The fragile state of the Nigerian economy has once more been highlighted by a report that millions of Nigerians lack access to modern financial services. A survey jointly conducted by Microfinance Information Exchange and the MasterCard Foundation revealed that 80 million Nigerians, roughly half the population, are not captured in the formal financial system. The report noted that despite the hundreds of microfinance banks across Nigeria, there is a huge gap between the people that have access to financial services and those that do not have.One implication is that the number of those who use banks and other financial institutions are much lower than the estimated 70 per cent or 112 million Nigerians living below the United Nations poverty threshold of $2 per day. This confirms concerns raised recently by the United Nations Development Programme that poverty is rising in Nigeria, not reducing, unlike the trend of rising prosperity in other emerging markets. For instance, the report identified Kenya and Cape Verde as two African countries where the number of (bank) account holders exceeds the population living below the national poverty line. Little wonder that efforts by Nigerias monetary authorities to manage money in circulation to control inflation and interest rates have always failed since a substantial portion of the currency in circulation is outside the formal system.The great number of un-banked Nigerians reflects rising poverty and unemployment while the reforms and interventions of the Central Bank of Nigeria have not succeeded in bringing more people into the banking system. In contrast, Brazil and China have dragged millions of their people out of poverty through intelligent development programmes. Major sectors of the Nigerian economy are depressed, translating into job losses and very little disposable income. For instance, manufacturing, formerly a large employer of labour, is beset by a hostile operating environment, leading to factory closures, relocation to neighbouring countries and less than 50 per cent capacity utilisation on the average for those surviving. From a high of 11.4 per cent in the early 1980s, manufacturing currently contributes a paltry 4 per cent to Gross Domestic Product.Most of the 36 states are struggling to pay workers the new salary scale that has N18, 000 as monthly minimum. Even the federal authorities are yet to fully implement the new structure. Inflation, put officially at 9.4 per cent by the National Bureau of Statistics and 11.9 per cent by the organised private sector, means that disposable income is too little to leave room for savings. One report says that 83 per cent of the average wage earners income in Nigeria is spent on food and other essentials. The World Health organisation adds that up to 20 per cent of the average salary earners income is spent on drugs. Nigerians are also believed to spend the highest per capita in providing electricity for themselves through the ubiquitous petrol and diesel-fired generators as the state-run power monopoly is miserably inefficient. Most Nigerians are therefore left with little or nothing from their meagre earnings for saving.Innovation and entrepreneurship are crucial for long-term economic development. It has been established that there is a link between technology innovation and national economic prosperity. The Federal Government and other tiers of government should invest more in human capital development. Universities represent a crucial linchpin in efforts to build an innovative economy and should be well funded.An ingenious strategy that ties government projects with job creation is sorely needed. The Federal Government should initiate intelligent stimulus plans and implement the long-delayed privatisation of all state-owned commercial enterprises. It should fast-track the power sector reforms to free the industry from government control. There should be a review of import and export tariffs to encourage a diversification of export revenues away from oil and protect local industries.The CBN should also pursue policies that will encourage banking and drop its policy somersaults. The reversal of the universal banking model after only a few years, the scrapping of community banks and the rush to a so-called cashless economy are ill-thought-out policies. The CBN failed to appreciate that the advent of the big bank model succeeded in attracting many previously un-banked Nigerians, while community banking needed reforms and stricter supervision, not scrapping. The microfinance banks that replaced them have not matched their ability to draw customers and have a high attrition rate as well.Above all, the CBN urgently needs to rebuild confidence in the banking system, which was badly bruised in the wake of the crisis that began in 2009. The Asset Management Corporation of Nigeria recently bought N2.78tn worth of non-performing loans from 21 of the 24 deposit money banks at the cost of N1.16 trillion. The crisis scared many who now seek either off-shore or alternative investment instruments. The government should also do more to support efforts to revitalise the capital market where market capitalisation was N6.62tn on October 14, compared to a high N15.3tn in March 2008.The federal, state and local governments should plough resources into infrastructure and cut down on recurrent spending in line with global trends, while prioritising job-creation programmes that will empower millions of people and encourage savings and investment.
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