Godwin Emefiele, CBN governor

BY EMEKA EJERE

The 95 percent financial inclusion programme of the Central Bank of Nigeria (CBN) received a boost recently with the release of the revised guidelines for licensing and regulation of payment service banks in Nigeria.
According to the World Bank, financial inclusion means that individuals and businesses have access to useful and affordable financial products and services that meet their needs – transactions, payments, savings, credit and insurance – delivered in a responsible and sustainable way.
Following a meeting between the CBN and the Bill and Melinda Gates Foundation in August 2019, the apex bank raised Nigeria’s financial inclusion target to 95% from 80% set in 2012, and extended the target year to 2024 from 2020.
Few months earlier, the CBN governor, Godwin Emefilele, had reaffirmed that having moved from 42 percent to about 65 percent financial inclusion within 18 months, Nigeria could achieve 80 per cent come “next year” (2020) if the banks and telecoms companies cooperate with the apex bank. But available statistics would soon say otherwise.
While speaking at the meeting Bill and Melinda Gates Foundation, Emefiele disclosed that the CBN had discovered new techniques and policies to drive financial inclusion. He listed some of the policies to include Licensing and Regulatory Guidelines for Payment Service Banks, the Shared Agent Network Expansion Facility and generally providing the conducive regulatory environment for Fintechs to contribute to financial inclusion.
The guidelines stipulated that only entities with the right capabilities will drive the payment service in the banking sector as it attempts to make the field competitive. The key objective of the regulation is to enhance financial inclusion by increasing access to deposit products and payment/remittance services to small businesses, low income households and other financially excluded entities through high volume low value transactions in a secured technology-driven environment.
Previously, the CBN had sought to drive financial inclusion by the introduction of microfinance banking, agency banking and mobile money operators amongst others. However, reality eventually showed that there is still much to be desired.
According to a 2018 report by the CBN, 37% of Nigerians do not have access to financial services, at a time when internet penetration and smart phone penetration are on the rise in Nigeria, with 103 million Nigerians using the internet as at May 2018.
In other words, more than 66 million Nigerians do not have bank accounts or lack access to basic financial services. This deficit has led the CBN to introduce various policies to ensure that this number is drastically reduced. It is even more pertinent considering the fact that the informal sector contributes to more than half of the GDP of Nigeria.
According to the CBN, the linkage between financial inclusion and economic development of developing countries has provided the impetus for countries to develop and implement improved strategies to financially include their unbanked citizens.
In a report, the apex bank noted that a study by the World Bank revealed that there was a strong positive correlation between account penetration of various countries and their GDP per capita.
The CBN explained that High Income Countries with approximately 100 percent of account penetration posted GDP per capital ranging from $25,000 above while Sub-saharan African Countries with less than 65 percent account penetration in most cases recorded GDP per capita less than $10,000.
The revised National Financial Inclusion Strategy (NFIS) places implementation focus on women, rural areas, youth, Northern Nigeria and Micro Small and Medium Enterprises (MSMEs).
In order to address the disenfranchised demography, the CBN is seeking that for product development, financial service providers must now ensure that they understand the value proposition in catering to the unbanked and must actively and intentionally develop products that meet the needs of the unbanked, leveraging on experiences from informal financial service providers in rural regions.
Also, in financial education/consumer protection, there must now be a massive drive by stakeholders to ensure that customers are well educated on the products to ensure trust and uptake of the products.
“Digital technology must remain on the front burner of financial inclusion efforts in order to leap frog and achieve 95 per cent financial inclusion rate by 2024. Banking and mobile agents must be leveraged in order to reach remote and difficult to reach customers,” it said
Breaking the barriers
One of the major barriers to financial inclusion in Nigeria has been the uneven spread of financial access points, limiting access to appropriate products and services in the rural areas. To aid the achievement of this target, the National Youth Service Corps (NYSC) has approved the posting of corps members to deposit money banks (DMBs), microfinance banks (MFBs) and local government areas (LGAs) from 2019 to 2024.
The corps members are to serve as peer educators, particularly in the rural areas, with each expected to drive the opening of 200 new accounts by the end of 2019 and complement other ongoing efforts by the CBN.
Earlier in the year, the CBN Governor unveiled four policy documents for the financial sector – the revised National Financial Inclusion Strategy, the Financial Literacy Framework, the Consumer Protection Framework and the Consumer Education Framework, all of which are targeted at facilitating the attainment of the financial inclusion target.
Revised fees and charges for banking services
In December 2019, the CBN, reviewed charges and fees for banking services. Particular highlights include the downward review of charges for subsequent withdrawals from another bank’s ATM (after the third withdrawal) to N35 from N65 (a 53.8 percent price slash). There was also a review of cost of electronic bank transfers, to a tiered structure from a flat fee of N50.
Analysts at Sustainable and Inclusive DFS believe that given that the associated costs to access financial services (pecuniary and non-pecuniary) has been a deterrent to financial inclusion, these revisions are a step in the right direction.
“As the digital revolution transforms the banking and payments industry, we anticipate attendant benefits of further reduced costs, convenience and speed which are meant to enhance financial inclusion.
“The price reviews, we believe, will also encourage customers at the bottom of the pyramid to embrace digital payments more often and we’ll see money stay digital for longer.
“As for bringing excluded citizens into the formal ecosystem, cheaper interbank transfer is a good value proposition but may not be compelling enough to switch – after all, cash still works! For that, alternate strategies such as customised product offerings, messaging, and delivery channels are necessary.
On their part, analysts at Proshare believe that Fintech companies have a significant role to play if CBN is to achieve this target in 2024. According to them, Fintech providers can capitalise on their large customer bases for payment services, to offer customers other financial services.
“Not only are Fintech firms involved in financial deepening, they also facilitate economic development in SSA. Fintech supports technological advancement in other sectors such as agriculture and infrastructure as well, boosting economic growth”, the analysts stated.
“Fintech firms are filling the gap between financial services companies and customers by disrupting key financial services segments ñ digital payments (Paytech), digital insurance (Insurtech), banking (Banktech), wealth management services (Wealthtech), and regulations (Regtech) ñ and creating space for selling financial products.
“Big technology firms such as Apple, Facebook, Amazon, Google, and Alibaba have also entered the financial services space, enhancing innovation and competition.”
However, a major threat to mobile technology as a way of driving the programme is the claim that there are some remote communities in Nigeria that are still without mobile networks.
This was confirmed by the President of the Association of Telecommunications Companies of Nigeria (ATCON), Mr. Olusola Teniola, in an interview with Business Hallmark.
“There are 102 market gaps that we have identified through research, which represents 20 to 30 million Nigerians, who have never made a voice call because they have never seen a mobile phone in their lives, let alone get onto the Internet”, stated.
Also, until the extension of National Identification Number (NIN) registration deadline was postponed by two months, many had feared that the policy would suffer a major setback should the federal government carry out its threat of blocking about 100 million lines for noncompliance.