CBN: Financial Inclusion to Add $36b Deposits to Banks

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  • CBN: Financial Inclusion to Add $36b Deposits to Banks

Banks’deposits are expected to rise by $36 billion in 2025, a financial inclusion report released by the Central Bank of Nigeria (CBN) has shown.

The Exposure Draft of the Financial Inclusion Strategy signed by CBN Director, Development Finance Department, Modashiru Olaitan, said 46 million new individuals will join the financial system, Gross Domestic Product (GDP) will rise by 12.4 to $88 billion by 2025, new credit worth $57 billion will be given to customers, three million jobs to be created while $2 billion reduction in government leakage annually will be achieved.

He said: “There is global consensus that financial sector development makes two mutually reinforcing contributions to poverty reduction through its impact on economic growth (finance for growth) and direct benefits to the poor using financial services. An increasing body of evidence shows that appropriate financial services can help improve household welfare and spur small enterprise activity. There is also macroeconomic evidence to demonstrate that economies with deeper financial intermediation tend to grow faster and reduce income inequality.”

Continuing, he said for Nigeria specifically, past research shows the potential economic benefits of digital financial services (DFS).

“As such, financial inclusion is critical to the economic recovery and growth of Nigeria. Senior political leaders, including the Vice President, have made public statements that emphasise the importance of financial inclusion, most recently during the official visit of the UN Secretary-General’s Special Advocate for Inclusive Finance for Development to Nigeria in November 2017,” Modashiru said.

He said government officials had also emphasised the need to act swiftly and collaboratively to accelerate progress towards financial inclusion by “propagating digital financial services as simple, flexible and easy alternative channels for reaching our remote areas and rural hinterland”.

He said given the importance of financial inclusion, it is crucial to have a strong strategy for achieving the financial inclusion goals and targets that have been established by the CBN. The goal of this strategy is to realise a financial system that is accessible to adults, at an inclusion rate of 80 per cent, and to promote the country’s economic growth.

“There is global consensus that financial sector development makes two mutually reinforcing contributions to poverty reduction through its impact on economic growth (finance for growth) and direct benefits to the poor using financial services. An increasing body of evidence shows that appropriate financial services can help improve household welfare and spur small enterprise activity. At present, Nigeria is not on track to meet the 2020 targets set out in the National Financial Inclusion Strategy (NFIS) of 2012.”

The NFIS set two financial inclusion targets for 2020: an overall financial inclusion rate of 80 per cent of the adult population and a formal financial inclusion rate of 70 per cent of the adult population. As of 2016, just 58.4 per cent of Nigeria’s 96.4 million adults were financially served and only 48.6 per cent of adults used formal financial services. The NFIS defined an additional 15 targets for channels, products and enabling environment, as well as 22 key performance indicators (KPIs) related to these targets.

“Still, promising developments have emerged, especially in recent times, as new stakeholders have joined the push for financial inclusion. For instance, the CBN and the Nigerian Communications Commission signed an MoU on digital payment systems in 2018.

“Also in the same year, CBN collaborated with the Nigeria Inter-Bank Settlement System (NIBSS) to create a regulatory sandbox that will allow financial technology start-ups to test solutions in a controlled environment and is partnering with the private sector to roll out a 500,000-agent network to offer basic financial services.

“In addition, several players in the private sector have introduced new products and services aimed at the un-serve/underserved, and new partnerships are driving the delivery of digital financial services more widely—programmes have been launched to boost access to finance specifically for excluded groups, such as women and micro, small and medium-sized enterprises.”

In 2012, the CBN adopted the NFIS. The document articulated the challenges in financial inclusion; identified areas of focus, key performance indicators (KPIs) and targets; and described the implementation structure. The strategy was built on the four strategic areas of agency banking, mobile banking/mobile payments, linkage models and client empowerment.

About the Author

Samed Olukoya
Samed Olukoya is the CEO/Founder of investorsking.com, a digital business media, with over 10 years experience as a foreign exchange research analyst and trader.

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