PATHWAY TO FINANCIAL INCLUSION IN NIGERIA.

Financial inclusion refers that individuals and businesses have access to financial products and services that meet their needs, delivered in a sustainable way. The gains from these are not only for individuals/businesses but economies as well, as financial inclusion directly influences on social and economic development.

In 2012, the Central Bank of Nigeria (CBN) launched the National Financial Inclusion Strategy to reduce financial exclusion to 20% of Nigerians by 2020. Since then, there has been quite slow progress in reaching the targets. Traditional financial service providers (read commercial banks) remain inaccessible to majority of the populace due to their limited geographical reach. There are also significant difficulties in serving the mass market profitably as 60% of Nigerians report earning an income less than the national minimum wage of ₦18,000/month.
As part of efforts to achieve the National Financial Inclusion strategy goal, The CBN in 2015 had licensed 21 companies comprising of 15 non-bank operators and 6 bank operators to offer mobile payment services. The CBN also introduced agency banking to allow banks and mobile payment operators (MPOs) render services through third parties in various locations.
The drive by the CBN aimed at reducing physical cash in circulation as well as boost development and modernization of payment systems presented an opportunity for more efficient electronic-based systems.

There’s obviously some level of growth from these measures but desired results to attract the massive unbanked populace into the financial sector is still facing a real challenge. It is safe to say with the youth constituting a large part of the unbanked demography, the best option to explore in terms of engendering interest is to go digital. Achieving the financial inclusion targets will require widespread adoption of digital financial services (DFS) – the provision of formal financial services through electronic channels. DFS enables the delivery of financial services through solutions such as mobile money, mobile/internet banking, use of cards, point of sale terminals, ATM services etc.

Nigeria is the most mobilized country in the world ahead of India and South Africa, with about 80% of internet activity coming through mobile devices. So why not meet this opportunity halfway?

The E-payments fact sheet for Jan – Dec 2017 from NIBSS reports about 59 million active bank customers from a total 100.2 million bank accounts. It also reveals a total point of sale (PoS) transaction value of ₦1.41 trillion (about 85% increase from the previous year ₦759 billion), ₦6.44 trillion transaction value in ATM operations (from ₦4.9 trillion in 2016) and ₦1.10 trillion in mobile money operations (from ₦756 billion in 2016).

Since the advent of Unstructured Supplementary service data options, number of transactions performed using the USSD service has more than doubled the number of transactions on mobile banking platforms for banks offering USSD. (Mobile Money Report, MEF 2017)
USSDs albeit providing a simple process to basic financial services are characterized with hidden charges, limiting operations and data security lapses.

Mobile services are viable tools to provide basic financial services via mobile technology platforms. While the DFS market is slowly growing in Nigeria, it poses an effective way to reach the unbanked cheaply. People are hesitant to adopt financial technology platforms partly due to consumer distrust as well as the country’s association with internet fraud. Perhaps in the near future, most Nigerian consumers will need banking services but will rather not turn to a bank to feel secure whilst saving cost and time.

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