Nigeria recently faced a cash challenge when the Central Bank decided to change the currency to new notes. This move highlighted a major issue: the significant gap among the underbanked, the low level of financial literacy, and the limitations of traditional financial systems in this part of the world.

A 2022 World Bank report showed revealing statistics – approximately 64 million out of Nigeria's nearly 200 million people don't have an account with a financial institution or mobile money platform. This paints a stark picture of the urgent need for change. But here's where blockchain steps in. It's not about complexities; it's about finding a solution.

In this article, we will explore how blockchain has the potential to bridge these gaps and revolutionize the financial landscape, providing a way forward for a more inclusive and accessible financial future in Nigeria.

What is blockchain?

Blockchain, in simple terms, is like a digital ledger that records transactions across a network of computers. It's not held by a single authority, making it secure, transparent, and efficient. It is a method of recording information that makes it impossible or difficult for the system to be changed, hacked, or manipulated.

Key Features of Blockchain

1. Decentralization: Traditionally, you need the approval of regulatory authorities like a government or bank for transactions; however, with blockchain, transactions are done with the mutual consensus of users, resulting in smoother, safer, and faster transactions.

2.Transparency: All transactions are visible to participants, enhancing accountability.

3. Highly Secure :It uses a digital signature feature to conduct fraud-free transactions, making it impossible for other users to corrupt or change the data of an individual without a specific digital signature.

4. Automation Capability : It is programmable and can generate systematic actions, events, and payments automatically when the criteria of the trigger are met.

Key Benefits of Blockchain

1.Security: One major advantage of blockchain is the level of security it can provide, and this also means that blockchain can protect and secure sensitive data from online transactions.

2. Speedy and convenient transactions : Blockchain technology offers this as it only takes a few minutes to complete a transaction, whereas other transaction methods can take several days to complete.

3. Reduced transaction cost: There is also no third-party interference from financial institutions or government organizations, which means reduced transaction costs due to elimination of intermediaries.

Four key areas in which blockchain can be deployed to improve financial inclusion

We identified four key use cases in Nigeria where blockchain can be used to improve financial inclusion.

1. Enabling Payment: Blockchain can improve payments in two critical areas. First, it simplifies and secures both domestic and international remittances with seamless peer-to-peer transactions via peer-to-peer (P2P) transfers and payments.

2. Identity Management: To prevent illegal transactions, banks can use blockchain for KYC to securely identify, verify, and evaluate customer profiles. Second, blockchain has the ability to keep records and documentation by creating, storing, and managing consistent, formal records of transaction activities.

3. Access to Finance: Blockchain opens doors for improved access to finance through different avenues. This includes providing supply chain financing to businesses, funding for critical inputs in various industries, facilitating small-scale loans and decentralized lending, and encouraging micro-level savings and investments. By addressing the diverse needs of individuals and businesses in these key areas, blockchain acts as a catalyst for a more inclusive financial landscape.

4. Land Titling and Registration: Blockchain technology can increase transparency when it comes to land ownership changes and reduce the possibility of manipulation of existing titles.

Blockchain can aid in the efficient transfer of government-to-person (G2P) programs, which allow the government to send money directly to people in need, particularly for poverty alleviation programs and targeted intervention schemes.

Key Stakeholders for Blockchain Adoption in Nigeria

Blockchain technology has enormous potential in Nigeria, but in order to realize this potential, four key stakeholder groups must collaborate: regulators, financial institutions (including fintechs), financial sector deepening organizations, and development institutions.

1. Regulators : The most important of these stakeholder groups, as you would imagine, is the regulators, as they have the final say on the innovations that are developed and deployed within the country.

2. Financial institutions : Financial institutions like commercial banks and fintech companies can explore forming a consortium with other players within the Nigerian financial services ecosystem to develop and test blockchain-based solutions that address current state challenges and improve access to finance. They can also initiate industry-wide awareness, educating Nigerians on the impact of blockchain-related solutions.

3. Financial Sector Deepening Organizations (FSD) : This sector can Implement policy advocacy and capacity development initiatives through conferences, hackathons, skills acquisition, etc. for various stakeholder groups, including financial sector regulators, blockchain experts, programmers, and

software designers.

FSD organizations can also set up dedicated funding desks for fintech startups working on embedding blockchain-enabled technology to drive financial inclusion and poverty reduction, especially for the underserved, such as the poor and MSMEs.

4. Developmental Institutions: Organizations such as the World Bank, IMF, and CAC can establish a regional network of regulators and relevant stakeholders for industry-wide collaboration and cooperation, as well as provide technical support to regulators for the development of blockchain technology and tools within their ecosystems.

In conclusion, as Nigeria stands at the crossroads of financial evolution, the adoption of blockchain technology is not just a technological upgrade; it is a commitment to a future where financial services are accessible to all.

By addressing the gaps in financial inclusion, blockchain holds the promise of transforming the economic landscape and creating a more inclusive, efficient, and secure financial future for Nigeria and its people.

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