBN. The World Population Review data show that there are 109.8 million people in Nigeria above the age of 18. In essence, there are still 53.4 million adult Nigerians without bank accounts.
“Accounts — whether they are with a bank or regulated institution such as a credit union, microfinance institution, or a mobile money service provider — allow their owners to safely and affordably store, send, and receive money for everyday needs, plan for emergencies, and make productive investments for the future, such as in health, education, and businesses. People without an account, by contrast, must manage their money using informal mechanisms, including cash, that may be less safe, less reliable, and more expensive than formal methods,” the latest Global Findex report said.
According to VerifyMe Digital ID report, Nigeria operates a foundational ID system concerned with accounting for the population overall, and functional IDs, used to demonstrate eligibility for certain services or entitlements like voting or driving. Foundational ID systems are synonymous with national IDs issued by the government and are used by people to demonstrate legal status (for example, citizen, resident, visitor, refugee, and asylum seeker).
The government has in recent times made efforts to increase the number of Nigerians with unique identities, especially with the National Identity Number (NIN) campaign, with 92.63 million Nigerians enrolled as of November 2022, up from 39 million. In terms of gender distribution, the NIMC data showed that 52.1 million people, representing 56 percent of Nigerians captured in the NIN database so far are male, while the remaining 40.5 million, representing 44 percent, are female. VerifyMe estimates that over 100 million Nigerians are not captured in the ID system.
Apart from that, the existing IDs are being held by different agencies, which means there is only little the government, organisations and even individuals can do with them. For example, a Nigerian seeking to obtain a new international passport would need to go through fresh biometrics despite having a BVN, a voter’s card, or a driving licence. He or she would however need to produce a NIN before the new biometrics is completed.
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The fragmentation of the identity system also implies that operators in the financial system are limited to fragments of data on existing and would-be customers. This is one of the main barriers to growth in the credit industry. Companies that are to yet find a solution to the identity problem are faced with numerous risks, the top of which is high default rates.
Adedeji Olowe, CEO of Lendsqr, a digital lending services provider, told BusinessDay that there was an increase in organisations being “fleeced” by “fraudsters and bad borrowers who don’t pay back, knowing nobody would catch them.”
The Buhari administration continues to posture that the goal is to have a national database for all Nigerians. In 2021, while marking the third National Identity Day, the President again directed all government data and biometrics collating agencies to harmonise their data collation before the end of his second term in 2023.
On December 19, the NPC said on its Twitter handle that it was set to conduct the first digital census in Nigeria that would be credible and meet international standards. The 2023 Population and Housing Census would be the first digital census to be conducted in the country and could present the country with the opportunity of having a national database for all citizens. The NPC, however, seems unable to pin down the exact day the census would be held. It has earlier projected May 2022 for the census and had to postpone it to next year.
