InterMedia recently completed and published its Financial Inclusion Insights (FII) 2016 Annual Report and Survey Data on the status of financial inclusion in Nigeria. The report, based on a nationally representative survey of 6,352 Nigerian adults, provides insight into Nigerians’ financial lives while tracking trends in attitudes, access, use and demand for financial services.
According to the annual survey data, the number of adults who are considered financially included, defined by FII as adults with a registered account at a full-service financial institution, has not improved in Nigeria since 2014. Financial inclusion in Nigeria dropped slightly from 37 percent in 2015 to 35 percent in 2016 (Figure 1), lagging behind the three other African countries surveyed as part of the FII program. In 2016, FII data showed 69 percent of Kenyans, 54 percent of Tanzanians, and 40 percent of Ugandans were financially included.
Figure 1: Registered financial service users
(Shown: Percentage of Nigerian adults for each year)
In an economy that is large enough to account for almost a third of Africa’s total GDP,  why might Nigeria be lagging its FII peers?
- More than half of Nigerian adults do not have access to financial services. The 2016 FII data found access to any formal financial service remained constant with 2015 at only 42 percent. Although awareness of mobile money providers showed an increase from 12 percent in 2015 to 20 percent in 2016, most Nigerians did not know of a mobile money point of service within a bus ride of where they live. In addition, even when Nigerians can access financial services, they face infrastructure issues. Thirty-seven percent of registered bank users cited nonworking ATMs as a challenge.
- FII data suggest that even when they have access, many Nigerians lack the basic resources and key skills that facilitate financial inclusion. Key factors that enable ease of account registration such as financial literacy are low (16 percent of adults) and necessary requirements for opening a full-service account, such as holding a valid identification and owning a SIM card, are not improving. Only 79 percent of Nigerian adults have the necessary identification documents for registering a mobile money or bank account. The percentage of adults who owned a SIM card in 2016 decreased to 79 percent compared to 86 percent in 2015.
- In 2016, decreases in bank ownership drove an overall drop in financial inclusion, despite a small increase in the number of adults with registered mobile money accounts. While historically, access, defined by FII as the number of adults who have ever used a financial institution, has been led by banks in Nigeria (see Figure 2), FII data points to several factors that may have contributed to the slowdown in bank account use and ownership:
- In 2014 the government began requiring bank account holders to obtain bank verification numbers (BVNs). As a result, some accounts were closed due to noncompliance and some customers have faced difficulties linking their BVN to their accounts.
- A federal government regulation enacted in March 2016 increased transaction costs associated with bank-based financial services. For example, the regulation imposed a stamp duty of N50 (USD 0.20) on bank customers for money received into their accounts, and added charges on cash withdrawals, debit card issuances and online transfers. The rise in costs may have lowered the appeal of banks.
- Nigeria slipped into a recession in 2016, as a result of deepening economic challenges related to a drop in global oil prices and security problems caused by the Boko Haram insurgency in Nigeria’s northeast and Delta regions. Rising inflation rates in 2016 reached 18.5 percent in November 2016, as reported by the National Bureau of Statistics, causing Nigerians to spend more on their daily needs and save less. FII data showed a steep decline in savings-to-debt and income-to-expenditure ratios from 2014 to 2016, with a more than 20-percentage- point decrease in both indicators. In addition to the noticeable impacts on the daily financial lives of Nigerians, this may have impacted their ability to meet bank’s minimum savings requirements. For instance, per FII data, the proportion of economically vulnerable adults rose significantly from 42 percent in 2015 to 60 percent in 2016.
Figure 2: Account access/trial
(Shown: Percentage of Nigerian adults for each year)
- In Nigeria, cash is still king. The population continues to work in the cash-based informal sector. In fact, per FII data, 47 percent of Nigerians generated income solely through irregular informal sector employment in 2016. To draw these cash holders away, formal financial services must better match their typical transaction sizes, needs, and make the case for their value-add. FII 2016 data showed that nonusers of banks reported not having enough money to make transactions with the service and lacking knowledge about the service as they key reasons for not registering for a bank account. Institutions could focus on products tied to facilitating agriculture given that the latest FII data shows that agriculture is the largest sector of the economy employing two in 10 Nigerian adults. Additionally, interventions could focus on closely evaluating the needs of the specific market segments that are more likely to be excluded to inform product design and marketing. As noted in Figure 3, financial account holders in Nigeria tend to be male, live in urban areas and are living above the poverty line. Current products and services do not have an attractive enough value proposition for the large number of low-income, rural or other vulnerable and historically financially excluded consumer demographics that continue to use cash.
Figure 3: Registered financial account owners, by demographic
(Shown: Percentage of Nigerian adults by each demographic)
The FII team will continue to examine how financial services can address some of these challenges and how factors such as SIM card ownership, KYC requirements, marketing and financial education, and better product design can advance Nigerians along the customer journey from access to advanced, active use of financial services.
If you are interested in seeing additional information about the factors that affect financial inclusion in Nigeria, we encourage you to visit the Data Fiinder at finclusion.org.
For more information about FII’s Research in Nigeria, please contact:
Financial Inclusion Insights
Financial Inclusion Insights is an ongoing research program funded by the Bill & Melinda Gates Foundation and designed to build meaningful knowledge about how the financial landscape is changing across eight countries in Africa and Asia (Bangladesh, India, Indonesia, Kenya, Nigeria, Pakistan, Tanzania and Uganda). FII produces data and analysis regarding citizens’ financial lives, attitudes, awareness and use of, access to, and advanced engagement with financial products and services. Through our qualitative and quantitative research, we aim to provide demand-side insights into consumers' financial behaviors, produce information that can guide policy interventions, and identify pathways for the poor to gain the financial tools they need to improve their economic circumstances.
 African Economic Outlook Report 2017, African Development Bank.