Nigeria’s journey to bringing more people into the financial system is yielding positive results. The Central Bank of Nigeria (CBN’s) policies on mobile money, agency banking, Know Your Customer (KYC), insurance, and recently, Payment Service Banks (PSBs) expected to takeoff this year have helped to bring 2.6 million new customers to the financial system.
CBN Governor, Godwin Emefiele has continued to take steps meant to deepen banking services in the economy. The hope for Nigeria to achieve 80 per cent financial inclusion rate come the year 2020 received a major boost, when the Enhancing Financial Innovation & Access (EFInA), released the result of its 2018 survey figures. The survey showed that 63.6 per cent of Nigeria’s adult population now has access to financial services and only 36.6 per cent are now financially excluded.
EFInA is a non-governmental organization and a financial sector development organization funded by the Department for International Development (DFID) and Bill & Melinda Gates Foundation towards promoting financial inclusion in Nigeria. The firm conducts surveys every two years in order to determine the situation of things regarding financial inclusion in the courtly.
EFInA’s 2018 report came after a painstaking research carried out across the country, with 750 respondents in each of the 36 states and the Federal Capital Territory (FCT), and 27,470 interviews, which represents 97 per cent of the target samples of 28,380.
The survey was anchored on several indicators including banked population, remittances, savings with a bank, payments, received income, loan with a bank, and banking agents, among others.
An increase of 1.4 per cent in the banked population from the 2016 to 2018 was found, a decrease of 2.2 per cent in remittances between in two years, and another decrease of 6.7 per cent in saving with a bank within the period. The indicators of payments, received income and banking agents all recorded increases of 3.4 per cent, 1.3 per cent and 0.6 per cent respectably, while loan with a lank remained static at 1.3 per cent.
The report however found a decrease of 1.6 per cent (from 30.1 per cent in 2016 to 28.5 per cent to 2018) in the non-bank indicators of Pension; Savings through other Formal Institutions; Mobile Money; Mobile Money Agents; Insurance; Remittances; and Loans with other Formal Institutions.
Shared Agent Network Expansion Facility
Before the release of the EFInA report, financial inclusion report on Nigeria showed that NorthEast and Southeast regions have the least access to banking, a report on financial access touch-points released yesterday has shown. With five per cent financial access touch-points for the Northeast and seven per cent for the Southeast, both regions remain disadvantaged in access to financial services despite efforts by the CBN, Bankers’ Committee and commercial banks to take banking to the grassroots, the Shared Agent Network Expansion Facility (SANEF) report has shown.
The CBN voted N20 billion for banks, Nigeria Inter-Bank Settlement Systems (NIBSS), licensed Mobile Money Operators and Shared Agents to accelerate financial inclusion and take banking to more Nigerians.
A member of Technical Committee of SANEF, Bolaji Lawal, said the SANEF initiative involves on-boarding 40 million low income and un-served Nigerians into the financial system, increasing financial access points from the current 50,000 to 500,000 by 2020 and deepening access to mobile and digital financial products and services such as savings accounts, micro-loans, insurance, pensions by Nigerians.
EFInA survey lists challenges to financial inclusion
The EFInA survey report concluded that three factors of affordability, institutional exclusion and lack of awareness were the biggest obstacles to financial inclusion. According to EFInA, 60.1 million Nigerians do not have/use a bank account, 96.3 million do not have/use mobile money and 97.9 million do not have insurance.
On the digital usage in the country, it revealed that mobile money, which was thought to be useful in the financial inclusion drive, was found to only deepen rather than expand financial inclusion. The report therefore revealed that while 35.5 million Nigerians (36.6 per cent of the adult population) use bank accounts only 3.0 million adults have both mobile money and bank accounts, whereas 59.4 million (60 per cent) neither have mobile money nor bank account.
Similarly, the study showed that while 82 per cent of Nigerian adults, comprising of subsistence farmers and small business owners, receive their income in cash, 10 per cent of those adults receive their own income via mobile money or bank account, while another eight per cent did not receive any income at all.
Savings in the country dropped by 13.3 per cent according to the report, while savings in assets, property, and livestock had risen from 47.4 million to 54.7 million since 2016. Other decrease in respect of this indicator was that of borrowing, which went down by 2.0per cent and remittances to one per cent.
On financial access by gender, the report indicated that out of 99.6 million adults in the country, 33.5 million male adult Nigerians were financially included compared with 29.4 million female adults. This represents a decrease in the exclusion rate of 4.3 per cent and 5.7 per cent in the male and female gender respectively, and a decrease of 4.8 per cent for both gender compared with the 2016 figures.
