Before the efforts to promote financial inclusion through the cashless policy of the Central Bank of Nigeria (CBN), the Nigerian economy was predominantly a cash-based economy with a significant proportion of the narrow money stock in the form of currency outside the banking system.
The Central Bank of Nigeria introduced the cashless policy effective January 2012 in a bid to leapfrog Nigeria to one of the best 20 economies by the year 2020. The main reason for the policy was to reduce the amount of cash used for business transactions but not to eliminate cash usage and encourage more electronic-based transactions.
The cashless policy was introduced to achieve three (3) key objectives as follows:
Financial exclusion has manifested prominently in Nigeria, as our economy was largely a cash-based economy. Financial inclusion has continued to assume increasing recognition across the globe among policy makers, researchers, and development-oriented agencies.
Financial inclusion derives its importance from the promise it holds as a tool for economic development, particularly in the areas:
The CBN adopted the National Financial Inclusion Strategy (NFIS) in 2012. The Strategy articulated the demand-side, supply-side and regulatory barriers to financial inclusion, identified areas of focus, set targets, determined key performance indicators (KPIs), and established the implementation structure[1].
According to the NFIS (Revised) 2018, “financial inclusion is achieved when adult Nigerians have easy access to a broad range of formal financial services that meet their needs at affordable costs.”
The services include but are not limited to, payments, savings, credit (loan), insurance, pension, and capital market products.
Financial inclusion reported growth since 2012 when the cashless policy was implemented. However, progress across the key focus areas is still significantly behind the NFIS target of 2020:
Nigeria reported one of the highest proportions of banked adults in Sub-Saharan Africa. However, financial exclusion remains high at 36% due to the inability to adequately leverage non-bank/ digital financial services (e.g., Agents, FinTech).
Several countries have expanded financial inclusion via non-banking. Rwanda with 36% banked adults, reduced financial exclusion to 7% using both non-bank and informal financial services rails.
In 2020, 68 million adults are financially included with access to formal and informal financial services. The growth of over 8 million banked (formal) adult population between 2018 and 2020 was largely driven by agent banking. Agent banking growth of 16% was on the back of increased usage of digital financial services.
Financial inclusion is the availability and usage of financial services by all, including those who are traditionally underserved or excluded from the formal financial system. In Nigeria, financial inclusion have been a significant focus area to promote economic development, reduce poverty, and enhance the overall well-being of its citizens.
Sources:
[1] https://www.cbn.gov.ng/out/2019/ccd/national%20financial%20inclusion%20strategy.pdf
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