NGX doubles down on goal for financial inclusion and empowering individual investors

Nigeria, a country with an adult population of 106 million, offers a vast market for financial services. Despite this it faces the expectation of a 16.8% shortfall in meeting its financial inclusion target.

Financial literacy is critical to the growth of capital markets and the Nigerian Exchange Limited (“NGX”) prioritises its commitment to bridging the financial inclusion gap in Nigeria. As a member of the Financial Inclusion Steering Committee of the Central Bank of Nigeria (CBN), and Financial Inclusion Technical Committee of the Securities and Exchanges Commission (SEC), we continue to contribute towards the achievement of Nigeria's National Financial Inclusion Strategy (NFIS) of reducing the proportion of Nigerians that are excluded from the capital market.

NGX supports the country-wide approach to addressing financial literacy and inclusion through an array of activities aimed at providing strategic direction, developing educational and outreach programmes, crafting suitable products and pilot initiatives, and reviewing progress of national financial literacy and inclusion targets.

The National Financial Inclusion Strategy targeted policy makers and market innovators alike with a common objective of enhancing access to finance and reducing the financial exclusion rate in Nigeria from 46.3% in 2010 to 20% in 2020. While overall financial inclusion continues to grow incrementally, progress has been too slow in meeting this target.

A survey conducted in 2020 by EFINA revealed that less than 30% of adult Nigerians have or use products or services from non-bank formal financial institutions and 78% attribute a lack of awareness and suitability of products as the main barriers to adoption. The survey also revealed that although Nigeria has a higher proportion of banked adults than many comparator countries, the proportion of adults without access to basic financial services is estimated at 36%.

As the challenges persist, the rapid growth in mobile payment technology and alternative financial services combined with lack of financial literacy is likely to exacerbate inequality. Amid a growing number of financial instruments, such as equities, bonds and exchange traded products, gaining importance, financial literacy initiatives need to be scalable to be effective.

NGX recognises that making well-informed financial decisions plays an important role in the ability of individuals to manage their financial affairs and contribute effectively to economic activities. To this end, the Exchange continues to implement and support initiatives that encourage the wider investing public to develop sustainable investment habits.

Inspiring children and youths

As a multi-asset securities exchange hub, NGX has pioneered a collaborative approach to advancing financial literacy and inclusion through a range of initiatives by engaging the next generation of investors and providing training through its dedicated learning arm, NGX X-Academy.

In 2014, NGX joined over 130 countries around the world in celebrating the Global Money Week (GMW). The annual global celebration, organized by the Organization for Economic Co-operation and Development (OECD) and International Network on Financial Education (INFE), consists of local and regional events and activities aimed at inspiring children and youths to learn about money, saving, creating livelihoods, gaining employment and entrepreneurship. Since the first celebration in 2014, the Exchange has directly impacted close to 22,368 students through the GMW celebrations.

The role of financial literacy in improving the quality of life cannot be overemphasised. It goes without saying that financially literate investors are knowledgeable about opportunities in the capital market and are therefore in a better position to make informed investment decisions. So, greater awareness about the capital market is required on the part of retail investors to evaluate the choices available to them.

The Exchange’s longstanding commitment to promoting financial literacy is evinced through its hosting of the NGX Essay Competition, its flagship youth-focused financial literacy and inclusion programme. The competition aims to close the gap in classroom learning with the practical knowledge required for long-term personal financial planning. The programme’s overall goal is to develop a culture of wealth creation among youths towards “Building a Financially Savvy Generation”. The Competition has been in existence since 2000 and has inspired over 67,000 young people in more than 12,000 schools across Nigeria.

NGX, through its X-Tour programme, hosted 1,864 students from 21 schools in the 2019. The platform gives students exposure to a ‘live’ view of what happens at a securities exchange through a field trip to any of the Exchange’s trading floors across the country as well as interactive sessions on financial education topics. The tours help to create interest among youths, and inspire them to seek career opportunities in the capital markets. At the onset of the pandemic, NGX transitioned the X-Tours programme to a virtual event and continued to engage schools to host virtual financial literacy sessions with their students.

Capital market training

In 2019, the Exchange strengthened its resolve to promote financial inclusion in the Nigerian capital market by publishing the maiden edition of StockTown, a comic book aimed at promoting financial literacy. The book makes use of illustrated characters to educate readers of all ages about the importance of savings and investment. Now with a second edition, StockTown is available in both print and digital formats and can be downloaded at this link.

As part of efforts to boost capital market literacy, the Exchange also launched X-Academy, its dedicated learning hub, in 2017, and the X-Academy e-learning platform in 2019, to offer bespoke capital market training programmes to empower individuals and businesses to create value, strengthen financial literacy and enhance investment in the capital market.

The X-Academy feeds directly into the government’s National Financial Inclusion Strategy. The programmes offered by X-Academy are facilitated by seasoned subject matter experts, with both domestic and international exposure along with practical experience. These programmes are built around six broad themes, which comprise: Listings and Trading, NGX Products, Market Data and Technology, Financial Education, Corporate Governance, and Risk Management and Compliance.

NGX has played a leading role in developing financial instruments that advance financial inclusion in the Nigerian capital market. The development and issuance of the Federal Government of Nigeria (FGN) Ijarah Sukuk has proven to be a highly attractive instrument that supports inclusion from Nigeria’s ethical and sharia-compliant investors. The Ijarah Sukuk were designed with financial inclusion in mind, offering low entry points to ensure participation from low-income earners.

The Exchange also played a leading role in developing the FGN Savings Bonds, another financial instrument aimed at promoting financial inclusion in the Nigerian capital market. The bond made its debut on the NGX Retail Bond Market in March 2017. It was designed to provide opportunities to invest in capital markets for all citizens irrespective of income level, and to contribute to national development. The bond features a low entry point and is tailored and targeted at retail investors to promote a savings culture among Nigerians while diversifying funding sources for the Federal Government.