CENTRAL BANK OF NIGERIA
CENTRAL BANK OF NIGERIANATIONAL FINANCIALLITERACY FRAMEWORKOCTOBER, 2015
National Financial Literacy FrameworkCONTENTSPagevixxiLIST OF TABLES AND FIGURES .LIST OF 1RELEVANCE AND LINKAGES BETWEEN FINANCIAL CAPABILITY,CONSUMER PROTECTION AND MARKET STABILITY.32.2RATIONALE.52.3DEFINING FINANCIAL LITERACY, CAPABILITY ANDEDUCATION .93.0VISION, MISSION AND OBJECTIVES3.1VISION .3.2MISSION.3.3OBJECTIVES.111111114.0STRATEGIC FOCUS AND TARGET SEGMENTS .4.1STRATEGIC APPROACH.4.2THE IDENTIFIED CONSUMER SEGMENTS AND DELIVERYMETHODOLOGY.4.3GOVERNANCE STRUCTURE AND STAKEHOLDER COORDINATION .1313225.0IMPLEMENTATION PLAN6.0.14.27ROLES AND RESPONSIBILITIES OF STAKEHOLDERS.297.0EXPECTED OUTCOMES .8.0.35MONITORING AND EVALUATION.379.0RISKS AND MITIGATION MEASURES.3810.0CONCLUSION .BIBLIOGRAPHY .1.41.43v
National Financial Literacy FrameworkACKNOWLEDGEMENTSThis report presents the approved National Financial Literacy Framework forNigeria. The Central Bank of Nigeria acknowledges the efforts of Messrs. GerdaPiprek (Marketworx- South Africa), members of the Financial Literacy SteeringCommittee (now Financial Inclusion Steering Committee), other FinancialServices Regulators, Financial Services providers development partners,Financial Literacy practitioners and other stakeholders for their contributions inthe production of this document.vii
National Financial Literacy FrameworkLIST OF TABLES AND FIGURESFigure 1Linkages between sustained financial sectorgrowth, market stability, Consumer Protection, Financialeducation and macro-economic growth and stability .Table 2Summary of institutional types, regulators andsector-level bodies .Table 4.Consumer segments: Profile, rationale, channelsand programmes, and stakeholders15Table 5Risks and Mitigants.viii.
National Financial Literacy FrameworkLIST OF ACRONYMSA2FAccess to Finance Survey, published by EFInAARActual Reach (media)ATMAutomatic Teller MachineCBNCentral Bank of NigeriaCEDConsumer Education Division (of the CBN)CGAPConsultative Group to AssistCPConsumer ProtectionCPCConsumer Protection Council (CPC)CPDConsumer Protection Department (of the CBN)CPPCost per point (media)CPSCompulsory Pension SchemeCOMBINCommittee of Microfinance Banks in NigeriaCRBCredit Reference BureauDFIDevelopment Finance InstitutionEFInAEnhancing Financial Innovation & AccessFinCapFinancial CapabilityFinEdFinancial EducationFinLitFinancial LiteracyFLFFinancial Literacy FrameworkFLICFinancial Literacy Implementation CommitteeFLSCFinancial Literacy Steering CommitteeFSSFinancial Sector StrategyGDPGross Domestic ProductIFCInternational Finance CorporationIMFInternational Monetary Fund M&E Monitoring and evaluationMFBMicrofinance BankMFIMicrofinance InstitutionMNOsMobile network operatorsMMOsMobile money operatorsMSMEMicro, small and medium enterpriseixthe Poor
National Financial Literacy FrameworkNBSNational Bureau of StatisticsNCRNational Credit Regulator (South Africa)NDICNational Deposit Insurance CorporationNERNet Enrolment RateN-FEFNational Financial Education Framework (revised FLF)N-FESNational Financial Education SecretariatNGONon-Governmental OrganizationNFISNational Financial Inclusion StrategyNSENigerian Stock ExchangePPPPublic Private PartnershipSECSecurities and Exchange CommissionUSDUS Dollarx
National Financial Literacy FrameworkPREFACEThe Government of Nigeria recognized the need for improving thelevels of financial inclusion and in 2012, launched the National FinancialInclusion Strategy, which aims to increase financial inclusion from 53.7 percent in 2010 to 80per cent in 20201. The Strategy sets as one of its goals clientempowerment, defined as 'an increase in the bankability of the populationthrough the increase of financial literacy and coordinated national financial2literacy initiatives that are complemented by consumer protection' .A financial literacy framework (FLF) was developed in 2013 to provide ablueprint for implementing financial literacy for the attainment of financialsystem stability and as a key component for the implementation of theNational Financial Inclusion Strategy.In the course of implementing the FLF, some gaps were identified whichnecessitated its review. Particularly, the following areas were identified forthe review:!Consumer Financial Education Strategy;!Stakeholder Strategy;!Support for Enabling Environment; and!Monitoring and Evaluation FrameworkAccordingly, the FLF was revised and renamed the National FinancialLiteracy Framework (NFLF). The NFLF maintains a multi stakeholder approachto the implementation of Financial Literacy in Nigeria and provides acomprehensive blueprint for the development and implementation offinancial literacy programs across the various sectors in the Nigerianfinancial system. It also incorporated key findings from EFInA Access toFinance Survey of 2014 and the National Baseline Survey on FinancialLiteracy, 2014 as well as extensive work done by other stakeholders.This document therefore presents an outline for implementing financialliteracy towards the attainment of the objectives of the financial inclusionstrategy and ultimately, financial system stability.12National Financial Inclusion Strategy (2012)Ibidxi
