Fresh insight into theNigerian Financial Inclusion Strategy (NFIS) introduced by the Central Bank of Nigeria may offer the desired relief toUnbanked Multitudes In Nigeria.

By Mike Abba

Nigeria’s Central Bank Governor, Godwin Emefiele has, again, raised the hope that the dead bones of the Nigerian Financial Inclusion Strategy (NFIS) will rise again amidst fears that the seven-year-old initiative has lost steam and may end up another success story on paper.  At the unveiling of his 5-year policy direction in Abuja recently, Emefiele presented a shop-list of initiatives that many described as the “crowded” or “congested” avenue to monetary policy stability. One area he mentioned was the Financial Inclusion agenda.

According to him, his second five-year tenure will witness the introduction of an adjusted NFIS programme that would ensure that 95 per cent of eligible Nigerians have access to financial services by 2024 – five years from now (June 2019). This is an adjustment to the earlier programme that had set 2020 as the target year to achieve 80 per cent inclusion of the multitude of the unbanked in our society. Emefiele also articulated the strategy for achieving this goal:

“Over the next five years, through initiatives and policy measures such as the Shared Agent Network (SANEF) and the payment service banks, we intend to broaden access to financial services to individuals in underserved parts of the country. Our ultimate objective is to ensure that 95 percent of eligible Nigerians have access to financial services by 2024.

“We will also intensify our financial literacy and consumer protection programs such that current and eligible bank customers are fully aware of the financial services being offered to them as well as the cost of utilizing these services, which will enable them to make well informed choices”, Emefiele said in his presentation titled “5 year Policy Thrust of Central Bank of Nigeria: 2019 – 2024”.

When the CBN launched the National Financial Inclusion Strategy (NFIS) in October 2012, it responded to the global demand to extend financial services to the majority of the people, especially in non-urban areas, in order to promote economic empowerment through access to financial services. The CBN recognised that Financial Inclusion had assumed increasing recognition across the globe and serves as a tool for economic development. It noted that this particularly applied to critical areas mainly poverty reduction, employment generation, wealth creation, improving welfare and general standard of living.

Armed with data from a survey conducted earlier by a development finance organisation, Enhancing Financial Innovation and Access (EFIA) in 2008, the apex bank embarked on the NFIS initiative with the aim to align with the global pursuit of financial inclusion as a vehicle for economic development. It formulated a strategic implementation plan to reduce the size of the unbanked (those excluded from financial services) to 20 percent in 2020.   Expectations were high as the move earned the CBN remarkable applause from stakeholders and the public at large.

The EFIA survey had revealed that about 53.0 percent of Nigerian adults were excluded from financial services. The CBN moved to reduce the exclusion rate from 53 percent in 2008 to 46.3 % in 2010; further to 20 percent in 2020. By this plan, adult Nigerians with access to payment services was planned to increase from 21.6  percent in 2010 to 80 percent in 2020, while those with access to savings should increase from 24 per cent to 60 percent. Similarly, access to Credit was planned to increase from 2 percent to 40 percent, Insurance from 1 percent to 40 percent and Pensions from 5 percent to 40 percent within the same period.

Additionally, the channels for executing the programme were defined and equally meant  to improve with deposit money bank branches targeted to increase from 6.8 units per 100,000 adults in 2010 to 7.6 units per 100,000 adults in 2020; microfinance bank branches to increase from 2.9 units to 5.5 units; ATMs from 11.8 units to 203.6 units, POSs from 13.3 units to 850 units, Mobile agents from 0 to 62 units, all per 100,000 adults between 2010 and 2020, according to CBN project implementation document. Stakeholders commended the apex bank knowing the huge impact of the NFIS on the nation’s overall economic development.

According to the CBN, the implementation of the Strategy did not fail in achieving the objective. The scheme took off on a seemingly sound footing. The apex Bank reported that the adult exclusion rate reduced from 46.3 percent in 2010 to 39.7 percent in 2012. It said the positive impact was recorded in all the geopolitical zones with the exclusion rate between 2010 and 2012 declining from 68.3 percent to 59.5 percent in the North East.

The North West exclusion rate dropped to 63.8 percent from 68.1 percent, while North Central declined from 44.2 percent to 32.4 percent. Exclusion rate in the South East declined from 31.9 percent to 25.6 percent, South West recorded 24.8 percent drop from 33.1 percent.  South South geopolitical zone dropped to 30.01 percent from 36.4 percent – within the survey period.

