In your view, how feasible is the central bank’s financial inclusion target for 2024?
AKANMU: In 2020 the financial inclusion rate was 64%, which the Central Bank of Nigeria (CBN) can feasibly grow to 80-90% by leveraging the expanding range of financial technology services. However, roughly 50% of the population holds a formal bank account, whereas informal financial services largely service the 64% figure cited. This represents an enormous opportunity to double the size of Nigeria’s financial base. Fostering a more accessible digital identity for Nigerians – the foundation for any credible and trustworthy payment system – is a key driver of growth.
The National Identity Management Commission tackled the identity challenge by implementing the national identity number (NIN) scheme. As of late 2022 roughly 90m NINs had been issued in three years due to the aggressive promotion of the NIN system, a stark contrast to the 50m that were enrolled under the eight-year bank verification number programme. We can therefore project that the NIN system will enrol 120m people within another three years, enabling them to have a digital footprint and a formal bank account to capitalise on financial services.
Why is an offline strategy critical to deepening financial inclusion in the country?
AKANMU: Given a smartphone penetration rate of around 50%, and a similar internet penetration rate, the offline payment rail will be as important as the online payment rail in Nigeria. By eliminating the need to visit a physical bank branch, agency banking enables people in remote parts of the country to carry out a wide variety of financial transactions, from sending money to paying bills. Nevertheless, fostering a more efficient and inclusive financial system will require bypassing the predominant cash exchange method of agency banking. We need to increase the number of people who can engage in peer-to-peer payments by providing a digital wallet that approximates the services of a traditional bank account. The Unstructured Supplementary Service Data (USSD) technology platform plays a key role in deepening financial inclusion, as the mobile penetration rate far outstrips the smartphone penetration rate in Nigeria. USSD provides access to essential financial services to the unbanked population irrespective of their income level.
An additional lever for driving financial inclusion is the merchant payment acceptance domain. We must continue to provide affordable and scalable solutions given the prohibitive cost of point-of-sale devices in a country that is home to 41m micro-, small and medium-sized enterprises. We must increase merchant acceptance solutions that are not reliant on physical assets, such as digital wallets, and can be scaled much more rapidly to catalyse the inclusion drive.
What steps must be taken to make value-added services more widely available?
AKANMU: Strengthening payment service infrastructure is the first step to cross-selling other value-added services. With access to credit in Nigeria hovering at around 6% even among the served, the opportunity for new revenue streams built on the payment service platform is enormous. However, we must begin by creating a financial system that reaches every Nigerian and provides as many services as possible to foster the development of the larger financial ecosystem.
Robust payment infrastructure supported by a digital identification system – including information on payment behaviour – will provide the requisite data to power the profusion of value-added services. Using advanced machine learning and artificial intelligence, we can leverage data to improve credit risk assessments and analyse consumer habits. Making sure the payment service infrastructure has been deployed to the last mile is needed to mobilise value-added services, ensuring that nobody is left behind.
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