National Financial Literacy Framework1.0INTRODUCTIONFinancial literacy may be defined as the possession of knowledge and skillby individuals to manage financial resources effectively to enhance theireconomic well-being. It also enables financial service providers to betterunderstand their products, the associated risks and the needs of theircustomers. It includes trust, confidence and participation in the formalfinancial system. Financial literacy, also referred to as financial capability, isan outcome of financial education.The Organization for Economic Co-operation and Development (OECD)defined financial education as “the process by which consumers/investorsimprove their understanding of financial products, concepts and risks, andthrough information, instruction and/or objective advice, develop the skillsand confidence to become more aware of financial risks andopportunities, to make informed choices, to know where to go for help,and take other effective actions to improve their financial well-being”.Financial literacy occupies a center-stage in the quest to achieve financialinclusion, financial stability, economic growth and development. Inclusivegrowth in the economy can only be achieved where a larger proportion ofthe population participates in the financial markets. For this to happen, it isessential for the populace to know, understand and develop the ability toevaluate financial products and services as well as participate in thefinancial markets.Financial literacy is also an essential requirement for consumer protectionin the financial sector as it creates better awareness and understanding ofpolicies, financial products, prices, and practices. A Consumer ProtectionFramework has been developed to ensure the institution of redressmechanisms and provide strategic direction in promoting fair pricing andmarket conduct by providers of financial services.This framework provides a roadmap for enhancing financial literacy toachieve financial inclusion in Nigeria and ultimately the attainment of thegoal of Financial System Strategy (FSS) 2020. It is designed to reach allsegments of the society with emphasis on specific target groups. Thedocument is divided into ten sections:1
National Financial Literacy FrameworkSection one provides an introduction and overview of the financial literacyframework and its benefits to the Nigerian economy. Section two providessome basic definitions and discusses the current status of financial inclusionand reasons for global attention of governments to financial literacy. Theoverall goal and specific objectives of financial literacy including theoverriding Vision and Mission are contained in section three, while sectionfour addresses the strategic focus, identifies target segments and thedelivery mechanism for financial education in the Nigerian Financialsystem.Section five contains details of the implementation plan divided into short,medium and long term while section six itemizes the activities expected tobe carried out by various stakeholders within specified timelines. Sectionseven identifies the roles and responsibilities of various stakeholders in thedelivery of financial literacy programs across different target groups; theexpected outcomes, which include reduction in the number of financiallyexcluded persons, enhanced economic wellbeing of Nigerians andimproved savings culture and financial discipline are enumerated insection eight. Section nine discusses the monitoring and evaluationtechniques while section ten concludes the framework.2
National Financial Literacy Framework2.0BACKGROUNDThe National Financial Inclusion Strategy launched on the 23rd October,2012 aims to reduce the financial exclusion rate in Nigeria from 46.3 percent in 2010 to 20 per cent in 2020. A key component of theimplementation process is client empowerment achieved throughimproved financial literacy and consumer protection. To support the clientempowerment component of the financial inclusion agenda, a financialliteracy framework was developed in 2012 in collaboration with relevantstakeholders.The National Financial Literacy Framework was developed drawing fromexperiences in the design and implementation of similar frameworks inother jurisdictions; a review of secondary research including ananalysis of the findings of Access to Finance Surveys conducted byEFInA (Enhancing Financial Innovation and Access); a review of the‘Mapping Exercise of Financial Literacy Initiatives in Nigeria’ commissionedby the GIZ in collaboration with CBN in 2013; and a review of otherrelevant policy and strategy documents.2.1RELEVANCE AND LINKAGES BETWEEN FINANCIALCONSUMER PROTECTION AND MARKET STABILITYCAPABILITY,Financial system stability is a prerequisite for sustained financial marketgrowth. If the building blocks, checks and balances for market stabilityare not in place, the financial sector is at risk of market failure3.3Piprek, G.L., Marketworx Africa (Pty) Ltd3
