The World Bank recently estimated that only 40% of Nigerians hold bank accounts, and given the size of our population, this means 4% of the world's unbanked reside in Nigeria. Access to formal financial services is a crucial catalyst for escaping poverty as it provides a regulated avenue to save for a home, borrow for business or obtain insurance against risks like crop failure.
In 2011 Nigeria committed to the Maya declaration - a global initiative to tackle financial exclusion. This commitment prompted the CBN to set a target of financially including 80% of Nigerian adults by 2020. With policies such as the BVN rollout and collateral registry, the government is taking innovative measures to reach this goal. However is it realistic to double the number of financially included Nigerians in three years? Here are four infographics to help you decide:
Despite growth in the proportion of Nigerians moving from informal to formal financial services, the actual number of financially excluded Nigerians is growing:
The largest contribution to banking Nigerians has come from "formal others**" through the growth of microfinance institutions (MFIs). By making themselves affordable and accessible to Nigeria's poorest, MFIs create a happy medium between the traditional banks and informal banking methods such as Esusu. Sadly the progress of MFIs met several roadblocks in 2014, one of which was the requirement to hold more emergency funds to protect customer deposits in case they fail. Ironically, this requirement put a strain on the profitability of MFIs and contributed to many MFIs failing since 2014.
Despite progress stagnating, not everyone has been impacted equally; access to finance in Nigeria appears to depend on one's location and gender.
The Gender financial inclusion gap correlates with other significant gender gaps in Nigeria
The World Bank reported that there is a 14% gap between the portion of men and women that own bank accounts in Nigeria - twice the size globally.
One of the drivers behind this is financial literacy. Opening and managing a bank account can be an overwhelming process for someone who does not read or write. To equip more Nigerians with the right skills the CBN introduced the Financial Literacy Framework in 2013, but for a country that ranks 124nd in gender literacy inequality, more focus is needed towards women. Failure to address this gap means any initiatives that boost the supply of financial services in Nigeria are more likely to benefit Nigerian men and undermine the CBN's ability to hit its 80% target.
Another key driver behind the gap is income. When asked, most Nigerians claim insufficient funds is the main reason they do not actively seek financial services. Given that more men are fully employed and they earn $2,000+ more, addressing the economic disparity between men and women would go a long way in increasing the number of Nigerians that demand bank accounts.
Financial exclusion is worse in the north
Financial exclusion may seem alien to Lagosians on the Island. But in parts of the North exclusion is the norm. In addition to the economic disparity between the north and south, the north simply gets less coverage by banks.
As a cash economy, having a bank account in Nigeria can often mean you spend a lot of time at ATMs and branches. Scarcity of these two mediums can make owning a bank account an inconvenience.
To combat this, the CBN is looking to embrace the use of mobile money and agents. Mobile money allows you to transact with fewer visits to the ATM, and mobile money agents who act like ATMs can move, meaning they can easily turn up to gatherings and markets, bringing the cash to the people. In its recent agent network policy, the CBN intends to increase the number of agents in Nigeria, particularly in the north.
However, with the north having a low penetration of mobiles relative to the south, how much interest can mobile money make?
When it comes to mobile money Nigeria is far behind her peers and simply increasing the number of agents won't be enough
Kenya's M-Pesa is seen as the golden standard when it comes to mobile money. What's interesting is that they have done this with a fewer number of agents per person than the likes of Rwanda.
The CBN aims to add 500,000 agents, but simply adding more agents may not be efficient, especially in Nigeria where the cost of operating mobile money is inflated by agents adding on their own fees. Yet, when most agents earn less than N5,000 a month because mobile money has not scaled enough, can you blame them?
To get the most out of agents, we will need the right policies in place to help mobile money take off in Nigeria. If we can do this then mobile money may take Nigeria beyond its 80% inclusion target - just like it did for Kenya.