Introduction
Nigeria’s financial inclusion framework has succeeded in expanding access to formal financial services but has failed to protect continued participation, allowing routine bank fees to quietly erode small balances and push low-income users out of the formal financial system.
This governance failure does not arise from regulatory absence. Rather, it reflects institutional design gaps: disclosure without protection, fragmented enforcement responsibilities, misaligned supervisory incentives, and inclusion metrics that prioritise account opening over account retention.
As the Central Bank of Nigeria reassesses conduct supervision, consumer-protection effectiveness, and digital-finance regulation in the aftermath of the 2023–2024 naira redesign and subsequent enforcement actions, this unresolved weakness has become more visible. High headline inclusion rates coexist with persistent dormancy, declining trust, and widespread low-balance attrition. Financial inclusion, in practice, remains fragile.
This Policy Pulse examines how cumulative fees undermine sustained participation, why existing institutions fail to respond, and what governance-level reforms can close this gap without undermining financial stability.
The Lived Problem: Balance Erosion and Account Exit
For millions of low-income Nigerians, participation in the formal banking system is defined not by credit access or asset accumulation but by the ability of an account to remain viable at low balances.
Accounts are frequently opened during government social-transfer programmes, salary onboarding exercises, student enrolments, or crisis-driven pushes toward cashless payments. These entry points are often successful. What follows, however, is a steady erosion of small balances through routine deductions: monthly account-maintenance fees, SMS alert charges, ATM withdrawal fees, and electronic transaction costs.
Each deduction is typically modest and formally disclosed. Taken together, however, they accumulate into a predictable outcome for users with irregular incomes and thin financial buffers. Balances decline to zero. Accounts fall into inactivity. Trust in formal banking diminishes. Users revert to cash or informal mechanisms.
This pattern is not primarily the result of poor consumer choices or low financial literacy. It is a governance failure in system design, one that tolerates cumulative balance erosion without triggering regulatory intervention.
Why It Matters: Inclusion Without Retention
Access Gains and Their Limits
Nigeria has recorded notable gains in financial access. According to the 2023 Access to Financial Services in Nigeria survey by Enhancing Financial Innovation & Access, approximately 74 per cent of adults had access to financial services, while 64 per cent owned a formal account. These outcomes reflect over a decade of coordinated policy effort, including agent banking expansion, digital-payments infrastructure, and national inclusion strategies.
Yet access metrics conceal fragility. Account ownership does not guarantee continued participation.
Poverty, Irregular Income, and Cost Sensitivity
This fragility has material implications in a country where approximately 63 per cent of the population, about 133 million people, experience multidimensional poverty. For low-income households, incomes are often irregular, balances are small, and financial resilience is limited. In this context, even small recurring deductions can represent a meaningful share of disposable income.
Financial inclusion cannot be credibly assessed by the number of accounts existing in databases. It must be assessed by whether low-income users can remain in the system without being priced out by routine charges.
The Core Policy Gap: Access Without Retention
Nigeria’s financial inclusion architecture is robust on entry but weak on continuity.
Policies, targets, and incentives are aligned around:
i. account ownership,
ii. payment-infrastructure expansion, and
iii. digital transaction volumes.
They are not aligned around:
i. balance preservation,
ii. account survival at low income levels, or
iii. fee-induced attrition.
This asymmetry explains why exclusion persists even within a densely regulated financial system.
The Governance Failure
Disclosure Without Protection
The Central Bank of Nigeria’s Guide to Charges by Banks and Other Financial Institutions (2020) requires banks to publish detailed pricing schedules and constrains certain excessive charges. The regulatory philosophy prioritises transparency.
For low-income users, however, transparency is not protection.
Low-balance customers typically
i. have limited bargaining power,
ii. face constrained alternatives, and
iii. lack the ability to meaningfully compare pricing structures across institutions.
Disclosure does not prevent harm where users cannot easily exit or negotiate. Cumulative deductions continue regardless of understanding. Transparency without enforceable limits allows predictable balance erosion to persist.
Fragmented Enforcement
Oversight of retail banking conduct is institutionally fragmented:
i. The Central Bank of Nigeria oversees prudential and conduct supervision.
ii. The Federal Competition and Consumer Protection Commission enforces consumer-protection standards.
iii. The Nigeria Deposit Insurance Corporation focuses on depositor protection.
iv. The Nigerian Inter-Bank Settlement System aggregates transaction data.
No institution is explicitly mandated to treat fee-driven dormancy or low-balance attrition as a supervisory risk. Harm is visible but not actionable. Complaint mechanisms exist, but low-value cases rarely escalate into systemic intervention.
Misaligned Incentives
Supervisory systems do not penalise exclusionary outcomes. Banks are not sanctioned for high dormancy rates. Fee revenues are aggregated into broad income lines, obscuring their distributional effects. Without mandatory reporting that links fees to customer outcomes, regulators lack early-warning signals. The system tolerates attrition not because it is endorsed, but because no institution is clearly responsible for preventing it.
What The Evidence Shows
Dormancy and Account Attrition
Publicly accessible, disaggregated datasets on account dormancy are limited. However, multiple secondary analyses drawing on payment-system transaction data published by the Nigerian Inter-Bank Settlement System and summarised by reputable financial-sector analysts indicate that between 18 and 19 million bank accounts were inactive or dormant on a recurring monthly basis through 2024.
During periods of economic disruption, including the naira redesign, analysts using the same transaction-flow methodology reported substantially higher inactivity counts, in some cases exceeding 40–50 million accounts nationally. Because NIBSS does not publish a single, official dormant-account time series, these higher figures should be interpreted as upper-bound estimates derived from transaction inactivity thresholds, rather than precise official counts.