National Financial Literacy FrameworkFigure 1: Linkages between sustained financial sector growth,market stability, consumer protection, financial education andmacro-economic growth and stabilitySource: MarketworxThe push for liberalization and modernization of the financial sector andincreased financial inclusion has resulted in deluge of new financial serviceproviders and products. experienced and inexperienced clients findthemselves exposed to a range of products that are either totally new ortoo complex and sophisticated. the risk of financial market or bank failureis particularly high during rapid market expansion or institutional growth ifunchecked. this underscores not only the need for prudential regulations,supervision and enforcement, but also financial education and consumerprotection.4
National Financial Literacy FrameworkFinancial education is cardinal to the financial system in the followingways: Financially capable consumers make better decisions inmanaging and growing their assets and are less susceptible tounscrupulous financial services providers. Improved financial capability can result in increased uptake ofappropriate products, decreased product cancellations, debt stressand repayment failure, and ultimately reduce risk for financialinstitutions. The behavior of financially capable consumers could engendercompetition amongst financial service providers and this cantranslate to more efficient products and competitive prices forconsumers as well as eliminate unscrupulous financial serviceproviders. Strong financial sectors and people capable of managing,protecting and growing their assets will ultimately support overallmacro-economic stability and growth.2.2RATIONALENational PrioritiesIncreased Financial inclusion as a National Priority: The NationalFinancial Inclusion Strategy (NFIS) launched in 2012 recognizes lowlevels of financial capability as one of the main constraints toimproved financial inclusion and recommended the developmentand implementation of a National Financial Literacy Framework(NFLF).Consumer Protection and Market Stability: The mix of newproducts and service providers coupled with new inexperiencedclients in the financial sector, puts consumers at risk of poor decisionmaking and abusive or fraudulent practices.The asymmetry of information and powerconsumers and providers of financialadversely affect the bargaining power ofparticularly the case for vulnerable segmentsthe poor and the uneduc ated.5imbalances betweenservices could alsothe consumer. This isof the market such as
National Financial Literacy FrameworkFinancial education plays critical roles in enabling consumers makebetter financial decisions and recognizing fraudulent practices. Anappropriate consumer redress framework also needs to be in placeand consumers must be informed (through financial education) oftheir rights, responsibilities and redress options.Improved Livelihoods: The 2014 Baseline Survey on Financial Literacyrevealed that about 30 per cent of the adult population* of 98 millionsurveyed generates an income from agriculture-related activities and26.1per cent of the adult population owns a business4.Thisunderscores the need for appropriate financial intermediation tot h e s e g r o u p s ( farmers and MSMEs), the absence of whichp r e s e n t s a n impediment to the growth of the sector and theeconomy as a whole. Consumer awareness and financial literacy –combined with an effective consumer protection framework – areimportant requirements for increasing financial intermediation in thesesectors.A Dynamic Financial Sector and Past LegaciesThe introduction of numerous policies, regulatory requirements andthe proliferation of products, services and financial institutionproviders: The financial sector has become more complex in recentyears. People are moving from being unbanked to u s i n g thirdgeneration products such as mobile banking; The 2014 NationalBaseline survey on Financial Literacy revealed that consumers lackeda general knowledge of most banking products in the market placeas 70 per cent of the adult population (98 Million) have noknowledge of mobile money product and more than 30 per cent donot know about current accounts5.2014 National Baseline Survey on Financial Literacy* Aged 16 years and above6