On financial access by age groups, the report revealed that Nigerians in the age bracket of 36 to 45 (19.5 million and 30.6 per cent exclusion) have more access to finance than all others. This group was followed by those in the age bracket of 26 to 35 (30.3 million and 31.5 per cent exclusion) and 46 to 55 (10.9 million and 32.4 per cent exclusion).
Regionally, the South West and South-East, two zones with the least financial exclusion rate in the past, had underperformed in the last two years. The zones recorded exclusion rate of 18per cent and 28per cent respectively in 2016, compared with 19 per cent and 29 per cent exclusion rate, respectively in 2018.
All the other zones however recorded significant decrease in exclusion rate in the last two years with the South-South zone improving from 31per cent in 2016 to 23per cent in 2018, and the North-Central achieving 31per cent in 2018 from 39per cent in 2016. North-East and North-West scored 55per cent in 2018 from 62per cent in 2016 and 62per cent in 2018 from 70per cent in 216, respectively.
The regional breakdown shows that Kano, Jigawa and Katsina States in the North-West Zone failed to achieve the region’s average of 62.4per cent, with Kano having the highest exclusion rate of 75.2per cent. Gombe, Bauchi and Yobe States fell below the average in the North-East region (54.5per cent). Gombe for example, had the highest exclusion rate of 76.1per cent, Bauchi 60.8per cent and Yobe 60.0per cent. Taraba had the least exclusion rate of 30.9per cent in the region.
In the South-East zone, Ebonyi emerged the only state that failed to achieve an exclusion rate below the average of 29.3 per cent. The state recorded a financial exclusion rate of 43.6per cent. In the South-South zone, Bayelsa, Akwa Ibom and Edo State were the states that had an exclusion rate more than the average in that zone (22.7 per cent). The states had 35.3per cent, 29.1per cent and 25.4per cent, respectively.
In summary, the 2018 EFInA report revealed that 36.6 million (63 million have access to finance) Nigerians are now financially excluded against 56.3 million in the 2016 report. Of this number, the exclusion by gender shows 55.9per cent for female and 44.1per cent for male. The exclusion rate of 34 per cent among Nigerians aged between 18 and 25 is the highest, whereas the exclusion rate in the rural and urban areas stood at 78.5 per cent and 21.5per cent respectively.
The report indicated N15,000 as the median income of the 99.6 million adult Nigerians, whereas 71.3per cent of that number did not have access to mobile money accounts, and a mere 17.5 per cent as the borrowing rate among Nigerians.
Some of the observations the report made were that the labor market in the country was not absorbing enough graduates while reduction in the formal employment often led to reduced disposable income and reduced savings. It also noted that adult Nigerians now resort to small businesses for survival even as it observed that day-to-day expenses was the most important financial need of Nigerians while planning for unexpected shocks as well as planning for the future goals become second and third priorities respectively.
The tiered Know-Your-Customer (KYC) framework was also introduced by the Central Bank of Nigeria (CBN) in 2013 to simplify the requirements for opening and operating bank and mobile money accounts for the low income people.
Furthermore, in collaboration with its stakeholders, the Securities and Exchange Commission (SEC) kick-started the process of increasing distribution channels to increase access to capital market products by promoting collective investment schemes, Capital Market Financial Literacy and a Capital Market Financial Inclusion Strategy.
On its part, the National Insurance Commission (NAIC) had been implementing non-interest based products to reach out to more people even as it released the micro insurance guidelines to provide explicit licensing of micro insurance companies and penetration of micro insurance to micro clients.
The Bancassurance Framework was another effort towards boosting inclusion. It was released by the CBN and NAICOM in order to be used as a platform for extending insurance courage to existing customers of banks.
Also, the CBN recently released the guidelines for the regulation of Payment Service Banks (PSB) in Nigeria. When this comes in effect early next year, it will provide a level playing field for the provision of payment services to the bottom of the pyramid. These interventions contributed in large parts to some of the positive results in the EFInA report. The revised National Financial Inclusion Strategy was released in November, 2018. Stakeholders have been mapping out interventions to address access to finance by women, youth, rural dwellers, MSMEs as well as those vulnerable and excluded groups in the Northern parts of the country. This is to create level playing field for service delivery and adoption of agency comparative advantage implementation agency activities.