40 million adults still excluded as financial inclusion hit 64%

•Exclusion highest in N’East
Nigeria’s financial inclusion journey though slow, appeared steady as penetration grew from 56 per cent in 2020 to 64 per cent in 2023.

It, however, painfully still leaves approximately 40 million adult Nigerians out formal financial system.

This is according to the Access to Financial Services in Nigeria (A2F) 2023 Survey Report, titled, ‘Unlocking Insights to Accelerate Financial and Economic Inclusion’, prepared by EFInA and A2F.

Just released, the report noted that the regulatory approach is showing results, saying the Central Bank of Nigeria (CBN) deserves credit for encouraging competition in the market and enabling a non-bank-led approach, which is driving the growth in formal inclusion. It stressed that innovations to improve market incentives to drive account opening with financial service agents are needed to rapidly extend the financial rail and deepen access.

Commending the formal access to 64 per cent, the report said the journey had just begun, stressing that the ecosystem needed to do more to give the last mile access, and focused on deepening inclusion for those with access. It posited that the rapid growth of access to payment is not translating to significant improvement in access to credit, savings pensions, and insurance where the social impact of financial inclusion would be bigger.

According to the report, poverty is a major reason for financial exclusion, saying nearly 50 per cent of adults have no financial account because they have no income.

EFInA noted that complementary policies to financial inclusion that tackle endemic poverty with regard to social investments in education, vocational skills, entrepreneurship, health, and market-friendly economic policies are important to ensure a wider social impact of financial inclusion.

With the submission that exclusion has a human face, the report said there are significant disparities in the data released that demonstrated the face of exclusion. It stressed that is predominantly in the North and in rural communities, saying it is more likely to be female, youth or farmers.

“We must be intentional. We must ensure that the incentives exist on both the supply side and demand side to serve excluded communities. We must be intentional about serving these communities,” EFInA stated.

Indeed, in the 36-page document, the report observed that the sluggishness of the economy in 2023 might also have contributed to slow inclusion. For instance, the report noted that the real GDP growth rate of 2.54 per cent in Q3 2023 was higher than the 2.51 per cent recorded in Q2, 2023 and 2.25 per cent recorded in Q3, 2022, stressing that weak economic fundamentals led to a 17-year high inflation rate of 25.8 per cent in August 2023. It said the sluggish growth with high inflation has left millions of Nigerians in poverty, with 63 per cent (133m) of Nigerians multidimensionally poor in 2022.

Accordingly, the report noted that though the Naira redesign policy advanced digital finance but had broad negative impacts. It said businesses and households saw more harm than good, stressing that about 70 per cent of entrepreneurs reported setbacks, with losses in revenue and market disruptions.

EFInA observed that though Nigerians remain even more ambitious with at least four in five working towards achieving a goal, they continued to be increasingly plagued with severe liquidity distress and financial shocks in the magnitude of the COVID-19 shocks.

On this, the report observed as of 2020, there were 73 per cent of adults, who claimed to have goals they are pursuing and by 2023, the figure rose to 84 per cent. In the same vein, the percentage of adults with liquidity needs as of 2020 was 72 per cent but three years later, the figure rose to 85 per cent.

Further, the report said over the last 15 years, the proportion of formally served adults has more than doubled, while the proportion of adults, who rely on informal providers only and the financially excluded has more than halved.

According to the A2F report, the ecosystem shift portrayed by a growing decline in the proportion of adult Nigerians, who rely exclusively on banking services and the increasing use of a combination of providers to meet financial needs, suggested that certain needs are being met outside of the banking and formal system. It also highlighted the role of technology in driving access.

Precisely, it noted that the use of a combination of bank, non-bank and informal mechanisms to manage financial needs has doubled to 20 per cent in 2023 from 10 per cent in 2020, stressing that financial service agents extend access to 11 million adults, who do not use banks or mobile money.

The report said despite growing access, including significant gains in the North-East and North-West, all states in the North-East report exclusion levels above the national average. It stated that gains in the adoption of non-bank formal services should also be explored to adopt learnings in lagging states to ensure no state is left behind.

Accordingly, EFInA said Nigeria’s financial inclusion landscape has transformed significantly from 2016 to 2023, with formal financial service usage growing from 30 per cent to 57 per cent and that the adoption of financial service agents has also skyrocketed, from 4.4 per cent in 2018 to 54 per cent in 2023.