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Financial literacy: Developing responsible economy managers




THAT the responsibility of being accountable to the use of personal finance lies with individual persons cannot be controvertible, however, there must also be conceding to a fact that the level of financial knowledge has much to do with decisions about use of personal finance. Broadly speaking, a nation of financially literate population tends to make decisions that will rub-off on the economy positively.

Of course, as the financial markets globally have become more complex with avalanche of investible products and banks in particular, have gone through series of reforms since the financial crisis, which opened several avenues of funds’ mobilization, the need to get more of the populace financially educated comes to the fore.

Indeed, banking- from the internal operations to customers’ mode of entry (banking relationship) has all changed. Even the payments system landscape has become more direct, with just a touch or click of the button, but the same goes with its risk. Also, the financial inclusion initiative has brought huge number into banking relationship, many of whom are not lettered. These call for holistic and deliberate efforts to advance the financial literacy campaign.

The Central Bank of Nigeria (CBN) had in 2013, unveiled a financial literacy framework aimed at articulating a multi-stakeholder approach to the delivery of financial education across all segments and sectors of the economy.

The framework had identified the need to start the financial literacy programme from the grassroot, as a way of deepening financial inclusion and this culminated in the adoption of March every year as the financial literacy month. It kicked off last year, with the Central Bank Governor, mandated to lead the campaign in secondary schools, alongside chief executives of banks, in what may be described as “catch them young” approach.

But taking a queue from the mandate, the importance of financial orientation, as well as the contributions of high financial literacy level to the economic fortunes of the country was reiterated by Fidelity Bank Plc as it took to classroom for the campaign.
The Managing Director and Chief Executive Officer of the bank, Nnamdi Okonkwo, while speaking with newsmen during the Financial Literacy Day programme organized by the bank in conjunction with the Junior Achievers Nigeria, for the students of Day Waterman College Abeokuta, Ogun State, commended the Central Bank of Nigeria (CBN) for mobilizing stakeholders towards ensuring that financial literacy became part of the curriculum of schools in the country.

Okonkwo, who was represented by the Chief Compliance Officer of the bank, Adeboye Ogunmolade, assured the regulatory agency that Fidelity Bank would make it’s input in making the project a reality.
He noted that the bank with high physical presence, as well as its Automatic Teller Machine (ATM) in many educational institutions, it is only natural that it takes interest and possibly the lead, in projects, which have the objective of teaching students financial education.Literacy graphics 1 Copy

“For a start, we must emphasize and give credit to the Central Bank of Nigeria. They are the initiator and the champion of this agenda. They are now mobilizing all stakeholders, even the Federal Ministry of Education to incorporate this financial literacy project as part of the curriculum of the students. So, as far as we are concerned, in Fidelity Bank and in the industry, we are willing and prepared to partner with the CBN to go the whole hog. As I said earlier, our products for students are second to none and we know there is hardly any higher institution in Nigeria where we don’t have our physical presence and even our ATM galleries.

“So, we know the importance of this programme and as I’ve said we’ll partner with the CBN, apart from the things we are doing, we’ll also support them in every aspect to make sure that this project is a success,” he said.

He noted that the financial literacy day would enable the students to learn and imbibe early in life the culture of saving for the future, adding that being students is no excuse from having deep knowledge about banking, investment and finance.
He also stressed that the bank has a range of banking products for school children,
to help drive the message of financial literacy.
Bu the Principal, Day Waterman College, Linda Potticary, said it was imperative that children were educated about finances and saving culture at a tender age, as the future leaders, who would manage the nation’s economy.

“Absolutely, every person throughout the entire life, probably by the age of 10, needs to know about money because the whole world runs around money and if you are not able to manage your own money and understand its importance, then a secure future is not guaranteed. We need to prepare them for the economy that they are going to fit in as adults, as well as manage. If we don’t prepare them now, then we are not doing a good job,” she said.

A Deputy Director, Consumer Protection Department, CBN, Hajia Khadijab Kasin, once said the apex bank was putting a lot of structures in place to ensure that consumers got maximum benefits from financial services that would enable people take charge of their financial well-being, as well as enhance their economic development.

Perhaps, the measures put in place culminated in the kick off of the financial literacy framework aimed at articulating a multi-stakeholder approach to the delivery of financial literacy.
The financial literacy programme would mean that consumers are given reasons to trust the system and with the right knowledge and information put at their disposal, hence ensuring confidence in dealing with financial services providers.

