According to Enhancing Financial Innovation and Access (EFInA), 52.5 percent of Nigeria’s adult population was excluded from financial services in 2008. Two years later, financial exclusion further declined to 46.3 percent. On the back of this development and with the ambitious mandate of reducing the financial exclusion rate to 20 percent by 2020, the National Financial Inclusion Strategy (NFIS) was launched in 2012.

Financial inclusion is not merely a fancy term but a globally recognised catalyst for economic growth and development. The World Bank defines financial inclusion as individuals and businesses having access to useful and affordable financial products and services such as payments, savings, credit and insurance, delivered responsibly and sustainably. This could equally result in wealth creation, reduction in unemployment and poverty, as well as an improved standard of living. In fact, on the strength of the definition above, the NFIS housed other specific targets – to boost inclusion in payments to 70 percent, savings to 60 percent, credit to 40 percent, insurance to 40 percent and pension to 40 percent, all by 2020.

While financial inclusion has steadily improved over the last decade, the country fell short of the NFIS targets for 2020. That year, only 50.5 percent were formally served, with 35.9 percent still financially excluded (EFInA). On the specific targets, payments hit 45 percent, savings at 32 percent, credit and insurance at a staggering 3 percent and 2 percent, respectively, while pension only went as far as 7 percent. Though these targets were not met, there is no denying the progress that has been made so far. According to the Central Bank of Nigeria (CBN), Nigeria has gained 64 percent financial inclusion in 2022 and now targets 95 percent in 2024.

Among other factors such as government programmes and policies, the gradual rise in the financial inclusion rate has been significantly impacted by the proliferated deployment of digital financial services (DFS) in the country; though it may also be argued, vice versa, that financial inclusion targets have facilitated the drive for DFS. Either way, digital platforms continue to provide innovative avenues for distributing and accessing financial services while liberalising traditional transaction processes. Nigeria is home to the majority of the fintech unicorns on the continent, most of which operate in the payments system. It comes as no surprise that the payments and savings segments have been the most improved on the country’s financial inclusion index.

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Further, with a combined subscriber base of 130.3 million in Nigeria, MTN and Airtel recently launched their respective Payment Service Banks (PSBs), which would have them offer SIM-based mobile banking services like deposits and withdrawals, transfers, bill payments and credit. Subsidiaries of Glo and 9Mobile are also PSB-licenced by the CBN. More so, PSBs are required to have a 25 percent rural presence to ensure they focus on the unbanked and financially excluded populations. It is also noteworthy that the various licence categories (switching and processing, mobile money operations, payment solution services, agent banking and so on) available to banks and other financial institutions (OFIs) have also contributed to the penetration of DFS. Agent banking – which involves the provision of financial services within communities on behalf of banks – alone contributed about 19 percent to the 2020 financial inclusion gains, compared to the 3 percent it contributed in 2018 (EFInA). Contactless payments are growing in popularity as Quick Response (QR) Code usage and Near Field Communication (NFC) technology continue to be adopted by financial service providers.

The CBN is now looking more closely at enforcing digital financial literacy. In one of its most recent stabs at driving financial inclusion, it released the Exposure Draft on the Digital Financial Services Awareness Guidelines (Draft DFS Guidelines) in July 2022. The Draft DFS Guidelines sets minimum consumer knowledge and practice standards that financial services providers are to adopt when providing DFS. Among other things, DFS providers are required to – promote campaigns to underserved populations regarding DFS available to them; ease access to product information to allow consumers make informed financial decisions; provide product information in English and local languages; disseminate educational materials to prospective and existing customers through basic channels like SMS, USSD and at agent locations in addition to web and social media platforms; and provide reliable customer support services. The apex bank intends to implement these standards to the letter as non-compliance attracts sanctions.

From the foregoing, DFS has and will continue to deepen financial inclusion in Nigeria – perhaps even at an exponential rate. However, in light of the country’s 2.5 percent annual population growth rate, along with existing inclusion gaps and inequalities particularly regarding gender and geographic location, regulators must find more sustainable ways for low-cost financial services to expand to the unbanked and underbanked. Also, the crusade to promote financial literacy and consumer protection has to be further intensified, as people will only use systems they veritably understand and can trust. As the government continues to roll out more financial inclusion initiatives, it must ensure it keeps nurturing an enabling environment for digital financial products and services to thrive, though within a regulated ecosystem.

Fabusiwa, a legal practitioner, writes from Lagos on law and fintechs.