Nigeria has witnessed remarkable strides in financial inclusion, largely driven by enhanced accessibility and equity in accessing financial products and services.
Recent data indicates promising progress towards the nation’s financial inclusion objectives.
At the Citi-CEEMA conference in London, Muhammad Sani Abdullahi, Deputy Governor of the Economic Policy Directorate at the Central Bank of Nigeria (CBN), disclosed that as of 2023, three out of every five Nigerians were financially included, as per data sourced from Enhancing Financial Innovation and Access (EFIna), a leading financial sector development organization.
EFIna’s latest survey highlights a notable increase in the proportion of financially included individuals, rising from 68% in 2020 to 74% by December 2023.
This surge is attributed to the rapid advancements in financial technology (fintech) solutions and the proliferation of digital assets, which have expedited the growth of financial inclusion.
Formal financial inclusion has experienced significant growth, escalating from 56% in 2020 to 64% in 2023, driven by modest increases in banked populations and substantial gains in the adoption of non-bank formal services.
Despite these strides, approximately one-quarter of Nigerian adults still remain financially excluded. However, the reliance solely on banking services is diminishing, indicating a shift in the financial ecosystem towards diversified service providers, with technology playing a pivotal role in enhancing accessibility.
Although there have been substantial improvements, disparities persist, particularly in the North-East and North-West regions, where exclusion levels exceed the national average. Efforts to bridge these gaps should focus on leveraging the successes observed in other regions to ensure comprehensive inclusion across all states.
The report also underscores the significance of addressing income-related challenges, which have emerged as a notable barrier to financial inclusion, alongside emphasizing the growing importance of mobile phones in facilitating access to financial services.
From 2016 to 2023, Nigeria has witnessed a significant transformation in its financial inclusion landscape, with formal financial service usage nearly doubling. The utilization of financial service agents has surged dramatically, and there has been a notable rise in the adoption of informal financial service providers, particularly in the South East.
Moreover, there has been an uptick in the usage of various financial services, including transaction accounts, savings, remittances, credit, and insurance, indicating a deepening of financial inclusion. However, challenges such as fraud, high banking costs, and inadequate financial literacy persist, hindering broader impact.
With Nigeria nearing its NFIS targets for 2024, there is a pressing need to intensify efforts to enhance the quality and efficacy of financial inclusion initiatives. While innovation has propelled growth in the payment ecosystem, translating this growth into more comprehensive financial services remains a critical challenge requiring urgent attention.
The NFIS aims to ensure access to and usage of financial products and services by 95% of adults by 2024, with a recommended financial exclusion target of 25% by the same year. However, achieving these targets necessitates concerted efforts, considering population growth and the current status of enabling factors.
“Nigerians continue to rely on physical financial coping mechanisms to meet their goals, address liquidity distress and cope with shocks. Both active physical mechanisms, such as taking on additional work and cutting back on expenses, and passive physical mechanisms, like doing nothing, remain prevalent choices.
“With over one-third of adults reporting low financial capability and relatively low access to formal, efficient mechanisms to meet financial needs, Nigeria reports a 12% point drop in the proportion of financially healthy adults.
“Nigeria is just 1% point away from achieving the 2022 NFIS recommended targets for 2024 and must now pay equal attention to deepening the quality and impact of inclusion.
“While innovation has catalysed growth in the payment ecosystem, translating the growth in payment services into broader, impactful financial services remains a significant challenge that urgently requires attention,”