There is an indication that the plan by the Central Bank of Nigeria (CBN) to engage Agency Banking Networks in the currency redesign exercise will achieve the two-prong benefit of fast-tracking financial inclusion among the country-side dwellers. Many Nigerians had expressed fears that the currency redesign initiative announced on October 26, 2022 would put the rural dwellers in a difficulty given the absence of bank branches to deposit their old currencies in their locations.
However, the disclosure by the apex bank to use alternative service channels for the currency redesign would address the concern about the countryside dwellers as well as providing a far-reaching avenue for the financial inclusion strategy – a pet project of the CBN Governor, Godwin Emefiele.
Addressing journalists at the end of the bi-monthly Monetary Policy Committee (MPC) meeting on Tuesday, November 22, Emefiele said the financial regulator and other commercial banks have deployed agency banking across the country and extended workdays to ensure people have places to deposit their money and withdraw the redesigned Naira.
Reacting to speculations that the January 31, 2023 deadline might be extended to accommodate the needs of rural areas, the CBN governor said there are 1.4 million agency banking networks that will attend to both urban and rural areas. He added that the rapid increase in the number of the alternative payment service channel in three years was a remarkable milestone.
“In 2020, the Central Bank of Nigeria or banking industries agency licence network was only at 86,000; As of October, 2022, our agency banking network has increased to 1.4 million all over Nigeria in almost all the local governments in Nigeria, I therefore cannot see any reason why anybody would say that he needs an extension because he can’t deposit his money in the bank, even if you’re in a rural area.
“And the agency network is like saying that we have 1.4 currency points all over the country, then how can anybody come and say that he wants to shift the deadline because there are people in the rural areas that cannot deposit cash? That is a lie. They know what they have in mind and we will not go with them on that journey.
“Our journey is that on January 31, 2023, all the old currencies will lose their legal tender status and we’ll begin to use the new currencies. We’re doing our work in line with the law that establishes us and we will continue to do so,” Emefiele said.
He had tackled persons calling for an extension to the deadline to phase out the current naira on the grounds that the rural dwellers would be handicapped: “When people say there are people in rural areas who cannot pay cash, they just are begging the question, they don’t know what they are saying. They have other motives, [and] it is not because they are sympathetic to the cause of the ordinary weak people in our rural area.”
It is believed that the statement of the CBN governor on the apex bank’s syndication of agency banking networks with commercial banks had addressed the concern over the fate of the rural dwellers on the currency redesign.
Financial inclusion means that people have access to basic financial services like a savings account, credit and insurance. The importance is on the fact that financial services have the capacity to empower people, create jobs and open up the remote areas for meaningful economic activities. The higher the inclusion, the better the quality of life for the people. A higher exclusion rate in Nigeria could lead to a poorer population, as lack of access to credit and insurance puts them at an economic disadvantage.
The CBN had in a circular in 2018 lamented that Nigeria was not meeting any of the agreed financial inclusion targets included in the 2012 Financial Inclusion Strategy. The Enhancing Financial Innovation and Access, EFInA, data showed that only 64.1 percent was financially included by the end of 2020. This means that 36 percent of Nigerian adults, or 38.1 million of the country’s 106 million adults of 18 years and above, remain completely financially excluded – a shortfall by 16 percent points from the desired target of a 20 percent exclusion rate.
To underscore its importance, Emefiele, in his second term agenda as the CBN Governor in 2019, put Financial Inclusion at the forefront of his 5-point agenda. He set a target of 2024 to achieve 95 percent financial inclusion.
“Over the next five years, through initiatives and policy measures such as the Shared Agent Network (SANEF) and the payment service banks, we intend to broaden access to financial services to individuals in underserved parts of the country. Our ultimate objective is to ensure that 95 per cent of eligible Nigerians have access to financial services by 2024.
We will also intensify our financial literacy and consumer protection programs such that current and eligible bank customers are fully aware of the financial services being offered to them as well as the cost of utilizing these services, which will enable them to make well-informed choices,” Emefiele stated in his world press conference on June 24, 2019.
The CBN, thereafter, fired from all cylinders, especially by embracing the Payment Service Bank (PSB) initiative. The move was different from the seeming lackluster, or wait-and-see attitude, it had adopted before then – since 2018 when it rolled out the Guidelines (revised in 2020) for the Licensing and Regulation of Payment Service Banks (PSB) with little results. It eventually embraced the PSB approach after several years of “pressure” from members of the public who urged it to tow the path of successful African countries like Kenya, Ghana and Ethiopia that had become role models in the financial inclusion.
Alternative payment channels have expanded since the financial inclusion project, especially the Point of Sales (PoS) terminal. Within a period of nine months (January-September), the volume of PoS transactions in Nigeria has increased by 24.3 percent, an indication that more Nigerians are going cashless.
A report on analysis of the data from the Nigeria Interbank Settlement System (NIBSS) showed that its volume rose by 24.3 percent to 878.4 million in the first nine months of 2022 from 706.8 million in the same period of 2021.
Its value also increased by 32.6 percent from N4.6 trillion as at September 2021 to N6.1 trillion this year.
Experts say the growth of PoS transactions is bridging the gap created by the shortage of Automated Teller Machines (ATMs) deployed by banks, as many Nigerians now withdraw through PoS agents.
It is also an enabler for creating employment opportunities for Nigerian youths who are facing a high unemployment rate of 42 percent.
According to the Central Bank of Nigeria 2019 National Financial Inclusion Strategy document, the number of banking agents rose by 517 percent to 236,940 agents in December 2019 from 38, 416 agents in December 2018.
Also, a total of 568,488 additional PoS terminals have been deployed over the last nine months as the number of deployed machines stood at 915,519 as of December 2021.
The opportunity to make an additional income is a major motivation for becoming an agent, a 2020 Enhancing Financial Innovation and Access (EFINA) agent survey stated.
Apart from PoS transactions, mobile transfers also followed the same trend as its volume in the first nine months of 2022 amounted to 438.3 million, a 132.3 percent increase from what was recorded in the same period of 2021 at 188.7 million.
In terms of value, it recorded an increase rate of 152.9 percent year-on-year from N5.1 trillion to N12.9 trillion.
The volume of Nigeria Instant Payment (NIP) platform transactions also rose to 3.6 billion in the nine months, showing a 50 percent increase from 2.4 billion recorded in the same period of last year.
Correspondingly, from the NIBSS data, the volume of cheque transactions fell by 6.1 percent to 3.1 billion from 3.5 billion over the same period.
About the Author
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
