In a country where over 40% of the population lives below the poverty line, saving isn’t just a luxury; it’s a necessity. Whether it’s for emergencies, school fees, or starting a small business, saving gives people a safety net.
But the reality is only about 32.5% of adults in Nigeria actively save, and even fewer invest. According to the SEC, less than 5% of Nigerians invest in the capital market.
Why is this the case? Well, the truth is, Nigeria’s financial system doesn’t exactly make it easy.
CBN and EFinA testified that low income, lack of education, and low trust in Financial Service Providers are why 36.8% of Nigerians are financially excluded. Banks are notorious for hidden fees, unclear terms, and savings products that are, frankly, more mysterious than the British royal family.
Most people don’t even know the difference between a fixed deposit and a mutual fund, let alone where to find the best rates. And it’s not just the banks’ fault—financial literacy is low, and many don’t trust the system enough to commit their hard-earned money.
So, is it any surprise that most Nigerians would rather stash cash under their mattress than navigate this confusing system?
Absolutely not. And that’s where open banking comes in.
In this article, we’ll dive into exactly how open banking can transform this chaotic landscape and make savings and investment not just accessible, but effortless.
1. Transparency becomes the default setting
According to the EFInA Access to Financial Services in Nigeria 2020 survey, only 64% of Nigerian adults were financially included, and of those, many still rely on informal savings methods like local thrift systems, known as Esusu or Ajo.
Banks would often present complicated savings terms or surprise customers with hidden fees.
This lack of transparency has contributed to a culture where many people would rather stash their money in informal savings groups or simply not save at all. But with open banking, the average Nigerian would know exactly what they’re signing up for.
You can clearly see what you’re earning, what you’re paying, and what your options are. Want to know which bank offers the best interest rate or which savings account has the lowest fees? All of that information becomes readily available, allowing people to make informed choices in real time.
This shift is particularly significant in a country like Nigeria, where trust in financial institutions has traditionally been low.
2. Personalization will be at 110%
Many Nigerians earn irregular incomes, often working in the informal economy where traditional salary structures don’t apply. In fact, about 80% of Nigeria’s workforce is engaged in the informal sector.
This means that a large chunk of the population doesn’t fit into the rigid monthly salary model used by most financial products.
With open banking, providers can access transaction data from multiple financial institutions to understand a person’s earning and spending patterns better. So, they can offer flexible savings products, designed specifically for individuals with inconsistent income streams.
Instead of a one-size-fits-all approach, open banking makes it possible to tailor solutions based on what someone can afford each month. For example, third parties could offer personalized savings products such as ride-now-pay-later schemes so riders can save a certain amount of money after each ride.
The possibilities are endless.
There would no longer be barriers to entry for Nigerians who might struggle to commit to rigid savings plans.
Featured read: Consumer savings application (an open banking use case)
3. Competition will breed excellent customer-centric savings and investment products
Transparency would open doors for more competition among financial institutions, and competition drives down fees and encourages banks to offer better terms on savings and investment products.
Because, third parties know they can access a customer’s data and others can too, and customers can compare their options easily to pick the best fit for their financial goals.
As Elaigwu Elaigwu, a fintech expert, put it: “na dem go dey rush you” since service providers would try their hardest to be more attractive to the customer.
4. Nigeria would achieve true financial inclusion
Historically, rural and underserved communities have been left behind by traditional banks due to poor infrastructure and limited resources. Many people don’t have access to the internet or a nearby branch.
Open banking is leveling the playing field for Nigeria’s underserved population by making savings and investment products more accessible. This is why the CBN is pushing to increase financial inclusion to 95% by 2024 through initiatives like open banking.
Technologies like USSD-based banking have already proven to be a key driver of financial inclusion in Nigeria and open banking only strengthens that.
Currently, there are over 170 million mobile phone users, based on subscriptions, in Nigeria. With basic mobile phones, even those in remote areas can access the same savings and investment opportunities as those in major cities.
So, underserved Nigerians get a better chance to build wealth over time.
Open banking’s full potential is unraveling
The journey toward increased financial inclusion is far from over. But with the continued push for open banking, the future of savings and investment in Nigeria looks brighter than ever.
As access expands and innovation continues, the financial landscape will become more inclusive, ultimately allowing every Nigerian—no matter their income or location—to have a stake in the nation’s economic future.
