A Multi-Dimensional Approach to Financial Literacy in Nigeria

By: Irene Robinson-Ayanwale, Divisional head, business support service, Nigerian Exchange Limited Oct 2022

Nigerian Exchange Limited (“NGX” or “The Exchange) has financial inclusion as one of its key mandates. As a member of the Financial Inclusion Steering Committee of the Central Bank of Nigeria (CBN) and the Financial Inclusion Technical Committee of the Securities and Exchange Commission (SEC), NGX continues to contribute effectively to country-wide aspirations to unlock opportunities for under-served communities and demographies through financial literacy and inclusion. The exchange is particularly invested in increasing the participation of Nigerian young people in the capital market as this would improve capital formation and enhance wealth creation and economic development, thereby securing a brighter future for Africa’s largest economy.

NGX adopts a multi-dimensional approach to closing the financial literacy and inclusion gap through market development, the introduction of innovative products, social media engagement, as well as Corporate Sustainability and Responsibility (CSR) initiatives among other impactful initiatives. The participation of NGX in the upcoming World Investor Week (WIW) organised by the International Organization of Securities Commissions (IOSCO) highlights its commitment to heralding this initiative. With a focus on investor resilience and sustainable finance, the exchange will leverage WIW to implement a far-reaching market-wide engagement initiative aimed at promoting financial education on critical issues and mitigating against increased retail participation in the market such including fraud and scam prevention.

Financial literacy in Africa, especially Nigeria, requires tailored information that caters for every demography to ensure that content is effectively distributed and understood. A study by Enhancing Financial Innovation & Access (EFInA) in 20201 titled “Access to Financial Services in Nigeria” revealed that women continue to be more financially excluded than men with only 45% of women using formal financial services; northern Nigerian adults are significantly more financially excluded than their southern counterparts, and rural adults are more excluded than those in urban areas1. This has significant implications for Nigeria’s prospects to achieve socio-economic and human development targets as enshrined in the Sustainable Development Goals (SDGs). Without a strategic approach towards achieving effective country-wide financial literacy, income and wealth inequality could potentially rise, thereby leaving significant underserved demographies and communities behind. NGX has recognised this need and continues to execute initiatives for the achievement of the overarching goals.

Leaving no one behind

The median age in Nigeria is 18.1 years, according to the National Population Commission (NPC), exhibiting a skew toward the younger generation constituted of mostly teenagers and youths2. The Multiple Indicator Cluster Survey (MICS) 20213 aggregated by the National Bureau of Statistics (NBS) and supported technically and financially by the United Nations Children Emergency Fund (UNICEF) disclosed that the Total Fertility Rate (TFR) – the number of children expected in a lifetime - of the average Nigerian woman was 4.6, showing strong procreation trends2. Nigeria’s young and growing population calls for innovative solutions to address the financial literacy and inclusion gap among young people.

In 2020, NGX launched the maiden edition of StockTown, a comic book series that uses simplistic, illustrative characters to educate readers of all ages about the importance of savings and investments. A long-term brainchild of the exchange, StockTown embodies the characteristics of an educational product that fits perfectly with the diversity of the Nigerian populace and its budding young population.

The financial landscape in Nigeria and the broader continent is evolving quickly and the exchange keeps seeking innovative ways to communicate the ideas of saving and investing using both its platform and leveraging relationships with traditional and new media to expand the reach of this critical information. StockTown demonstrates fundamental ideas around buying and selling securities that effectively transmit abstract ideas in a simplified and fun-to-read format that “crowds-in” millennials and lovers of comics.

Every year, the exchange puts into action programs for kids and teenagers with the goal of creating a generation of smart consumers. The exchange commemorates Global Money Week (GMW), an annual event organized by the Organisation for Economic Cooperation and Development (OECD) and International Network on Financial Education (INFE) by presenting a workshop for young people at its offices and running outreach initiatives in the cities where it operates. The 2022 edition was implemented in partnership with the Lagos chapter of Association for the International Exchange of Students in Economics and Commerce (AIESEC) and reached over 500 students.

Additionally, the Exchange offers X-Tours, a financial literacy class that concludes with a visit to the trading floor and an interactive session with stockbrokers, by secondary schools and university students, and young professionals on the rise. These programs are implemented in accordance with the exchange’s aspiration to support efforts aimed at closing the financial literacy and inclusion gap. The X-Tours programme has been repurposed into a virtual event through the pandemic. NGX has hosted several virtual financial literacy sessions with students at several schools. Through the channels mentioned, NGX has been able to contribute to significantly to reducing the degree of financial exclusion in Nigeria to 20%.

Market Development and Resilience

NGX has realised that constant investor education in the fast-paced knowledge economy is crucial to boosting capital market resilience and literacy. This culminated in the launch of the X-Academy, a knowledge platform for transmitting bespoke capital market training handled by seasoned and certified subject matter experts with both domestic and international exposure and experience. It was conceptualized considering the demand for high-quality, transformational knowledge to help businesses leverage the capital market for sustainable growth.

NGX has taken the lead in creating financial products that improve financial inclusion in the Nigerian capital market. In the predominantly Muslim Northern regions of Nigeria, where interest-based instruments are discouraged, FGN Ijarah Sukuk bonds have become a highly attractive instrument that support the inclusion of Nigeria's ethical and sharia-compliant investors. The purpose of Ijarah Sukuk bonds is to promote financial inclusion and they were created with low entry points to increase participation among low-income investors while maintaining sharia compliance.

The exchange was also instrumental in the creation of the FGN Savings Bond, a different financial product designed for and targeted at retail investors to encourage financial inclusion in the Nigerian capital market. In March 2017, the FGN Savings Bond debuted on the NGX Retail Bond Market. The FGN Savings Bond provides a chance for everyone, regardless of income level, to contribute to national development, and participate in and benefit from the attractive returns available in the capital market. The bond was created with a low entry price and additional multiples, tailored for retail investors, and intended to encourage Nigerians to save while diversifying the Federal Government's revenue sources.