Why must Central Bank of Nigeria promote Financial Inclusion?

Central Bank of Nigeria is promoting Financial Inclusion on a high priority basis. What is this financial inclusion all about and why should CBN be bothered about it?

Financial Services like providing facilities for savings, loans, money transfers, insurance etc is considered to be a public good. As with any public good, the Governments are responsible for rightful allocation to its citizens without any discrimination. It will not be an exaggeration to say that in our democracies every citizen should have equal accessibility to financial services.

To include everyone in the financial services gamut, can be termed as "financial inclusion".

But in Nigeria, not everyone is financially included, meaning not everyone has access to finance. The accessibility part of financial services has always been an issue in Nigeria due to high costs of delivery and high costs of monitoring.

Hence the role of Central Bank of Nigeria (CBN) to launch a Financial Inclusion Strategy in October 2012. But why should CBN be interested in financial inclusion strategy? Are there not better things to do for it? To answer this question, lets look at the Objectives of CBN and analyse how Financial Inclusion is important for CBN to achieve each of its objectives.

CBN's Objectives Vs Financial Inclusion 

Central Bank of Nigeria has five specific objectives that were setup in The CBN Act, which was originated in 1958 Act of Parliament and subsequently amended for about six times. The five objectives and their relation to financial inclusion is discussed here under:

 CBN Objective 1: Ensure Monetary and Price Stability

CBN's primary objective is to ensure stability in the economy, particularly in relation to the way money behaves and prices of products fluctuates. 

When more Nigerians begin to participate in the formal financial sector, CBN will be in a better position to influence the savings, investment and consumption behaviour of its citizens and thereby having a control over interest rates and exchange rate changes.

CBN Objective 2: Issue Legal Tender Currency in Nigeria

CBN has the responsibility ensure the issuing of currencies in Nigeria and has high operating costs of monitoring its issue. 

With an increased participation of every Nigerian, CBN could implement electronic transfers and cashless banking will considerably reduce the cost o monitoring of issuing legal tender currency. This way it will be able to control the currency in a better way.

CBN Objective 3: Maintain external reserves to safeguard the international value of Nigeria

Value of Nigeria need to be protected and it is best done when the nation produces higher income. CBN has a greater role in doing this particularly when only oil-exports dominate the national income and the value of Naira getting depreciated. 

Financial Inclusion helps CBN control the value of Naira. Increased access to finance for micro, small and medium enterprises as a result of financial inclusion will lead to greater productivity in the country and thus increase the non-oil exports.

 CBN Objective 4: Promote a Sound Financial System in Nigeria

A Sound Financial System is one which is built with best practices and provides cushion against external shocks. CBN's objective is to promote a sound financial system in Nigeria. This is best achieved when every citizen of Nigeria is financially included with proper control and monitoring system. Including everyone in the robust financial system will reduce frauds. 

CBN Objective 5: Provide economic and financial advice to the Federal Government

Government's responsibility is to ensure that among all other public goods, financial services also reaches the poorest of the poor. CBN is a custodian of that task and it can advice the federal government in a better way if it is able to achieve an inclusive economy.

In summary, financial inclusion as a strategy addresses CBN's objectives but how far will they be implemented is something that we all need to watch out. Perhaps we all need to supplement CBN with our contribution in different roles as a responsible citizens for designing a financially inclusive nation.

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