In the last decade, Nigeria’s banking sector has experienced considerable growth that has made it accessible to nearly everyone who has a need for it.
Statistics from 2020 shows that about half of the adult population in Nigeria used some form of formal (i.e. regulator) financial services including commercial banks, microfinance banks, mobile money, insurance or pension services. Between 2018 and 2020, there was a 5% increase in the volume of banked individuals in Nigeria. Growth in digital financial services and agent banking highlights the opportunity to drive faster progress and greater financial inclusion in the sector. Although the reach of banking services has widened, the country fell short of its target to include more demographies. As a result, financial services which use technology in creating digital banking products have stepped into this gap. Unsurprisingly, the low entry barrier has led to the proliferation of unregulated and sometimes fraudulent online financial institutions that provide instant loans as well as to defraud Nigerians. The government has finally stepped in as it shut down several of these online banks. The focus on Business Edge is Nigeria’s clampdown on online banks with Dr Soji Akinyele, economist and government relations expert joining Tolulope Adeleru-Balogun from Lagos, Nigeria.
The low rate of banking services among Nigeria’s populace is not unconnected to the status of the economy where 65% of business activities operate within the informal sector and 80% operate in the small and medium scale sector. To improve this, Dr Akinyele says a lot more still has to be done to create financial inclusion and access to capital.
While fintech has been extremely effective in providing digital financial services through mobile phones, it has also created these online banks that serve customers via smartphones. A recurring factor is how they bypass the regulation and legal framework required to deliver banking services.
Business Edge also takes a look at the role of traditional banking institutions in creating useful products such as instant loans for their consumers, how government can continue to protect consumers and much more. Watch in full above.