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Nigeria’s financial sector regulators, such as the Central Bank of Nigeria (CBN) and Nigerian Deposit Insurance Corporation (NDIC), have an uphill task in improving financial inclusion in the country. This is evident in the recently released World Bank Global Financial Inclusion Indicators.

Financial Inclusion implies access to a broad range of financial services including payments, savings, credit, insurance and pension products.

The CBN in 2012 rolled out a financial inclusion strategy, aimed at setting a clear agenda for significantly increasing access to and use of financial services in Nigeria by 2020, by which time the bank aims to increase the formal use of financial services to 70 percent, from the current level of 36 percent of the adult population.

The World Bank data reveal the depths of the problem.

The data show that Nigeria under-performs most of its sub-Saharan African (SSA) peers, with the widest disparity being in the category of percentage of adults who borrowed from a financial institution in the past 12 months.

While 24 percent of Nigerians say they have saved in a financial institution in the past year, less than 2 percent have been able to access loans, making Nigeria one of the worst performers in that category in SSA (see chart).

“The high interest rates in the economy have probably contributed to this situation, although there are more fundamental reasons that account for the banks’ reluctance to lend actively and at somewhat affordable rates to the economy,” said Samir Gadio, Emerging Markets Strategist at Standard Bank, London.

“The risk profile of borrowers and long-term infrastructure projects, the focus on Tier-I names at the expense of SMEs and retail banking, as well as the absence of a viable corporate bond market are certainly underlying issues that will need to be addressed for a qualitative shift in the credit market,” he added.

For other analysts though, the high interest rates in the country (which average 23 percent) do not tell the full story, as other structural issues with the Nigerian economy may be at play.

“I think we also need to be realistic about what is contributing to weak real-sector lending in Nigeria. High interest rates are only a part of it,” Razia Khan, head of Africa research at Standard Chartered Bank, said, adding, “Often the problem stems from a high cost structure and the poor viability of SMEs in Nigeria.”

The CBN estimates the formal use of financial services in Nigeria is currently at a low 36 percent of the adult population, roughly 31 million out of an adult population of 85 million.

This figure compares to 68 percent in South Africa and 41 percent in Kenya.

The recent growth of mobile money in countries like Kenya, which has allowed millions of people who are otherwise excluded from the formal financial system to perform financial transactions, has for now not been that successful in Nigeria.

In Kenya, 68 percent of adults report using mobile money, while in Nigeria, the share using mobile money is less than 5 percent, according to the World Bank report.

The data also show that while only 26.67 percent of Nigerians have accounts at a formal financial institution, 42.34 percent of Kenyans and 53.65 percent of South Africans have the same.

Kayode Akindele, Partner at 46 Parallel, an investment firm, says there are many issues inhibiting financial inclusion in Nigeria, such as inability to efficiently and effectively identify and track borrowers and the slow and cumbersome process of adjudicating financial disputes through the courts.

“There are many schemes such as the new national identity card scheme, SIM registration, credit bureaus, etc, being developed to address these issues, but they are all still at their infancy,” he said.