The Central Bank of Nigeria (CBN) recently reported that the country is not on track to meet the goals it set in the 2012 National Financial Inclusion Strategy (NFIS). According to a CBN statement, “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.”

The goals of NFIS are to: (1) establish an overall financial inclusion rate of 80 percent by 2020; and (2) establish a formal financial inclusion rate of 70 percent by 2020. The latter of these refers to usage of the country’s microfinance banks, traditional banks and other institutions registered with CBN. As of 2016, CBN finds that 58 percent of Nigerian adults use financial services, and 49 percent use formal financial services.

CBN cited the following reasons for the continuing gaps:

1. The quantity of Nigerians that lack a National Identity Card, a primary requisite for using bank services;

2. Banks lacking sufficient capital and incentives to employ agents to sell and distribute their financial products in rural areas;

3. Microfinance institutions (MFIs) lacking sufficient capital to develop digital financial systems;

4. MFIs’ operational challenges, including high customer acquisition costs, poor data management and insufficient customer deposits;

5. The lack of financial products tailored to the needs of groups such as people in rural areas, women and youth; and

6. Insufficient financial literacy programs.

CBN proposes it and other government entities take the following actions to increase the rate of inclusion in the country:

1. Encourage the expansion of digital financial service infrastructure, including the demonstration of its cost-saving potential;

2. Continue hiring government-paid agents to deliver financial products in rural areas;

3. Increase the incentives for individuals to open and use bank accounts; and

4. Find new ways to incentivize banks to serve the most marginalized groups.

CBN was established in 1958 as Nigeria’s central banking authority. Per the act of parliament that created it, CBN’s mandates are: “to issue legal tender currency; to maintain external reserves; to safeguard the international value of the legal tender currency; to promote monetary stability and a sound financial system in Nigeria; and to act as banker and financial adviser to the Federal Government.”

By Nicholas Galimberti, Research Associate