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Why is Financial Inclusion in Nigeria Lagging Compared to its African Peers?

The provision of inexpensive and accessible financial services to all people and businesses, regardless of their level of income or geography, is known as financial inclusion. Despite being one of the biggest economies in Africa, Nigeria has lagged behind its counterparts in terms of financial inclusion. This article will examine the reasons why Nigeria is lacking in terms of financial inclusion compared to other African countries. 

Financial Inclusion Strategies and Their Execution in Nigeria

 Financial Inclusion in Nigeria

In Africa, Nigeria is the largest contributor to the continent’s total economy. It accounts for almost a third of Africa’s total GDP, and, as such, has a lot of potential for financial inclusion. Yet, in Nigeria, financial inclusion falls short of expectations. Financial inclusion refers to the participation of the entire population in the economy of a country. It is judged from the number of adults with a registered account and access to all financial services. 

Financial inclusion is essential in alleviating poverty as it ensures that the financially excluded have access to payments, credits, basic insurance, etc. that contribute to their economic well-being. Several factors such as illiteracy, internal strife, and economic instability are responsible for limited financial inclusion in the country. Let us look at the financial inclusion strategy in Nigeria that addresses key problems leading to financial exclusion. 

The impact of financial inclusion on the economic development of a country is critical, as financial inclusivity improves the overall standard of living, and reduces poverty through wealth creation and employment generation. The Nigerian government has committed to the Maya Declaration, to reduce the financially excluded to 20% by 2020. To this end, they launched the National Financial Inclusion Strategy in 2012.

National Financial Inclusion Strategy of Nigeria

A National Financial Inclusion Strategy is in place in most countries to regulate and guide the market and ecosystem factors that directly or indirectly affect the growth of microenterprises. Since the adoption of the National Financial Inclusion Strategy, the inclusion rates of the country have been gradually rising, but they still need to increase their efforts to reach their financial goals adopted in 2012.  

In Nigeria, the promotion of financial inclusion is crucial as a significant portion of the currency lies outside the banking system. So, efforts are directed by the government towards increasing inclusion and bringing the larger, if not the entire population, under the consolidated banking systems. This helps in regulating and controlling the individual financial institutions for the regulation of the market. As a solution to financial inclusion barriers in Nigeria, the following steps were taken. 

Introduction of Financial System Strategy 2020 

The Financial System Strategy (FSS) is a framework adopted by the Central Government of Nigeria to provide a strategic roadmap for the development of the financial sector. The aim was to propel Nigeria into one of the 20 largest economies by 2020. The FSS adopted six initiatives to meet this end by building up the domestic financial market. Out of these four are dedicated to improving the financial inclusivity of the country. They are:

  • Development of varied financial products
  • Enhancement of payment processes
  • Development of credit system
  • Encouragement of savings culture

Reviewing Microfinance Policies

Reviewing Microfinance Policies

The microfinance economy is instrumental in financial inclusion as they directly deal with small enterprises, marginal communities, and the unbanked population. So, regulation of microfinance policies is required to protect the interest of the clients while maintaining stability in the market. Microfinance is also important for alleviating poverty as the majority of its clients fall in the low-income group. 

The National Microfinance Policy, launched in 2005 by the Nigerian government, put forth guidelines for the facilitation of microfinance institutes, both that are privately-owned and the third sector institutions. The latter refers to self-help groups, non-governmental institutes, cooperatives, market associations, etc. These policies help strengthen the microfinance model. 

Non-interest Banking

In an attempt to include a section of the population that had previously been skeptical of its usage of formal financial establishments, the Central Bank of Nigeria included the Non-Interest Financial Institutions (NIFIs) under a new framework in June 2011. After the Africa board fellows deliberated and found that overindebtness is a huge problem in microfinance, rules have been strict.  

As a part of this framework, the Central Bank of Nigeria promoted Islamic Bank Products in the hope to attract foreign investments from the Middle East and Southeast Asia. Formalizing policies guiding non-interest banking ensures quality oversight and regulations.

Regulations Controlling Financial Technologies

The Central Bank of Nigeria has campaigned for banks to increase their low-cost branchless facilities such as ATMs, point-of-sale (POS), etc. These were promoted along with other cashless practices. The campaign was initiated with the following major goals in mind:

  • To develop and modernize the payment system
  • To reduce the cost incurred by banking for financial inclusion
  • To improve the effectiveness of monetary policies

The Central Bank of Nigeria also promotes mobile banking by allowing 14 mobile payment providers to conduct their business within the country.

