Financial Inclusion beyond Lagos

Financial inclusion is now globally at the forefront of policy makers, central banks, and development banks attention. Most of the attention has deservedly been focused on the underserved low-income households, especially in rural areas. Nigeria has not been left out as the Central Bank of Nigeria rolled out its financial inclusion strategy in October 2012 aimed at reducing the exclusion rate to 20% by 2020.

Another area of concern in Nigeria is the regional disparity in credit availability. Data released by the National Bureau of Statistics showed that 76.2% of loans were issued to businesses and individuals domiciled in Lagos at the end of 2015. The rest of the South received 14.2%, the North 6.6% and Abuja 3%.  Lagos generated 49.9% of the deposits meaning it sucked in an extra 26.4% from the rest of the country. My personal experience confirms this as an attempt to access credit using collateral in Kano met with little enthusiasm from commercial banks.

While commercial banks could argue that the action is in Lagos, the reality is concentrating their portfolios in Lagos exposes them to concentration risk. This risk is now playing out in the current economic challenges as a number of banks have a large percentage of their credit portfolios exposed to the oil and gas sector and are now facing write-offs amounting to hundreds of billions of Naira. The exposure to real estate in Lagos is also playing out as a number of expensive hotels, office and residential buildings are vacant indicating possible over supply at the high end of the market. Ultimately, a significant number of such loans would be written down, crystallizing losses to the banks. Commercial banks, therefore, need to diversify their loan portfolios across sectors and the various parts of the country as part of their risk management strategy and ultimately for better returns.

Development banks such as the Bank of Industry (BOI) and Bank of Agriculture (BOA) have a role to play considering their development focus which is not confined to one State. There are industries in the rest of the country outside Lagos that are viable and need low-cost financing from BOI. Obviously, Agriculture is not a Lagos affair and the recent recapitalization and restructuring of BOA positions it to significantly increase its loan portfolio across all States. Both institutions, therefore, need to put in place processes that ensure their portfolios are diversified across the country.

To sum it, banks in Nigeria need to diversify their loan portfolios across the country to better manage their risk and ultimately for better returns.


  1. Dear Amina, I totally agree with you direction of thougt. While Bank of Industry should look at real Sectors in the economy, Bank of Agriculture should concentrate on Agriculture in States. They should also not play lip service to financial inclusion of women as a statistics.
    Are you still around I have some issues to raise with you as follow up to AWIEF forum.
    Have a nice day.

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