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FINANCIAL SERVICES LANDSCAPE IN NIGERIA (SUPPLY SIDE STUDY) - PowerPoint PPT Presentation

FINANCIAL SERVICES LANDSCAPE IN NIGERIA (SUPPLY SIDE STUDY) Presentation to key stakeholders Robert Stone 10 August 2010 1 Outline 1. The objective and methodology of the survey 2. The Nigerian economy 3. The demand side access to


  1. FINANCIAL SERVICES LANDSCAPE IN NIGERIA (SUPPLY SIDE STUDY) Presentation to key stakeholders Robert Stone 10 August 2010 1

  2. Outline 1. The objective and methodology of the survey 2. The Nigerian economy 3. The demand side – access to finance 4. The supply side – institutions and regulation 5. Constraints to financial access 6. The supply side response 7. The landscape of access 8. Windows of opportunity 9. Conclusions 2

  3. Objective of the survey The primary objective is to document Nigeria’s financial infrastructure, to establish levels of financial access and usage from a supply perspective, and to provide the necessary context within which the levels and trends in access to these services can be evaluated. The analysis aims to: • identify possible barriers to access • fill any information gaps relating to financial access highlighted by the EFInA survey findings and • propose indicators by which expected improvements in levels of access to finance can be tracked over time 3

  4. Methodology Primary data: quantitative and qualitative surveys. Interviews were conducted with: – 13 deposit money banks – 5 microfinance banks – 3 insurance companies – 8 public institutions and associations – 8 donors and research institutions – 6 other relevant stakeholder Secondary data: desk research and data analysis • filling gaps in the information collected from the primary sources, • background and context for the comprehensive analysis Testing the potential for rolling out services that are accessible, affordable and appropriate for the needs of low income people. 4

  5. The Nigerian economy (I) Evolution of some economic indicators 2 nd 3 rd 1 st 2 nd 4 th 1 st 2 nd 3 rd 4 th 4th 3rd 1st Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr Qtr 07 07 07 08 08 08 08 09 09 09 09 10 Gross Domestic Product 5.5 6.6 7.8 5.8 5.2 6.0 7.1 4.5 7.2 7.1 7.4 6.7 (annual growth rate) Oil share of GDP 18.7 18.6 18.0 21.6 16.7 16.9 15.7 18.7 16.0 15.5 14.7 17.6 Non-oil share of GDP 81.3 81.4 82.0 78.4 83.3 83.1 84.3 81.3 84.0 84.5 85.3 82.4 Inflation Rate 5.9 5.9 5.4 5.8 7.0 9.2 11.6 13.1 13.7 10.4 11.9 11.8 Interest rates (Max. lending 18.7 18.2 18.2 18.1 17.9 18.1 19.7 22.2 22.8 22.8 23.1 23.1 rate) Interest rates (Ave. term 8.97 8.99 8.69 9.35 10.7 11.0 11.6 12.2 11,8 12.3 11.7 9.44 deposit rate) Credit to private sector 14.8 20.6 21.5 18.1 13.6 10.4 7.9 2.1 4 14.7 3.5 -1.7 (%) The crisis has affected Nigeria somewhat less than many other oil producers: the decline in revenues has been less than in some other countries, the compression in real public expenditure has been more modest, thanks to the new fiscal regime. Source: CBN, NBS, IMF 5

  6. The Nigerian economy (II) The profile of poverty is partly a feature of high inequality Source: NBS, 2004 Poverty is multidimensional issue : correlation of economic, political and socio- cultural inequalities, gender, location and ethnicity 6

  7. Outline 1. The objective and methodology of the survey 2. The Nigerian economy 3. The demand side – access to finance 4. The supply side – institutions and regulation 5. Constraints to financial access 6. The supply side response 7. The landscape of access 8. Windows of opportunity 9. Conclusions 7

  8. The demand side (I) Distribution of access to financial services This is the distribution among the 47.5% of adults who are financially served – the remaining 51.5% of adults are financially excluded 8