Factors that Led to Low Financial Inclusion in Nigeria

Although there are several strategies in place, financial inclusion is not easy to achieve for a developing country like Nigeria. As compared to more developed countries in Africa, Nigeria is still far behind in being financially inclusive. The following factors are mainly responsible for hindering financial inclusivity in Nigeria:

Political Interjection Conflicting with Regulatory Policies 

The Central Bank of Nigeria is accountable for policies regulating the economy of the country. Unfortunately, its efforts to move the country towards a financially inclusive economy have been contested multiple times by the political powers in the country. Lawmakers are skeptical about the implementation of financial policies that can be difficult in the short-term but have many benefits in the long run.

An example of such political interference is evident when lawmakers vetoed CBN’s policy to exact a fee for deposits and withdrawals of cash. Although this policy was put forth to encourage cashless, digital transactions that will push adults to open and engage with bank accounts, the fee charged for deposits and withdrawals was deemed excessive, and the entire policy was dismissed. Thus keeping the population from the benefits of cashless transactions such as reduction of theft, corruption, and robbery. 

Poor Infrastructure Contributing to High cost of Doing Business

Nigeria’s poor financial infrastructure is another issue slowing the country’s progress toward financial inclusion. It is challenging for financial institutions to reach rural places and offer financial services due to a lack of basic infrastructure like electricity, internet connectivity, and transportation.

The expansion of informal financial services, which are frequently unregulated and lack even the most basic consumer protection safeguards, has also been attributed to the lack of adequate financial infrastructure. In addition, the lack of financial literacy in the general population has exacerbated public suspicion of formal financial institutions and made it difficult for them to establish a presence in the market.

The high cost of doing business is reflected in the prices of financial products and services offered by the bank. As a result, the high-interest rates on loans and high transaction costs deter customers from using banks’ financial services, reducing overall financial inclusivity. Several other African countries have adopted national strategies for the improvement of financial inclusion, which have been more successful. For example, Tanzania launches a national financial inclusion framework to reach its commitment to the Maya Declaration. 

Culture Leading to Uneven Financial Development in the North and South Regions

Financial development within the country has clear demarcations as the South regions benefit from the high number of financial institutes while the North regions are scantily developed due to poor infrastructure and cultural components. Northerners are generally of lower education levels as compared to southerners which makes it harder for them to access financial services. They are also skeptical about the usage of bank accounts, debit cards, digital banking, etc., due to religious and other belief systems that are anti-technology in their practices. 

Barriers to Financial Education 

Barriers to Financial Education 

The efforts directed toward financial education have been ineffective in the country. The main reason for this is that the cost of educating the populace is much higher compared to the benefits it incurs. So, for educators, this is not a worthwhile venture. There is also a reluctance to go to remote places and teach the community there about the benefits and correct usage of several financial products. 

Also, as there are no standards set for financial literacy, it is a problem to judge how effective financial education programs are. Lastly, the curriculum for financial education is not well-tailored for different demographics and is unable to properly educate the people.

A study conducted by the Central Bank of Nigeria found that the usage of financial services directly correlates with the formal educational background of the population. The population with higher education is more likely to use bank accounts, contribute to savings deposits, issue debit cards, or take credit from the bank. The policies which are put forth as solutions to financial inclusion barriers in Nigeria, so far, have been ineffective. 

High Degrees of Poverty

In Nigeria, poverty is a major impediment to financial inclusion. In fact, 4 out of 10 Nigerians live below the poverty line. Because so many people in the nation are poor, it is challenging for them to receive banking services. Also, a lot of people do not have the necessary credit history or collateral to obtain credit from banks and other financial institutions. This reduces the amount of savings, along with reducing business ventures. 

Due to a lack of savings, people rarely use bank accounts and do not use digital wallets for any transactions. As savings are key to merchant payments in developing countries, the lack of savings due to lower incomes, high inflation, etc. in Nigeria hinders the growth of digital financial services.

The Nigerian government has introduced a number of programs to combat poverty with the goal of enhancing people’s economic circumstances. For instance, the government has started the National Social Safety Net Program with the goal of giving the nation’s most vulnerable groups financial support. In order to help individuals produce income and improve their economic conditions, the government has also established a number of measures targeted at encouraging entrepreneurship and creating jobs. 


Any policy requires funds for its proper implementation. Sadly, the funds allocated towards improving infrastructure, increasing financial services, promoting financial education, or any other improvements often get misused due to the involvement of corrupt officials. The funds never reach the responsible party who will actually implement the policies. 

Fintech Increases Discrimination

Fintech is an essential tool for both financial inclusion and reducing poverty, but it should have proper regulations for the benefit of the clients. In the case of poor control of regulatory bodies over digital financial service providers, the fintech lenders will be more prone to lending money to only creditworthy clients and exclude the poorer section of society. 


