Relevance of Financial Literacy in Financial Sector Development and Stability in Nigeria

International Journal of Research and Innovation in Social Science (IJRISS) | Volume IV, Issue VII, July 2020 | ISSN 2454–6186

Relevance of Financial Literacy in Financial Sector Development and Stability in Nigeria

Okere, Peter A. Phd¹, Mbanasor, Christian O. Phd² & Uzokwe, Nnamdi J. Phd^{3
1, 2&3}Banking and Finance Department, Imo State Polytechnic, Umuagwo-Ohaji, Nigeria

Abstract: This study was aimed at assessing the relevance of financial literacy in financial sector development and stability in Nigeria. The study theoretically evaluated the relevance of financial literacy in stability and development of financial sector in Nigeria with more reference to the deposit money banks. Financial literacy is a set of skills and knowledge that allows an individual to make informed and effective decisions with all of their financial resources. From the literature, it was observed that financial literacy promotes financial system stability by increasing market demand, equitable use of financial services, improves savings culture and financial discipline, and stimulates economic activity. Financial literacy is essential for a viable financial system which in turn positively affects the economy as a whole. Lack of financial knowledge is the main driver that pulls people away from financial markets. The study therefore recommend that professional bodies like Chartered Institute of Banker of Nigeria (CIBN), Chartered Institute of Loan and Risk Management of Nigeria (CILRMN) etc should expedite more actions to incorporate financial literacy as part of professional training and organize capacity building for members and other target groups. Deposit Money Banks (DMBs) in collaborate with the CBN and other stakeholders in the implementation of financial literacy initiatives should continuously carry out in-house training programmes and capacity building for staff who will subsequently educate the customers on products/services being offered especially the terms and conditions, fees, charges and risks associated with such products.

Keywords: Deposit Money Bank, Financial Literacy, Financial Inclusion, Financial Sector Stability, Financial System.

I.INTRODUCTION

“The Customer is the most important person in the economy and every business succeeds only when the customer is happy”. This explains why the customer is regarded as King. There is no where this assertion is so true and more dominant than the financial service sector. The current realities in the financial sector show that, it is only when the interest of consumers is given proper attention and protected that public confidence would be restored in promoting a strong and stable economy. Financial service sector is fragile and dynamic, it changes as events around the world and country changes. It is the wheel through which economic activities rotates. Generally, activities of the financial service sector impact on the soundness and stability of the financial system, hence, special attention is accorded to them by the regulatory authorities. Financial literacy is essential for viable financial system which in turn positively impacts the whole economy.

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