Nigeria’s Revised National Financial Inclusion Strategy 2018 - CBN


Thursday, January 10,  2019  10:27 AM / CBN        



Executive Summary


The Central Bank of Nigeria (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. The NFIS was built on four strategic areas of agency banking, mobile banking/mobile payments, linkage models and client empowerment. Four priority areas were identified for guideline and framework development namely, Tiered Know-your Customer (T-KYC) regulations, agent banking regulations, national financial literacy strategy and consumer protection.


The Strategy defined a set of targets for products, channels and enablers of financial inclusion. The KPIs were defined, based on the various dimensions of financial inclusion, including access, usage, affordability, appropriateness, financial literacy, consumer protection and gender. The NFIS proposed strategies for each of these elements, which included a comprehensive set of policy and regulatory changes as well as suggested business models. In the implementation of the Strategy, the targets were further tailored to reflect the needs and challenges of individual financial service providers (FSPs).


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Strategy Review Process


In line with the 2012 NFIS monitoring plan, a review was carried out from October 2017 to June 2018 based on research reports, data analysis and stakeholder engagements. The exercise aimed to understand the current state of financial inclusion in Nigeria, assess past approaches, lessons learnt in order to prioritise the most critical interventions to achieve the objectives.


Accordingly, the following were consulted:

  • Public sector institutions: Regulatory agencies, Federal and State Ministries, Departments and Agencies.
  • Private Sector institutions: Financial service providers and their apexes, financial technology companies.
  • Development partners: National and International 


This NFIS provides revised objectives, priorities and principles for driving financial inclusion in Nigeria. It was developed with input from a broad range of interviewees, working groups, data sources and reports. The process involved: a. Guidance and direction from a “core team” of key stakeholders. b. Numerous group discussions, workshops and interviews. c. Experience sharing and insights from consumers. d. Assessment of existing financial products and services. e. Assessment of the regulatory framework for financial inclusion. f. Data gathering from published sources (EFInA Access to Financial Services in Nigeria Survey reports, World Bank Global Findex report, etc.).


Key Findings


The key findings from the review include:


i.            Nigeria had made significant progress to implement the NFIS because Stakeholders regard financial inclusion as a National development tool.


ii.    Inter-departmental and inter-agency governance arrangements including Steering and Technical Committees, Implementation structures in the 36 States and the Federal Capital Territory (FCT) and National Working Groups, have been collaborating to achieve set targets.


iii.               Stakeholder engagements revealed the following:

  • Some of the elements of the strategy such as point-of-sale terminals are no longer the appropriate or most efficient channel for distribution of financial services in view of advances in technology;
  • Regulations and policies such as fixed fees for certain transactions, limit the range and variation of business models that can be deployed.
  • Innovative models that have substantially increased financial inclusion in other countries such as mobile money penetration are yet to take significant root owing to some restrictive policies and regulations.
  • The pace of adoption and agent density have been low due to lack of understanding of the workings of agent banking and the opportunities it provides for stakeholders;
  • Challenging macroeconomic and security situation in the review period exacerbated the constraints to financial inclusion.
  • Low or non-adoption of financial products owing to cultural and religious factors slowed down financial inclusion in the Northern parts of the country.


In 2016, 58.4% of Nigeria's 96.4 million adults were financially included comprising 38.3% banked, 10.3% served by other formal institutions and 9.8% served by informal service providers. In 2020, Nigeria plans to have 70% of its adult population in the formal financial services sector and 10% included in the informal sector.


Prospects for Financial Inclusion


The revised strategy recognises the imperative for prioritizing the foundational constraints, the importance of innovation and the need to create an enabling environment to promote financial inclusion. Despite the current implementation challenges, there are some emerging opportunities that enhance the prospects of remarkably increasing financial inclusion over the next two and half years (2018-2020).


These include:


(i)                the signing of an MoU in 2018 between the Central Bank of Nigeria (CBN) and the Nigerian Communications Commission on digital payment systems.


(ii)            collaborative efforts between the CBN and Nigeria Inter-Bank Settlement System (NIBSS) to create a regulatory sandbox for innovative financial services,


(iii)     partnership between the Committee of Bank CEOs and the private sector to roll out a 500,000-agent networks nationwide.


Policy Implementation Principles


In the revised NFIS, two overarching principles have been defined to make implementation comprehensive, easy and efficient as follows:


        I.     An appropriate risk based regulatory level playing field that focuses on both activity and the actors. The regulation should prescribe what eligibility conditions a party needs to meet to provide a particular service, without closing off the sector from future innovations. Specifically, this entails:

  • Ensuring that the same set of regulatory requirements and conditions apply to all potential providers of a given service, regardless of their background or type of operation.
  • Ensuring that the playing field is balanced across various objectives. For example, the set of licensing requirements should both maintain financial system sustainability and also create incentives to drive financial inclusion.