National Financial Literacy FrameworkImproved Product Offering: Financially capable consumers expresstheir needs better and thus contribute to the development ofappropriate products and services to suit their needs.Credit Bureau: There are critical to the optimal functioning of creditmarkets. However, the public need to be educated on how theyoperate, the implications of bad credit records and their complaintsredress processes. This also means that the necessary disputeresolution mechanisms must be in place as part of a broaderconsumer protection framework.Lack of Trust in the Financial Sector: This is a result of historic bankfailures and the crisis in the banking and capital markets following theglobal financial crisis of 2008/2009. While it is not the role of Financialeducation to instill trust in institutions (trust must be earned by theinstitutions through their treatment of consumers), it is necessary tomake the public aware of the developments in the sector.Changes in the Socio-Economic ProfileChanging Demographics:Longer life expectancy, increasingchildcare expenses and household costs are increasing financialpressures on households. Governments and employers are alsoincreasingly shifting the cost burden for social services to theindividual. The implication is that consumers need to take moreresponsibility for their financial well-being, and therefore need to bemore financially capable.Growing Middle Class: Consumers are increasingly becoming creditworthy and may face increasing social pressure to showcase theirwealth. The principles of responsible finance – particularly in relationto credit – should be emphasized with the suppliers of financialservices, and the public needs to be made aware of both thebenefits of credit and the dangers of over-indebtedness.52014 National Baseline Survey on Financial Literacy7
National Financial Literacy FrameworkIncreasing Urbanization: Over time, urbanization results in theweakening of social networks and relationships increasing the needfor self-reliance, long-term planning and risk management.Urbanization also leads to increased exposure to financial serviceproviders and sophisticated financial products.Young Population: The relative increase in the number ofyoung people in the population – combined with urbanization – isa major social challenge facing many African countries, includingNigeria. The youth often fail to find gainful employment andhave to carve out a living through a small enterprise. Support toyouth and enterprise start-ups are required, including personalfinancial management skills.Levels of Financial CapabilityLow Levels of Penetration: The low levelcomplex financial products and low- costamong the banked, points to a lackunderstanding of the potential benefits ofchannels.of penetration ofelectronic channelsof awareness andthese products andLack of Long-term Planning and Growing Assets: While mostNigerians save, these savings appear to be primarily forpurposes of income smoothing, i.e. focused on the short-term.The uptake of pension products is also limited to just 5 per cent ofthe adult population6Risk Management: With insurance penetration at just 1.5 per cent 7,there is a lack of appropriate risk mitigation strategies and familiesand business owners often sink deeper into poverty following anadverse experience.MSMEs and Farmers: Improved personal financial capability is aprecursor to improved financial management of a small business orfarm. Personal and business finances are also closely linked in mosthouseholds; few households maintain separate budgets and bankaccounts from their businesses.6, A2FEFInA – 20148
National Financial Literacy FrameworkYouth: Given the rapid development of the financial sector, thereare few role models and mentors for the youth to provide guidanceon money management and navigate them through thecomplexities of the financial sector. The importance of ‘earlyintervention’ in the sphere of financial education is widelyrecognised, as it is easier to instil the right values, attitudes andperceptions among young people than to change the habits andperceptions of older people.2.3DEFINING FINANCIAL LITERACY, CAPABILITY AND EDUCATIONFinancial Literacy relates to an individual’s knowledge of financialconcepts and products. This knowledge in turn affects the individual’svalue system and attitudes thereby impacting positively on his or heraction/decision on financial matters.The term ‘financial capability’ encompasses ‘financial literacy’ andreflects the multiple dimensions of Knowledge, Skills, Attitudes,Confidence and Behaviour (KSACB). It is “The ability of an individual toact with confidence in making optimal choices in the management ofhis/her money matters8.”Financial Education is the process by which consumers/investors improvetheir understanding of financial products, concepts and risks and throughinformation, instruction and/or objective advice, develop the skills andconfidence to become more aware of financial risks and opportunities, tomake informed choices, to know where to go for help and take othereffective actions to improve their financial well-being97A2F EFInA - 20148Adapted from: Financial Literacy Framework for
The Central Bank of Nigeria acknowledges the efforts of Messrs. Gerda Piprek (Marketworx- South Africa), members of the Financial Literacy Steering Committee (now Financial Inclusion Steering Committee), other Financial Services Regulators, Financial Services providers development partners, Financial Literacy practitioners and other stakeholders for their contributions in the production of .
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