Nigeria: Financial inclusion to add $36b deposits to banks

Banks’deposits are expected to rise by $36 billion in 2025, a financial inclusion report released by the Central Bank of Nigeria (CBN) has shown.

The Exposure Draft of the Financial Inclusion Strategy signed by CBN Director, Development Finance Department, Modashiru Olaitan, said 46 million new individuals will join the financial system, Gross Domestic Product (GDP) will rise by 12.4 to $88 billion by 2025, new credit worth $57 billion will be given to customers, three million jobs to be created while $2 billion reduction in government leakage annually will be achieved.

He said: “There  is global consensus that  financial  sector  development  makes  two  mutually  reinforcing contributions  to  poverty  reduction  through  its  impact  on  economic  growth  (finance  for  growth) and direct benefits to the poor using financial services. An increasing body of evidence shows that appropriate financial services can help improve household welfare and spur small enterprise activity. There is also  macroeconomic  evidence to demonstrate that  economies  with  deeper  financial intermediation tend to grow faster and reduce income inequality.”

Continuing, he said for Nigeria  specifically, past  research  shows  the  potential  economic  benefits of  digital  financial services (DFS).

“As such, financial inclusion is critical to the economic  recovery and  growth  of  Nigeria. Senior political  leaders, including  the Vice  President, have  made  public  statements  that  emphasise the importance  of  financial  inclusion, most  recently  during  the  official  visit  of  the  UN  Secretary-General’s  Special  Advocate  for  Inclusive  Finance  for  Development to  Nigeria  in  November  2017,” Modashiru said.

He said government officials had also emphasised the need to act swiftly and collaboratively to accelerate progress towards financial inclusion by “propagating digital financial services as simple, flexible and easy alternative channels for reaching our remote areas and rural hinterland”.

He said given  the  importance  of  financial  inclusion,  it  is  crucial  to  have  a  strong  strategy for achieving  the financial inclusion goals and targets that have been established by the CBN. The goal of this strategy is to realise a financial system that is accessible to adults, at an inclusion rate of 80 per cent, and to promote the country’s economic growth.

“There  is global consensus that  financial  sector  development  makes  two  mutually  reinforcing contributions  to  poverty  reduction  through  its  impact  on  economic  growth  (finance  for  growth) and direct benefits to the poor using financial services. An increasing body of evidence shows that appropriate financial services can help improve household welfare and spur small enterprise activity. At present,  Nigeria is not on track to  meet  the 2020 targets  set  out  in  the National Financial Inclusion Strategy (NFIS) of 2012.”

The NFIS set two financial inclusion targets for 2020: an overall financial inclusion rate of 80 per cent of the adult population and a formal financial inclusion rate of 70 per cent of the adult population. As of 2016, just 58.4 per cent of Nigeria’s 96.4 million adults were financially served and only 48.6 per cent of adults used formal financial services. The NFIS defined an additional 15 targets for channels, products and enabling environment, as well as 22 key performance  indicators (KPIs) related to these targets.

“Still, promising developments have emerged, especially in recent times, as new stakeholders have joined the  push  for  financial  inclusion. For  instance,  the  CBN  and  the Nigerian  Communications  Commission  signed  an  MoU  on  digital  payment  systems in  2018.

“Also  in the same year, CBN collaborated with the Nigeria Inter-Bank Settlement System (NIBSS) to create a regulatory  sandbox  that  will  allow  financial  technology  start-ups  to  test  solutions  in  a  controlled environment and  is partnering  with  the  private sector  to  roll out  a 500,000-agent  network to offer basic  financial  services.

“In  addition,  several  players in the private  sector  have  introduced new products  and  services  aimed at the un-serve/underserved,  and new partnerships are  driving  the delivery of digital financial services more widely—programmes have been launched to boost access to  finance specifically for  excluded groups, such as  women  and  micro, small  and  medium-sized enterprises.”

In 2012, the CBN adopted the NFIS. The document  articulated  the  challenges  in  financial inclusion; identified  areas  of  focus, key performance indicators (KPIs) and targets; and described the implementation structure. The strategy was built on the four strategic areas of agency banking, mobile banking/mobile payments, linkage models and client  empowerment.

SOURCE:THENATION / Collins Nweze 

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