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Why Nigerian banks will not burn the bridge for financial inclusion

As the number of people living within the poverty line continues to grow, and Nigeria becoming the most preferred home of poor people in the world, there is an urgent need for all stakeholders to show total commitment in growing financial inclusion to lift many out of the cycle.
But Nigerian banks’ laser focus on growing their revenue base and satisfying shareholders has meant that many of them are dragging their feet. Many of those getting involved are only doing so for fear that the Central Bank of Nigeria might sanction them. Indications of absolute commitment is nearly zero.
The CBN had in a circular on July 2018, lamented that Nigeria was not meeting any of the financial inclusion targets agreed and contained in the 2012 Financial Inclusion Strategy. Not only was the country not meeting its targets, but it was also declining in growth. For instance, while Nigeria achieved 60.3 percent in 2012, it declined to 58.4 percent in 2016 against a target of 69.5 percent translating to financial exclusion of about 41.6 percent.
The World Bank Global Findex Report 2017 estimates that of the 1.7 billion adults who are unbanked and financially excluded worldwide out of the estimated world adult population of billion, Nigeria has 3.4 percent even though its population is 2.6 percent of the world population.
Irrespective of this reality, Nigerian banks have been reporting profits from charging banking customers for opening an account. The 2019 half-year data on account maintenance charges showed that 13 Nigerian banks made N39.5 billion. Among the leaders were Zenith Bank, First Bank, Access Bank, GTBank which generated N9.6 billion, N6.6 billion, N6.2 billion, and N5.7 billion respectively.
“Account maintenance fee is the biggest innovation in Nigerian banking,” Ndubuisi Ekekwe, chairman of Fasmicro and fintech expert. “In America, they pay you for the privilege of serving you (yes, when you open an account, most US banks have reward promotions that pay up to $500 for doing that). But in Nigeria, banks legally leak your account balance. It is only in Nigeria that banks declare profits in a fluttering economy.”
Some analysts have suggested that why banks are reluctant to do or like financial inclusion, is because banking the poor is hard. It will require doing it on a very large scale before they can make money.
Yinka David-West a professor at the Lagos Business School, once noted in a presentation that a bank has to do $1 billion in financial inclusion transactions before it has a chance of making a profit.
There is also a tunnel vision that afflicts bankers. There are two key ways that banks can make money: from money at rest (deposits) and money in motion (transactions).
“So a banker today begs for deposits which become float which they lend (and earn interest income) or put in the money market for treasury bills, OBBs, etc,” Adedeji Olowe, CEO of Trium Networks, a venture capital firm, explained to BusinessDay. “Unfortunately, poor people don’t have money to save. N10 billion deposit is equal to 100,000 middle-class depositings at N100,000 each. Why scale? And that’s 10 million poor people leaving N1,000 behind in their bank accounts. The technology that would support 10 million bank accounts with N1,000 balance would be so expensive that even the N10 billion deposit won’t cover it.”
But money in motion is different. Last year, banks in Nigeria collectively made $100 million from interbank transactions alone when they charged N50 for 729 million NIP transactions. That’s money in motion.
“However, lack of business sense and tunnel vision can’t let them see that if they reduce the transfer fees from N50 to N5, it would make transaction volume to increase like 100 times. Why? Because poor people can’t justify using N50 to send N200 to buy bread. Maybe N5, they would be convinced,” Olowe said.
SANEF is the closest Nigerian banks have come to show true commitment to driving financial inclusion.
SANEF (Shared Agent Network Expansion Facility) is a project powered by the Central Bank of Nigeria, Deposit Money Banks (DMBs), Nigeria Inter-Bank Settlement Systems (NIBSS), Chartered Institute of Bankers of Nigeria (CIBN), licensed Mobile Money Operators and Shared Agents with the primary objective of accelerating financial inclusion in Nigeria.
SANEF started as a project in February 2018 but was incorporated as a company in January 2019. SANEF is an intervention to widen and deepen financial access points and services to increase financial inclusion to 80 percent by 2020.
At the financial services agents forum held on July 30, 2019, in Lagos, Ronke Kuye, CEO, SANEF, said the company is meant to achieve 250,000 agents by the end of 2019 and 500,000 agents in the six geo-political zones by the end of 2020.
Although the program was launched in February 2018, it was not until August of the same year that it went live. With barely four months to the end of 2019, SANEF has rolled out 156,000 agents across the country out of its target of 250,000 since it started operations. It still has about 94,000 agents to deploy before the end of the year.
Finding over 90,000 people to deploy in the next four months may appear simple on paper after all the unemployment rate is very high in Nigeria, but in reality, the cost of maintaining existing agents and servicing the technology that drives the network is a big disincentive for banks.
This is where Payment Service Banks (PSBs) would have been a solution, but the banks control the SANEF initiative and are not willing yet to relinquish control to mobile network operators MNOs who are going to compete with them in mobile money. Hence, it is highly unlikely the banks will be willing to collaborate with MNOs on agent networks. Moreover, although the CBN has issued a Full Agent License to MTN, the regulator is yet to fulfill its promise of PSB license to the MNOs.
Esaie Diei, former CEO of EFInA told BusinessDay that on the surface FI should be represent a big opportunity for banks giving that it is about opening an account with banks and microfinance bank or a wallet with MNOs. 
“The starting opening is that the business of the bank is to collect free or cheaper deposit so that they can trade with it. That’s the business of banks,” he said, “So the more accounts opened the better avenue to free deposit. However, the challenge lies in the cost opportunities. Banks are businesses with shareholders’ funds expecting returns in specific period of time. Therefore the trade off is more in the best interest of the owners of the banks and less focus on reaching the less economically viable for now.”
The banks however can be incentivised if the regulators addressed the national identity challenge that financial institutions have. The multiplicity of identification systems and the altogether low enrolment are limiting financial inclusion. In these cases, Nigeria requires policies to increase enrolment capabilities of both the National Identity Number (NIN) and Bank Verification Number (BVN).
“There has to be a strategic framework, intervention, funds and strong political engagement to make the expected impact,” Diei said. 
The CBN also have to address issues around interoperability, collaboration and cooperation among financial services providers. Yinka David-West recommended the extension of the Financial Services Regulation Coordinating Committee (FSRCC) to Digital Financial Services (DFS) and financial inclusion coordination. One of the mandates of the FSRCC would be the development of a unified agent framework that cuts across financial services – banking, payments, insurance, pensions and so on.  
At this stage in my life, I am currently trying to save for business school in UK commencing next month. So, I am starving myself and like to think I only spend on essentials.

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