Mobile money adoption drives Nigeria’s banking penetration to a record level

Increased adoption of mobile money is driving the growth of account ownership at financial institutions, particularly in sub-Saharan African (SSA) countries like Nigeria, according to a recent World Bank Global Findex 2021 report.

An analysis of the report titled ‘Financial Inclusion, Digital Payments and Resilience in the Age of COVID-19’ showed that Nigeria’s banked population increased by 15.6 percentage points to 45.3% in 2021, the highest level in 10 years from 29.7% in 2011.

45.3 percent placed Africa’s largest economy 18th out of 25 SSA countries.

Further analysis also showed that the percentage of women with bank accounts increased from 8.5% to 34.5%, while the number of men with bank accounts increased from 22.1% to 55.5%.

“Mobile money has emerged as an important enabler of financial inclusion in sub-Saharan Africa, especially for women, as a driver of account ownership and use through mobile payments, savings and loans,” the report states.

The Global Findex database has become a mainstay in global efforts to promote financial inclusion. Launched with funding from the Bill & Melinda Gates Foundation, the database has been published every three years since 2011.

Despite the improvement, Nigeria still has a high unbanked rate of 54.7 percent. The World Bank reports that Nigeria, India, China are among the countries that contribute to the world’s unbanked population.

“Globally, about 1.7 billion adults remain unbanked without an account at a financial institution or through a mobile money provider. Because account ownership is nearly universal in high-income economies, virtually all of these unbanked adults live in the developing world.

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“In fact, nearly half live in just seven developing economies, including Bangladesh, China, India, Indonesia, Mexico, Nigeria and Pakistan.

The report also highlighted that Mauritius (90.5 percent), South Africa (85.4 percent), Kenya (79.2 percent), Namibia (71.4 percent), and Ghana (68.2 percent) are the five Sub-Saharan African countries with the highest percentage of banked population, while South Sudan, Sierra Leone, Guinea, Burkina Faso and Malawi are the least important five with 5.8 percent, 28.9 percent, 30, 4 percent, 36.1 percent, and 42.7 percent, respectively.

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On improving Nigeria, Temitope Omosuyi, Investment Strategy Analyst at Afrinvest Limited, noted that it is slow progress and the country still has a long way to go.

“For monetary policy to become extremely effective in achieving its goals, such as reducing inflation and ensuring financial stability, more people are needed in the financial system,” Omosuyi said.

Data from the Nigerian Interbank Settlement System (NIBSS) and other sources show that the volume and value of electronic financial transactions increased after the pandemic and some financial services.

According to NIBSS, mobile transaction volume rose 128.4 percent to 153 million in the first four months (January-April) of 2022 from 67 million in the same period last year.

“Now we have technology that makes business better and easier. It is also in line with the Central Bank of Nigeria (CBN) plan to boost financial inclusion in the country,” said Ayodele Akinwunmi, Senior Relationship Manager, Corporate Banking Group, FSDH Merchant Bank.

Financial inclusion means that people have access to basic financial services such as a savings account, credit and insurance. It has continued to gain increasing recognition around the world among policymakers, researchers, and development-oriented agencies.

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Its importance derives from its promise as a tool for economic development, particularly in the areas of poverty reduction, employment generation, wealth creation, and improvement of well-being and living standards in general.

A higher rate of exclusion in Nigeria could lead to a poorer population, as lack of access to credit and insurance puts them at an economic disadvantage.

That is why in 2012, the cbn in collaboration with stakeholders, it launched the National Financial Inclusion Strategy aimed at increasing the inclusion rate to 80 percent by 2020.

And with 45.3 percent of the population banked, it shows that the country did not reach its goal. Therefore, the CBN has set a new target of 95 percent by 2024, which is believed to be achievable by exploring new techniques and policies, such as the Licensing and Regulatory Guidelines for Payment Service Banks, the Ease of expansion of the network of shared agents and, in general, providing the appropriate regulatory framework. enabling environment for fintechs to contribute to financial inclusion.