Yesterday, a very interesting news pervaded the business news streams. The Central Bank of Nigeria, has just put in place a policy for anyone to open bank accounts without a kobo.
On the face value, this a good move to promote financial inclusion. It will make banking accessible to the poor and rural population. It will further bridge the gap between the unbanked and the banked.
However, these over generalised assumptions might have worked for other countries, but it has been the opposite for Nigeria. While some argue that norms gets defied in Nigeria so, tested policies often fail when implemented, I think Nigeria is not just ideal for such a policy for so many reasons.
The first reason is that the banking system is too fragile, shallow and counter-productive. With over 40 million bank accounts as at year end 2015, Nigeria’s savings culture is one of the poorest in the world. The moment the federal government removed its deposits from commercial banks through the treasury single account, TSA, the continuous existence of many Nigerian banks have now come under threat more than ever since the 2008 financial crisis.
As a result of the low savings, Nigerian banks, insurance companies and fund managers have not been able to create a financial ecosystem that adds value to the same people, the poor population that the CBN plans to support. There is no banking system that can create a proper mortgage system that provided housing for people easily and affordably and no friendly interest rate regime for small and medium scale businesses.
The zero bank balance account opening is no longer needed in Nigeria. If anything is needed most, it is offering an incentive to drive savings culture. The economy and particularly the banking system needs more money to stay in the system longer than ever. Nigeria’s insurance companies are struggling to offer protection and risk management solutions to the economy because of the low level of interest of the public public in life and other investment products that provide protection and savings.
The CBN can promote financial inclusion through the adoption and promotion of technology such as mobile wallets, app and digital banking. With the continuous rising power of the smartphone, it is no longer necessary for the CBN to think financial inclusion can only be achieved through opening traditional bank accounts.
The fallacious stereotype that has been propagated over time is that Nigeria’s penetration banking services is low because Nigerians are too poor and do not have money to save. However, the massive informal and unregulated financial transactions unlinked with the formal economy is a sign that perhaps custodians of Nigeria’s financial system are too superficial in their approach. However, the challenge with the informal sector is that more emphasis is placed on consumption and because of its lack of structure, no one cares whether it benefits the larger economy, create jobs or supports innovation.
I watched a TV vox pop on this matter and I will like to conclude with the submission of an interviewee who said “I don’t think the zero bank account policy makes sense because most people will not fund it and it is like wasting the time of the bank’.
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