  9. The demand side (II) Access to Finance by demographic subgroup Formal Banked Formal Banked Formal Banked Formal Banked Formal Banked Formal Banked Formal Other Formal Other Formal Other Formal Other Formal Other Formal Other Informal Informal Informal Informal Informal Informal Financially excluded Financially excluded Financially excluded Financially excluded Financially excluded Financially excluded Total Total Total Total Total Total 21 21 21 21 21 21 24 24 24 24 24 24 53 53 53 53 53 53 Urban (28%) Urban (28%) Urban (28%) Urban (28%) Urban (28%) Urban (28%) 39 39 39 39 39 39 19 19 19 19 19 19 40 40 40 40 40 40 Rural (72%) Rural (72%) Rural (72%) Rural (72%) Rural (72%) Rural (72%) 14 14 14 14 14 14 26 26 26 26 26 26 57 57 57 57 57 57 Male (52%) Male (52%) Male (52%) Male (52%) Male (52%) Male (52%) 27 27 27 27 27 27 22 22 22 22 22 22 49 49 49 49 49 49 Female (48%) Female (48%) Female (48%) Female (48%) Female (48%) Female (48%) 15 15 15 15 15 15 26 26 26 26 26 26 57 57 57 57 57 57 Age group Age group Age group Age group Age group Age group 14 14 14 14 14 14 19 19 19 19 19 19 65 65 65 65 65 65 18-24 (27%) 18-24 (27%) 18-24 (27%) 18-24 (27%) 18-24 (27%) 18-24 (27%) 25-34 (27%) 25-34 (27%) 25-34 (27%) 25-34 (27%) 25-34 (27%) 25-34 (27%) 24 24 24 24 24 24 26 26 26 26 26 26 48 48 48 48 48 48 25 25 25 25 25 25 26 26 26 26 26 26 46 46 46 46 46 46 35-44 (18%) 35-44 (18%) 35-44 (18%) 35-44 (18%) 35-44 (18%) 35-44 (18%) 45-54 (14%) 45-54 (14%) 45-54 (14%) 45-54 (14%) 45-54 (14%) 45-54 (14%) 25 25 25 25 25 25 28 28 28 28 28 28 45 45 45 45 45 45 22 22 22 22 22 22 26 26 26 26 26 26 51 51 51 51 51 51 55-64 (8%) 55-64 (8%) 55-64 (8%) 55-64 (8%) 55-64 (8%) 55-64 (8%) 65+ (5%) 65+ (5%) 65+ (5%) 65+ (5%) 65+ (5%) 65+ (5%) 21 21 21 21 21 21 21 21 21 21 21 21 56 56 56 56 56 56 Geo-political Zones Geo-political Zones Region Region Region Region Region Region North central (16%) North central (16%) North central (16%) North central (16%) North central (16%) North central (16%) 22 22 22 22 22 22 30 30 30 30 30 30 46 46 46 46 46 46 North east (13%) North east (13%) North east (13%) North east (13%) North east (13%) North east (13%) 14 14 14 14 14 14 23 23 23 23 23 23 60 60 60 60 60 60 North west (21%) North west (21%) North west (21%) North west (21%) North west (21%) North west (21%) 8 8 8 8 8 8 21 21 21 21 21 21 68 68 68 68 68 68 South east (13%) South east (13%) South east (13%) South east (13%) South east (13%) South east (13%) 26 26 26 26 26 26 24 24 24 24 24 24 47 47 47 47 47 47 South west (18%) South west (18%) South west (18%) South west (18%) South west (18%) South west (18%) 34 34 34 34 34 34 20 20 20 20 20 20 44 44 44 44 44 44 South south (20%) South south (20%) South south (20%) South south (20%) South south (20%) South south (20%) 25 25 25 25 25 25 27 27 27 27 27 27 47 47 47 47 47 47 9

  10. The demand side (III) Access to Finance by income related groups Formal Banked Formal Banked Formal Other Formal Other Informal Informal Financially excluded Financially excluded Total Total 21 21 24 24 53 53 Income Income no income or less than 1000 (10%) no income or less than 1000 (10%) 10 10 21 21 67 67 1001-3000 (12%) 1001-3000 (12%) 7 7 28 28 62 62 3001-6000 (13%) 3001-6000 (13%) 13 13 30 30 52 52 6001 - 13000 (13%) 6001 - 13000 (13%) 21 21 31 31 45 45 13001 - 20000 (9%) 13001 - 20000 (9%) 39 39 25 25 34 34 >20000 (9%) >20000 (9%) 64 64 13 13 20 20 refused to answer/ DK (35%) refused to answer/ DK (35%) 17 17 21 21 61 61 Posession of National ID card Posession of National ID card Possession of National ID card Possession of National ID card yes (39%) yes (39%) 34 34 23 23 40 40 yes (39%) yes (39%) no (22%) no (22%) 28 28 23 23 47 47 no (61%) no (61%) Salary regular source of income Salary regular source of income yes (11%) yes (11%) 71 71 11 11 16 16 no (89%) no (89%) 15 15 26 26 57 57 10

  11. The demand side (IV) Reasons for not having a bank account But physical distance Income related and affordability are factors dominate also important 11

  12. The demand side (V) International comparisons 60 4 10 26 RSA '09 45 2 2 52 Nam ibia '07 41 18 8 33 Botsw ana '09 23 18 27 33 Kenya '09 21 2 24 53 Nigeria '08 Malaw i '08 19 7 19 55 Uganda '06 18 3 17 62 15 12 12 62 Zam bia '05 Rw anda '08 14 7 26 52 12 4 27 56 Tanzania '09 12 1 10 78 Mozam bique '09 Form al - Bank Form al - Other Inform al Financially excluded Source: FinMark Trust, February 2010 12

  13. The supply side – institutions CBN regulated institutions Category Number Commercial Banks (Deposit Money Banks) 24 Microfinance Banks 901 Development Finance Institutions 5 Bureaus de Change (including 50 Class A) 126 Finance Companies (Non Bank Financial Institutions) 112 Primary Mortgage Institutions 98 Discount Houses 5 13

  14. The supply side – banking sector consolidation Pre-consolidation (up to December 2005) Smaller banks with persistent illiquidity, weak asset quality and generally unviable operations Consolidation (2006 - August 2009) The increase in the minimum capital base for all universal banks to N25 billion reduced the number from 89 in 2004 to 24 by 2007 Post consolidation ‘reality check’ (August 2009 to date) Emphasis on transparency, efficiency and access, to provide the much needed intermediation for economic growth and financial access 14

  15. The supply side – deposit money banks (DMBs) Branches per million inhabitant: accessibility 15

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