The success story seemed to have gone on a vacation thereafter as the CBN had to take steps to adjust the post amid the ‘game’.  Several factors began to militate against what had started as a brilliant initiative and the NFIS suffered a setback. It became obvious that the CBN would not achieve the target of reducing the unbanked adult population to 20 per cent in 2020, a year also set for Nigeria to join the league of 10 top global economies. Deposit money banks, telecom operators, Financial Technology (Fintech) experts and others joined the apex bank in repositioning the NFIS strategy.

In July 2018 the CBN admitted that the NFIS had lost steam. “Overall, Nigeria has failed to meet its financial inclusion targets due to a variety of factors; a step-change in the pace of progress is needed to close the sizeable gap between the current status and the targets. While some notable milestones have been achieved, overall financial exclusion rate stands at 41.6 percent based on the biennial Access to Financial Services in Nigeria Survey”, the CBN said in a circular signed by its director, Development Finance Department, MudashiruOlaitan.

Pointing out that only 36.9 million adults were banked while over 59 million were unbanked, the apex bank said, “Performance did not meet expectations across all inclusion targets for products, channels and enablers. Among product categories, credit, insurance and pension fell short of targets by the most significant margins. Point of Sale terminals and Automated Teller Machines showed the least progress among channels.” In its exposure draft titled ‘National Financial Inclusion Strategy Refresh’, the CBN said it would collaborate with the deposit money banks and other stakeholders in accelerating the implementation of the NFIS.

Notwithstanding the “refreshed strategy” as renewed collaboration with the Nigerian Communications Commission (NCC), experts observed that without directly licensing the mobile telecoms operators, the NFIS implementation would continue to suffer. The CBN insisted it would not issue mobile money licenses to telecoms operators on the ground that they are not into financial services. The apex bank is being urged to follow the steps of Ghana and Kenya, for example, which allowed the telecoms service providers to establish subsidiaries for mobile money business. Nigeria is considered a huge market for mobile money.

According to a World Bank report, less than 6 per cent of Nigerians use their mobile telephone handsets for mobile money transactions compared with 73 per cent of Kenyans where more than two-thirds of the nation’s adult population have a bank account. Kenya’s mobile money app, M-Pesa, has over 17 million active users and conducts more than $50 billion in cashless transactions annually.

A recent policy document showed renewed vigour by the apex bank with other stakeholders to reduce financial exclusion from its present 36.8 per cent to 20 per cent by 2020. At an agreement signing ceremony between deposit money banks and Fintech providers in Lagos, Chairman, Body of Banks’ Chief Executive Officers, and Managing Director/Chief Executive Officer, Access Bank Plc, Herbert Wigwe, disclosed that the “agreement reflects our commitment to aggressively pursue the CBN 2020 Financial Inclusion target in an integrated way with minimal systemic risk to the financial system. This initiative will also generate 500,000 new jobs over the next two years.”

The committee explained that 10 licensed mobile money operators and super agents would deploy financial services agents’ outlets in under-served urban and rural areas in Nigeria, with priority in the Northern geo-political zones where financial exclusion is most predominant. The approved CBN-Bankers Committee’s roll-out ratio is as follows: North East, 30 percent; North West, 30 percent, North Central, 20 percent, South South 7.5 percent; South East 7.5 percent; and South West, 5.0 percent.

Doubts have been expressed as to how the CBN and deposit money banks would achieve the target of on-boarding and formally including 60 million additional Nigerians and average of 20 million yearly as well as enroll 40 million Nigerians for BVN in the bid to reduce financially excluded persons from present 36.8 per cent of the adult population to 20 per cent by 2020. Nigerian banks have embarked on an onslaught against their customers by introducing numerous charges that worry depositors such as maintenance fee, controversial withdrawal charges, stamp duty, among others. These will demotivate rural dwellers the banks target to capture in the inclusion strategy. The manipulation of withdrawals from the Automated Teller Machine (ATM) by banks which restricts users to options that attract charges to is a disincentive.

The poor telecoms infrastructure and connectivity challenges create problems for bank customers even in the urban areas. The situation is worse in non-urban areas where long queues are witnessed at bank ATM galleries with limited functional terminals. Telecoms operators allege attack on their base stations which are often vandalised. The state of insecurity across the country adds to the challenge of achieving the 80 per cent financial inclusion target by 2020. The overall poor services in executing the cashless policy and increased rate of e-payment frauds reported by banks do not send the right signals.

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