Of course, intensive consumer enlightenment activities are central part of the financial literacy campaign. There must be increased awareness and understanding of financial products and services, the efficient use of financial resources. Generally speaking, Nigerians must be empowered with the requisite knowledge to make informed choices and take effective actions that will enhance their financial wellbeing.
The majority of the Nigerian population that is financially excluded can only come into mainstream if they become financially literate, which ultimately would contribute to financial stability of the country.

The Junior Achievers Nigeria, in its financial literacy teaching module, titled: “Growing Your Money”, pointed out that saving money in a box, which is prevalent among the secondary school students, is a starting point, but not the ultimate, as the savings method does not increase the value of the money.
“Money saved at home should be transferred to a financial institution or invested after a while. This reduces the risk of spending, theft and gives the money the chance to grow. Bank is the typical example of financial institutions where money is kept and they as well, lend money to people to buy houses, cars, among others. Other financial institutions are insurance, microfinance and investment companies, non-bank financial institutions like cooperative societies.”

The financial literacy campaign has a lot to offer, especially with regards to interest payments by banks to savings account holders, account numbering, which recently was changed to 10-digit, the ongoing Bank Verification Number (BVN).
Beside saving money in the bank for interest rate and safe keeping purposes, investments in bonds- public or private company (corporate) are alternatives, which have been assessed safer, with higher interest yields, because it is normally long term and these can be communicated with increased financial literacy campaign.

Recently, Fidelity Bank’s boss, Okonkwo, said the ongoing BVN project will enhance the management of credit score of banks’ customers in Nigeria and deepen financial knowledge as it would bring even the unlettered ones into the banking system through the use of biometrics for transactions, as opposed to the sole method of signatures.
The credit score, which would be based on credit report from credit bureaus, would help lenders to determine who really qualifies for a loan, as identities provided by the exercise would be matched against the information.
Okonkwo, also said the BVN would enhance access to credit for the burgeoning sub-sector- Small and Medium Enterprises (SMEs), with 17 million registered ones already in operation.

“In more developed parts of the world, they have credit rating systems and social identification system. For example, if I am Nnamdi Okonkwo, there might be other 1,000 Nnamdi Okonkwos, but each Nnamdi Okonkwo has a unique number assigned such that whenever you put that number in, everything about that person comes out. We are gradually getting to that.
“Until we get there, credit scoring system is still a challenge. Therefore, it is possible that this same Nnamdi Okonkwo can go to a bank, take a loan and default, move to another bank, still take a loan and default and nobody sees that his credit history is bad. But with what the CBN has done with the BVN, this will be taken care of. That is why I am advising everybody to go and register and get your BVN.

“When each of us has the BVN, which is tied to our thump, if I need to lend money to you, I can easily check your background. If the person is a notorious debtor in other banks, then he doesn’t get a loan from me and that protects all of us because the bank does not own all the money. Most of the monies that banks do business with belong to depositors. So, whatever initiative the CBN is taking, it is to protect depositors and the larger economy,” he said.

But speaking further on the need for the initiative as part of deepening financial literacy, as well as the bank’s leadership role in compliance, he added: “The BVN is a unique number that every account holder in Nigeria should have, going forward. So, with your thumb registered, wherever you go, you can confirm that it is you. It is for security, it is for Know Your Customer scheme. Like you know, for you to borrow from any bank now, you must have your BVN. It helps our credit scoring system.

“The compliance level has been growing. At Fidelity Bank, we first made sure every staff member was registered because you can’t sell what you don’t understand. So, when we are explaining to our customers, we can as well show them our own BVN.”

The National Bureau of Economic Research in a report titled: “The Importance of Financial Literacy”, said: “Even with little personal knowledge, individuals can avoid making mistakes by consulting with those who are more knowledgeable, including financial professionals. It is not enough to recognize that financial knowledge is low; we must also understand whether financial literacy matters in decision making. Addressing this question is particularly difficult because financial literacy is not distributed randomly in the population: those who possess high levels of literacy are likely to possess characteristics, such as high talents and ability, or patience, which also are correlated with financial decision making. Moreover, individuals may choose to invest in acquiring financial knowledge; thus, financial literacy itself can be a choice variable. And, it may be that those who have high wealth, rich pensions, or investments in financial markets care more about improving their financial knowledge.”

Whatever the disposition of individual persons towards financial literacy- investing in acquisition of the knowledge or taking advantage of the campaign spearheaded by the apex bank in conjunction with financial institutions, the bottom line is that the higher the literacy level, the better for individual persons and the economy as a whole in terms of stability, investment decision, safety of wealth and seamless economic activities, among other things.

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