The absence of a clear and cohesive policy framework is one of the main factors contributing to Nigeria’s poor progress toward financial inclusion. There has been a lack of cooperation amongst different parties despite the Central Bank of Nigeria’s (CBN) launch of multiple programs to promote financial inclusion, including the National Financial Inclusion Strategy. 

The financial inclusion strategy in Nigeria has also not been implemented well, which has had a minimal impact on the ground. As an illustration, the 2012 launch of the cashless policy has been slowed down by a lack of adequate infrastructure, such as point-of-sale (POS) equipment, and insufficient internet access.

Access to Banks and Other Financial Services

More than half of Nigerian adults are unaware of the financial facilities provided by formal or informal institutions. This is mainly because they do not have access to financial service providers easily. The figures slightly changed in 2016 when more and more people were aware of and using facilities provided by mobile money providers. 

Decreased Bank Account Ownership

Cultural misconception, poor infrastructure, and lack of financial education, all result in decreasing bank account ownership. This further caused a drop in the financial inclusion of the country as more and more people avoided the use of any financial institutions for monetary transactions.

Financial Inclusion in Other Developing Countries 

In order to battle poverty and increase financial inclusion, Alliance for Financial Inclusion (AFI) launched the Maya Declaration at the 2011 Global Policy Forum (GPF). The Maya Declaration enlists the core principles of AFI to help countries reach their goals by following a basic framework for enhancing their financial inclusion strategies. A total of 76 countries have pledged to commit to the Maya Declaration and made 1,023 targets for themselves.

India is one of the pledged countries from Southeast Asia. Towards this end, India has initiated the Jan-Dhan Yojana (Scheme for People’s Wealth) that provides zero-balance accounts and debit cards to encourage people to move towards digital transactions. These measures, along with accident insurance and overdraft protection, are aimed at protecting the client’s interest while increasing financial engagement. 

Although, a cautionary tale of India’s financial inclusion push comes from past experiences. Even though the scheme has increased adults holding a bank account, these remain dormant as customers rarely interact with the institute or use any of the financial tools available to them. This is probably affected by a lack of financial education available to the masses.

Countries such as Myanmar have improved their financial inclusivity by improving financial technology and making digital finances available to their citizens. In 2017, Alfred Hannig, AFI’s Executive Director, noted that the adoption of digital finance is significant for financial inclusion and at large, economic growth. The Myanmar Payment Union, the country’s only online payment system and Myanmar’s first e-commerce platform was launched in 2011. 

It is a domestic, card-based system that allows customers to make online purchases within the country. The success of this depends mainly on awareness building. It is also essential to ensure both the client and merchant have bank accounts to conduct digital transactions. 

Frequently Asked Questions (FAQs)

Q1. What are two reasons why financial inclusion has not grown in Nigeria?

The major reasons why financial inclusion has not grown in Nigeria are because of a lack of distrust among the population regarding formal financial institutions and high rates of poverty that hinders savings among the poorer community.

Q2. What are the challenges of the financial system in Nigeria?

The financial system in Nigeria faces many challenges such as corruption, poor infrastructure, high financial illiteracy, high inflation rates, and poverty. All these factors ultimately deter larger populations from participating in the economy and bring down the growth of the financial system in Nigeria. 

Q3. What is the financial inclusion rate in Nigeria?

The financial inclusion rate of Nigeria has improved due to the various policies enacted by the government of Nigeria. In 2020 around 44.8% of adults were banked while 5.7% preferred other formal channels and 13.6% made use of informal financial service providers. The factors that led to low financial inclusion in Nigeria including corruption, poverty, etc. have kept this figure lower than intended. 

Q4. What is Nigeria’s National Financial Inclusion Strategy?

The Central Bank of Nigeria initiated the Nigeria National Financial Inclusion Strategy to reach its financial inclusion goals. The latest addition to this strategy was brought about by the Central Bank of Nigeria and National Financial Inclusion Governance Committees which included National Financial Inclusion Strategy, National FinTech Strategy, and Strategy for Leveraging Agent Networks to drive women’s Financial Inclusion and Payment System Vision 2025.


As a result of a multitude of reasons, such as a lack of financial infrastructure, low financial knowledge, high poverty levels, etc., financial inclusion is lagging in Nigeria. The Nigerian government has initiated a number of programs to improve financial infrastructure and promote financial literacy in order to address these issues. Thus, the Nigerian government needs to reimagine the study of financial inclusion to improve its financial standing.

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Jonas Taylor
Jonas Taylor
Jonas Taylor is a financial expert and experienced writer with a focus on finance news, accounting software, and related topics. He has a talent for explaining complex financial concepts in an accessible way and has published high-quality content in various publications. He is dedicated to delivering valuable information to readers, staying up-to-date with financial news and trends, and sharing his expertise with others.

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