Risk management as the missing link in Nigeria’s financial literacy drive

 

Temitope Ijibadejo

 Financial literacy is becoming increasingly recognized around the globe as a vital factor in driving economic empowerment. Countries that have poured resources into teaching their citizens how to manage money, plan for the future, and build financial resilience often witness improvements in household stability and national growth. Nigeria is certainly part of this important discussion. With a population exceeding 200 million and a rapidly expanding youth demographic, the nation has made significant strides in broadening access to financial services. The 2023 Access to Financial Services in Nigeria report by EFInA reveals that over 74% of Nigerians now have access to some form of financial service, a notable increase from less than 60% just ten years ago.

 

However, behind these impressive statistics lies a concerning reality: access doesn’t necessarily mean capability. A significant number of Nigerians using financial products like bank accounts, mobile money, or savings plans often lack the essential knowledge or skills to leverage these tools effectively. Many still grapple with managing debt, fall prey to fraudulent investment schemes, or neglect to plan for emergencies. The disparity is evident—while Nigeria’s financial literacy initiatives are progressing, they are missing a crucial element: risk management.

 

At its core, risk management is about the ability to foresee, prepare for, and navigate uncertainty. It’s not about dodging risk entirely—since every financial decision carries some level of risk—but about cultivating the insight to identify, evaluate, and handle it in a constructive way. Integrating this concept into financial education could elevate Nigeria’s financial literacy efforts from a superficial campaign to a deeply ingrained culture of resilience.

 

 

The Missing Link in Nigeria’s Financial Literacy

 

For many years, Nigerian financial literacy programs have mostly focused on teaching the fundamentals, such as how to budget, save, comprehend interest rates, and tell needs from wants. These are fundamental lessons, but they are not enough in a nation where widespread financial scams, inflationary pressures, and economic volatility are everyday occurrences. Take the prevalence of fraudulent investment schemes, for example. Millions of Nigerians lost their savings to Ponzi schemes like MMM in 2016, which many joined because they were ill-equipped to properly evaluate risk. More recently, “get-rich-quick” schemes and unregulated digital trading platforms have flourished, luring gullible participants who mistake safety for large returns. These are failures of risk awareness rather than access.

 

If a financial literacy program were more resilient, it would teach people not only the skills to save, but the reasons why savings should be diversified; not only the skills to borrow, but the ways to calculate the long-term cost of debt; not only to invest, but to assess the risk/reward ratio. Simply put, such a program would be one that incorporates risk management at every financial decision.

 

From a household perspective, this translates to the idea of families being encouraged to set aside emergency funds, purchase affordable health or agricultural insurance, and limit the amount of money they put into a single source. At the social level, it is about getting the people to partake in common ways of staying safe from shocks be it economic downfall, a quick rise in inflation, or losing a job unexpectedly. Without such a foundation, Nigerians can be financially literate on paper but weak in practice.

 

 

Lessons from SMEs: Why Risk Management Changes the Game

 

Risk management can hardly be underscored enough with Nigerian SMEs. SMEs have been described as “engines of growth,” generating nearly 50 percent of the country’s GDP and employing over 80 percent of the workforce, yet they are notoriously fragile.

 

The 2023 study of SME owners in Ado-Ekiti found that financial literacy had a direct effect on how business owners managed risks. The more they knew about finances, the less cautious they became. In other words, they could grasp how and when to take calculated risks, borrow for expansion purposes, and choose to cut losses. The key distinction is that an uninformed entrepreneur either shies away from the opportunity or rushes into disaster, whereas an informed entrepreneur chooses to use risk to drive growth.

 

The same is soon to apply to individuals and households. Risk management does not mean risk avoidance; it implies being risk-smart. Teaching younger persons about diversification of investments does not make them afraid to invest in higher-yielding assets such as equity or fintech products and instead helps them balance such investments …using safer options such as government bonds or savings plans. This way, people don’t just learn about money; they become able to handle tough times without falling back into poverty.

 

Conclusion 

 

Nigeria has done well in making financial services more available. It won’t be real if people don’t learn to handle risks well. Saving without knowing about inflation, borrowing without thinking about how to pay it back, or investing without looking at market changes only makes things seem better than they are. It’s like building on sand, and it can all fall apart quickly.

 

To fix this, everyone with a stake needs to change how they think about teaching financial basics. Schools need to add risk management to what they teach, so young people learn not just to count money but also how to deal with the unexpected. Banks need to be clearer, telling customers not only the good things about their products but also the possible risks in plain language. Local groups should create programs that show how risk management works in real life, helping families and small businesses prepare for bad times.

 

Think of it this way: financial knowledge without risk management is like learning to drive but not learning about brakes or road dangers. You can start, but you’re not ready for what might happen. For Nigeria, adding risk management to financial education is not extra—it’s the thing that’s missing. It will decide no matter if millions of people just have access to money, or if they can do well even when the economy is unsure.

 

Temitope George Ijibadejo is an award-winning Forex fund manager with over 15 years of experience as a Forex fund manager and Business consultant. He’s currently the African Regional Director for SquaredFinancial, a leading trading platform in Nigeria and Africa.