As financial exclusion rate grows

A survey conducted by EFInA titled “Access to Financial Services in Nigeria 2016 survey” revealed that the financial exclusion rate rose to 41.6 percent in 2016 from 39.5 percent in 2014. According to the survey, 40.1 million of Nigeria’s 96.4 million adults were financially excluded in 2016 compared to 36.9 million adults in 2014. Effectively, 3.2 million adult Nigerians who hitherto had access to financial services in 2014 backed out in 2016 due mainly to the tough economic conditions in the country. Also, within the same period, household consumption fell year on year in real terms, by 1.05 percent in the first quarter of 2016, and by 6.00 percent in the second quarter of the same year.

In 2012, the Central Bank of Nigeria developed a financial inclusion strategy that sought to increase the formal use of financial services in Nigeria from 36 percent to 70 percent and cut down on the number of the financially excluded, which was roughly more about 50 percent of Nigerians to just 20 percent in 2020.

But hardly had they started the implementation than the prices of oil crashed and recession kicked in. The banks were seriously affected as they were overexposed to the oil sector. The government was also cash-strapped and needed money to finance its budget. Then, in an attempt to raise non-oil revenues, the government and the CBN unwittingly jettisoned the financial inclusion strategy.  The CBN not only introduced an account maintenance fee (a surreptitious reintroduction of the already suspended CoT charge through the back door), it also allowed banks to turn on the savings of its customers to also shore up their depleted incomes. Charges such as ATM withdrawal, SMS and email alert fees, inter-bank transactions fees, even on banks’ internet platforms etc were introduced or reintroduced and vigorously collected. Similarly, the government imposed a compulsory stamp duty charge of N50 on all bank customers for bank transactions in the country. Some banks became even more zealous and extended the stamp duty charge to all accounts and transactions instead of current accounts as was directed by the apex bank. Although the apex bank had directed the banks involved to make a refund to their customers, Heard on the streets learnt only one bank had partially complied.

This has badly affected many Nigerians who have been reeling from the economic recession and inflation and have less disposal cash and fewer savings. Consequently they are being discouraged from patronising the banks or using formal financial services as provided by the banks. What is worse and bad news for financial inclusion is that Nigerians being targeted for inclusion are the most sensitive to the imposition of such arbitrary charges.

Petty traders and those in operating in the informal economy therefore prefer to conduct other means of banking such as market union’s thrift societies and esusu than patronising the banks. Even formal sector workers now rush to the banks to withdraw their entire salary once they receive an alert. It is understood that if this is not done, the banks will go on deduction spree on the accounts.

We call on the government and the CBN to urgently review their revenue expectations and reverse most of these exploitative charges on the poor. We are aware of a valid court judgement prohibiting the CBN from levying and collecting the stamp duty charge of N50. But as it is becoming customary in this administration, the court order has been ignored and the banks are becoming more aggressive in the collection of the levy.

The CBN should also review the so many levies and charges collected by banks. Nigerian banks are bastardising the very idea of banking by making a constant habit of feasting on their depositor’s money. That is not banking and if this should continue, we should be ready to live with the reality of majority Nigerians being financially excluded.

Editorial