Last year ended on an optimistic note for most Nigerians as the National Bureau of Statistics (NBS) confirmed the country’s recovery from the recessionary trend that characterised the previous year. Gross Domestic Product (GDP) rose from -0.9% in the first quarter to 0.72% and 1.4% in the second and third quarters, respectively. Moreover, inflation, one of a nation’s key economic indicators, stood at 16%; an improvement from the 18.6% it attained at the end of 2016. Besides, the Central Bank of Nigeria recently announced the steady growth of the country’s External Reserves at $46 billion as at the close of business on Friday, March 9, 2018; reflecting a growth rate of about $3.2 billion between February and March 2018.
On the flip side, the African Economic Outlook Report (AfDB, 2018) has revealed that about 152million Nigerians (about 80% of the estimated 190million population) now live below $2 a day. According to World Bank standards, living below $1.90 (about N680) per day signifies extreme living conditions. This reveals that despite improvements in the economy, there has not been a significant translation to the lives of many citizens.
Globally, financial inclusion is being utilised as a vehicle for economic development particularly in the areas of poverty reduction, wealth creation, employment generation, and improving welfare/general standards of living. At the basic level, financial inclusion is a measure of the extent to which economic agents utilize the financial services apparatus at their disposal to effect the desired exchanges, and particularly, support the highest possible activity in the real economy. Consequently, the correlation between financial inclusion and economic growth, as well as inclusive economic growth has long been widely recognised. Moreover, financial inclusion is to be seen as a tool to be primarily explored for financial accessibility, which is provided with guaranteed quality to individuals who require financial services whilst ensuring that there is capacity through a diverse and competitive marketplace, especially for the currently excluded population.
In essence, low financial inclusion impedes economic growth. For instance, access to easy and affordable credit by the disadvantaged social groups is acknowledged as a key criterion for poverty alleviation and reduction of social inequality. To a significant extent, circulation of money matters for the impact of economic growth to become visible on the people that constitute an economy and the economy itself. However, despite the broad consensus on the importance of access to finance as a powerful poverty alleviation tool, it is estimated that nearly half of the Nigerian population continues to be excluded from the formal financial sector.
The Push from the Financial Sector
Financial institutions play strategic roles in the economic development of a nation through the provision of financial catalyst for economic progress, poverty alleviation, and ensuring the general well-being of the economy and the people.
The financial industry plays a critical role for the society at large, serving individuals, families, businesses, governments, civic institutions, and other stakeholders. The sector performs indispensable functions such as facilitating savings and investments, providing protection from risks, supporting the creation of new jobs and enterprise, and also, enabling financial inclusion.
Over the years, the financial sector in Nigeria has been the primary lead in incorporating financial inclusion through several services. From the 2012 Nigerian National Financial Inclusion Strategy (NFIS) with an overall target of reducing the percentage of adult Nigerians excluded from access to financial services from 46.3% in 2010 to 20% in 2020, to the recently launched targets for Deposit Money Banks and all Microfinance Banks towards achieving 80% financial inclusion target for the adult population in the country by 2020, and the state-by-state targets for the 21 commercial banks and 942 micro finance banks in the country to ensure that every Nigerian adult has access to financial services.
Moreover, financial institutions are mandated through principle five of the Nigerian Sustainable Banking Principles (NSBP) to provide products and services that cater for the disadvantaged and marginalised groups within the society. All banks now provide digital banking services, rural banking initiatives and banking services for the physically or socially disadvantaged groups, to mention a few.
Despite the advancement in the sector however, reports still reflect that there has not been much progress made in meeting targets as exclusion rates stands at 41.6% (Access to financial services survey, 2016), which may partly justify the slow inclusive economic growth levels in the country.
The Cross-Sectoral Approach
In spite of the efforts and lofty targets of the financial sector at reducing financial exclusion in Nigeria, true and full inclusion will only be attained when targets are set beyond the financial industry to corporate bodies; irrespective of sectoral focus, through financial access initiatives.
There is a pressing need for corporations to incorporate financial inclusion through joint efforts with the financial sector. For instance, the collaboration between telecommunications companies and banks is no doubt yielding positive results as many more banking services through digital financial technology (fintech) – e-recharge, mobile banking, and a few others have been launched in recent years. Yet, there is more to be achieved by ensuring that services are provided in a stable and sustainable way and awareness is increased on activities and services.
As part of Corporate Social Responsibility, corporate organisations can partner to leverage interactive lessons and introduce the excluded to concepts such as savings and budgeting. Also, by providing access to capital, a business can contribute to financial inclusion.
SABMiller, a multinational beverage company offers an example. The Peru office, in 2012 recognised that many of its customers were small storeowners, who were some of the 6 million Peruvians without any access to banking services. These customers depended on cash flow and risked not having enough cash or stock to weather the economic times, let alone grow.
Recognising the impact that this situation had on its business growth, the company introduced a Bankarization and Financial Inclusion product by identifying geographical areas where its clients lacked banking services, collaborated with banks to open up credit lines, delivered financial educational training to retailers and enhanced the entire banking infrastructure, including 1,500 mini-banks and a new mobile transactions service. Through this, the company was able to increase its sales as well as drive growth amongst SMEs in the country.
In addition, the inclusion of efficient, accessible and safe payment systems that links payment transactions to financial institutions is a way all businesses can also participate in financial inclusion.
Finally, one of the factors contributing to the financial inclusion gap in Nigeria is the low financial literacy levels. The Non-Governmental sector can impart a significant quota by constantly providing consumer education about financial services, as well as other services and by also supporting promising entrepreneurs through grants and loans.
As the 2018 Global Money Week draws to an end, beyond the strategies and approach of the financial sector, it would become increasingly difficult to attain inclusive economic growth unless every sector contributes to reaching a remarkable financial inclusion rate and as captured by the theme of this year’s week, money matters matter, to every sector.
By mobilising mutually-beneficial partnerships; from financial players, telecommunications providers, other economic players, NGOs and government institutions, Nigeria can attain and exceed set levels of financial inclusion even sooner than envisaged.
ThistlePraxis Consulting (2014), The Intersection: Financial Inclusion, Economic Sustainability & Social Benefit: AR-CSR 2014 Report