The key point is not the exact number, but the persistence and scale of inactivity relative to total accounts opened. EFInA survey data reinforces this pattern. While approximately 38 million Nigerian adults remain unbanked, a non-trivial share of previously banked respondents cite high charges and unexplained deductions as reasons for disengagement. The survey does not quantify causality, but it establishes cost sensitivity as a recurrent factor in disengagement decisions.
Fee Revenues and Distributional Impact
Bank disclosures provide firmer evidence on the scale of retail fee income.
i. Eight listed deposit money banks reported approximately N59.67 billion in account-maintenance fees in the first quarter of 2024.
ii. BusinessDay’s aggregation of published financial statements shows that Nigeria’s Tier-1 banks earned over N100 billion from account-maintenance and electronic-banking charges within nine months of 2023.
These figures do not imply misconduct. They demonstrate that small, individually permissible charges generate substantial revenue at scale. In a high-poverty environment, the distributional impact of such revenues warrants regulatory scrutiny.
Illustrative Household Impact
For an illustrative low-income user maintaining an average balance of N5,000–N10,000, routine deductions of N300–N500 per month translate to an annual cost of N3,600–N6,000. This illustration draws on published bank fee schedules and common usage patterns; it is not a statistically representative estimate.
For households near the poverty line, this magnitude of cost can equal several weeks of basic food expenditure. The illustration is intended to demonstrate scale, not precision.
Fintech Migration: Adaptive Exit
Low-income Nigerians have not exited financial services entirely. Many have migrated to digital platforms such as OPay, Moniepoint, PalmPay, Paga, and Kuda.
According to aggregate transaction statistics released by the Central Bank of Nigeria and summarised in its 2024 payments-system reports, mobile money and related digital channels processed transaction values in excess of ₦70 trillion during 2024. This figure reflects the combined value of licensed mobile money operators and agent-banking channels.
Fintech growth, however, is best understood as a response to fee-driven exclusion, not a resolution of the underlying governance problem.
Regulatory Convergence Risks
Regulatory actions taken between 2024 and early 2026, including KYC-related sanctions and the approval of national microfinance bank licences for several large fintech platforms, are documented in official licensing circulars and press releases issued by the Central Bank of Nigeria.
These upgrades strengthen oversight but also increase capital, reporting, and compliance costs. Over time, such convergence may compress low-fee models, raising questions about long-term affordability for low-balance users.
Consumer-Protection Gaps
Consumer-protection mechanisms across digital platforms remain uneven. Dispute-resolution timelines, fee prompts, and charge transparency vary significantly. Without system-wide governance reform, migration risks reproducing the same exclusionary dynamics in a new institutional setting.
Why the System Persists
Three forces reinforce inertia:
1. Revenue pressures in a low-margin banking environment.
2. Regulatory caution, prioritising systemic stability over distributive outcomes.
3. Weak inclusion metrics, focused on access rather than retention.
Low-value harms are costly to enforce and politically invisible, allowing exclusion to persist quietly.
Comparative Insights
International experience illustrates governance levers rather than templates.
i. India: The Reserve Bank of India’s Basic Savings Bank Deposit Account framework caps fees and preserves low balances.
ii. Kenya: Temporary fee waivers and transparency requirements protected low-value users during crises.
iii. United Kingdom: Payment Accounts Regulations mandate access to basic fee-free accounts.
iv. South Africa: Conduct standards explicitly govern account closures and fees.
These cases demonstrate that binding classifications, outcome-oriented reporting, and enforceable consumer rights can protect inclusion without destabilising finance.
Policy Options for Reform
Nigeria does not need new institutions. It needs clearer mandates, measurable enforcement, and outcome-oriented supervision.
Designate Protected Low-Balance Accounts
Within existing authority, the Central Bank of Nigeria should designate a protected retail-account category with capped or zero maintenance fees for eligible low-income users.
Introduce a Retail Banking Consumer Cost Index
An annual Retail Banking Consumer Cost Index, published by the CBN, would track the cost of maintaining low-balance accounts across institutions, improving transparency and accountability.
Align Supervision With Retention Metrics
Dormant-account rates, low-balance attrition, and fee distribution should be integrated into supervisory dashboards, leveraging data already aggregated by the Nigerian Inter-Bank Settlement System.
Strengthen Consumer Enforcement
Standardised pre-transaction fee prompts, binding dispute-resolution timelines, and predictable penalties for unexplained deductions would operationalise existing consumer-protection rules.
Implementation Framework
|
Action |
Lead Institution |
KPI |
Timeline |
|
Designate a protected low-balance retail account |
Central Bank of Nigeria |
% of eligible accounts enrolled |
12 months |
|
Publish quarterly dormant-account metrics |
CBN / NIBSS |
Public dormancy dashboard |
6 months |
|
Introduce Retail Banking Consumer Cost Index |
CBN |
Annual index publication |
12 months |
|
Enforce pre-transaction fee prompts |
CBN |
Compliance rate across banks |
9 months |
|
Strengthen fee-complaint resolution |
FCCPC |
Avg. resolution ≤ 30 days |
9 months |
Conclusion
Routine commercial bank deductions have become a structural constraint on financial inclusion for low-income Nigerians, not because regulation is absent, but because governance is incomplete. Evidence of widespread poverty, substantial fee revenues, persistent dormancy, and adaptive exit into fintech platforms points to a system that measures access while tolerating attrition.
By converting guidance into enforceable protection, aligning supervision with retention outcomes, and strengthening consumer enforcement within existing mandates, Nigeria can close this hidden governance gap without undermining financial stability.
Financial inclusion should not be measured by how many accounts are opened but by how many are actively used, trusted, and retained, especially by the poorest.