   II.    Actors should play in their areas of core strength (comparative advantage) to engender high impact. This has three specific implications: 

  • All actors should continuously apply a lens of inclusivity to their activities in order to achieve impact on particularly excluded groups such as women, micro, small and medium-sized enterprises (MSMEs) and people living in the most excluded regions (North East and North West).
  • The government should create an appropriate regulatory context in which innovation can thrive.
  • Public and philanthropic (local and international) investments should be tailored towards: (i) creating public goods; and (ii) overcoming obstacles that hinder business case for private sector actors. 


Definition of financial inclusion


For the purpose of this revised Strategy, “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, loans, insurance, pension products and capital market products.


The implications of the definitions are that:

I.        The requirement for financial products should be simple enough to bring such services within easy reach of all segments of the population.


II.     Services should be broad enough to enable both access, choice and usage and specifically include but not limited to payments, savings, credit, insurance, pension and collective investment products.


III.     Financial products should be designed to meet the needs of clients taking into cognisance income levels and nearness to clients to be served through proper and appropriate distribution channels.


IV.       Prices for financial services such as interest rate and other indirect costs should be affordable even to low income groups. 


Strategy stakeholders and their interests


The stakeholders and the identified rationale for their participation in the implementation of this Revised NFIS are:

  • Providers: These include institutions that provide financial products and services, as well as their partner infrastructure and technology. The attraction for providers is the untapped business potential in serving the majority of Nigerians who are not currently using financial products and services.


  • Enablers: These are regulators and public institutions responsible for setting regulations and policies on financial inclusion. Their interest is triggered by the Federal Government's commitment to make Nigeria one of the top 20 economies by the year 2020 and the inter relatedness of financial inclusion with their core mandates.


  • Supporting institutions: These are institutions that enhance and support Nigeria's efforts to achieve the national financial inclusion goals. They include development partners and experts committed to supporting the Nigerian people and government through technical assistance/aid and similar programmes.


  • Consumers: These are users of financial services in this case, the target adult population in the country, including Micro Small and Medium Enterprises (MSMEs), Farmers, Artisans and all economically active people particularly those in the informal sector. Financial Inclusion supports them to engage in economic activities, manage risks and improve their standard of living.


Status and Progress of Financial Inclusion in Nigeria


A total of 40.1 million adult Nigerians (41.6% of the adult population) were financially excluded in 2016. Further analysis has revealed that 55.1% of the excluded population were women, 61.4% of the excluded population were within the ages of 18 and 35 years, 34.0% had no formal education, and 80.4% resided in rural areas.


Priority Actions and Time-frame


The revised strategy revealed that 46.5% of the females, 52.5% of those in rural areas and 53.5% of youth aged 18 to 25, 70% of those from the North West and 62% of those from the North East were excluded in 2016. MSMEs were also peculiarly excluded from financial services. The aforementioned demographic (women, rural areas, youth, Northern geopolitical zones and MSMEs shall be the primary focus of intervention in these revised NFIS.


Five priorities will be most crucial to increasing financial inclusion in Nigeria as follows:

  1. Create an enabling environment for the expansion of DFS.
  2. Enable the rapid growth of agent networks with nationwide reach.
  3. Harmonise KYC requirements for opening and operating accounts/mobile wallets on all financial services platforms.
  4. Create an enabling environment to serving the most excluded.
  5. Improve the adoption of cashless payment channels, particularly in government-to-person and person-to-government payments.


The strategy derives actions for each of these priorities and assigns them high-, medium-, or low-priority status, lays out a time frame for completion and specifies entities responsible for leading or supporting each action.


Monitoring and Evaluation


The measurement framework includes both qualitative, quantitative metrics and dashboard indicators that will be used to accurately track progress towards the outcome on regular basis.


The Financial Inclusion Secretariat will accordingly follow the steps below:

  • Biannual collection of comprehensive data from industry stakeholders
  • Distillation of key performance indicators from industry data
  • Comparison of results with defined indicator targets
  • Analysis of gaps and trends
  • Annual reporting to the Financial Services Regulation Coordinating Committee (FRSCC) and the National Economic Council.
  • Suggestions to increase target achievement rates, such as necessary measures to be taken, changes in priorities, or a partial review of the strategy direction.


National Financial Inclusion Targets


The major goal of this revised Strategy is to reduce the proportion of adult Nigerians that are financially excluded to 20% in year 2020 from it baseline figure of 46.3% in 2010. Other specific products and channels targets are:

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Emphasis has drastically shifted in favour of mobile money / Bank Agents in view of the fact that this brings financial services closer to the people and provides platform for offering simple diversified low cost financial services across the broad spectrum of excluded population in Nigeria.


Implementation Governance Arrangements


The Financial Inclusion Secretariat which has been set up within the CBN shall take responsibility for day-to-day reporting, coordination and implementation of the Strategy. It shall continue to receive guidance on its activities from the Steering and Technical Committees as already constituted. The overall responsibility for supervision of the activities of the Secretariat shall be performed by the Financial Inclusion Steering Committee, which will in turn, shall provide updates to the National Economic Council (NEC).

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