28 December 2013, Abuja – An average of 18 per cent of the adult population in the Northern Nigeria are formally banked, a report by the Central Bank of Nigeria, CBN, has shown.
The North -west has the lowest rate of population that keep their money in the banks with only 13 percent. The North- east followed with 15 per cent and the North -central has 27 per cent of the formally banked population.
CBN said the financial exclusion rate is worse in the Northern part of the country, with about 68 percent of the population excluded from financial services in both the North- east and North -west regions
The CBN report released Tuesday shows the figure is more than double the percentage of people excluded in the South -west (33%) and the lower in rural areas, making it less likely that clients will make use of financial products and services.
The report titled: National Financial Inclusion Strategy highlighted further financial inclusion is most advanced in Nigeria’s urban areas, especially in the Southern parts of the country.
“Northern Nigeria is particularly disadvantaged, with 68% of adults excluded in both the North-east and North-west regions. Formal inclusion rates range from 49% in the South-west Region to only 19% in the North- west Region. The “informally included” primarily live in the North-Central region, where 23% of adults have access to only informal services”.
However,the report said the vast majority (80.4%) of those who are fully excluded from formal and informal financial services live in rural areas.
The report explained that three possible explanations for the low penetration in the rural areas includes: First, the physical distance to bank branches in most rural areas makes it difficult and expensive to access financial services. Second, lower levels of economic activity in rural areas limit the profit potential of financial institutions.
Third, education levels and financial literacy are typically.
Other reason for the low percentage of the financial inclusion in the north is attributed to the average distance to Deposit Money Banks (DMB) branches varies widely within Nigeria, from almost 60 kilometres in Kebbi State to less than 1 kilometres in Lagos State. When branch proximity is compared to rates of service usage,
“It is apparent that physical access to a financial institution is a major contributing factor to financial inclusion and might even be the most important factor”.
The strategy which was unveiled to selvage the situation said the existing banking infrastructure has the capacity to expand financial inclusion throughout the country. “As of December 2010, Nigeria had a combined total of 5,797 bank branches, 9,958 ATMs, and 11,223 POS terminals.21Although the banked population has grown faster than the bank branch network, the infrastructure is operating below its potential and has the capacity to serve more clients. The average number of clients per branch was 3,882 compared to 3,922 in Kenya and 8,595 in Tanzania. To reach best-in-class levels, the average branch should serve more than double the number of clients it does today”.
Also, report lamented the low credit penetration in the country, saying that “Nigeria has very low credit penetration, with only 2% access to formal products.This is compared to 16% in Tanzania and 32% in South Africa. With 15 loan accounts at commercial banks per 1,000 adults, Nigeria’s rate is much lower than Malaysia, which has 963 loan accounts per 1,000 adults”
The strategy noted that financial inclusion is critical to achieving the Central Bank of Nigeria’s mandate and Nigeria’s overall economic development. As of 2010, 46.3% of adult Nigerians were excluded from financial services.
The barriers underscore the need to develop a National Financial Inclusion Strategy, the primary aim of which is to reduce the financial exclusion rate of adults to 20% by 2020.
The key initiatives in the Strategy include a tiered approach to Know Your Customer (KYC), agent banking, mobile payments, a cash-less policy, a financial literacy framework, consumer protection, and the implementation of credit enhancement schemes and programmes. Specific targets have been set for payments, savings, credit, insurance, pensions, DMB and MFB branches, ATMs, POS, banking agents, and youth and women. A variety of stakeholders have been identified to support the implementation of the Strategy and their roles and responsibilities have been defined.
“Stakeholders will need to commit sufficiently to supporting the Strategy and the Central Bank of Nigeria will need to take a lead role in coordinating and promoting the Strategy in order to achieve its goals and objectives.”
*Hamisu Muhammad, Daily Trust