Deploying Capital for Shared Prosperity.

In today's world, the fight against poverty is an arduous and ongoing struggle. Despite concerted global efforts to tackle economic disparities, approaches to social welfare vary significantly among nations. While some countries have robust systems in place to provide safety nets and support for their most vulnerable citizens, others rely more on individual resilience and market dynamics, leaving substantial portions of their populations to fend for themselves. According to the World Bank, as of the end of 2020, 9.2% of the world's population (719 million people) lived in extreme poverty, living on less than $2.15 per day. Sub-Saharan Africa hosts a significant proportion of this impoverished population, with an estimated 35% living in extreme poverty in 2019. Nigeria, despite having one of the largest economies in the region, faces significant challenges, ranking second globally in terms of its population living in poverty, with approximately 133 million people considered multi-dimensionally poor and 88.4 million living in extreme poverty as of 2022.

Recently, Nigeria has been grappling with a rising cost of living crisis, pushing more of its citizens below the poverty line. In response, many Nigerians are seeking opportunities abroad in what has been termed the "Japa Syndrome." Over the past few years, millions have emigrated in search of better prospects. However, beyond this trend, there are other innovative strategies to break the cycle of poverty and elevate people to the middle class. One approach involves leveraging available resources to address societal needs. Nigeria, for instance, has a significant money supply totalling N96.97 trillion as of April 2024, which, if effectively utilized, could profoundly impact the country's social challenges and usher in transformative changes.

Financial institutions play a crucial role in the efficient allocation of resources.

Financial institutions act as intermediaries, facilitating the transfer of funds from entities with surplus capital to those in need of financing. This fundamental role drives economic growth and fosters transformative changes that shape societies and empower individuals. However, for financial institutions to effect such transformation, they must possess certain key characteristics. These include equity in the use of funds, offering investment options that hedge against inflation and currency weaknesses, a progressive consumer finance system, robust systems for homeownership finance, and a commitment to shared prosperity.

Regrettably, financial institutions in Nigeria and similar economies often lag in these aspects. For example, Nigeria's total money supply amounts to N96.97 trillion, contributed by households, businesses, and the government. However, access to these funds is predominantly limited to the government and large corporations, leaving households as marginal beneficiaries. When consumer finance products are available, they typically cater to short-term needs like expenses and non-durable assets such as salary advances and school fees. There is a pressing need for financial instruments that address substantial needs like long-term assets (such as mortgage financing).

Moreover, Nigerian households require investment avenues to mitigate inflation and currency devaluation risks. As of April 2024, Nigeria's pension assets, which comprise contributions from employees and employers for retirement income, totalled N19.79 trillion as of April 2024. Over the past decade, these assets have grown nominally by 365.65% from N4.25 trillion in April 2014. However, the funds have shrunk significantly in dollar terms, losing 43.27% to $14.88 billion from $26.23 billion, making retirees worse off. This figure will be much lower when discounted for inflation. This underscores the urgency of developing investment options that offer protection against inflation and exchange rate fluctuations.

Furthermore, enhancing financial accessibility for households to build long-term assets necessitates reducing interest rates and transaction costs. Crucially, financial institutions committed to shared prosperity prioritize both profitability and social impact. They recognize their role in fostering economic well-being beyond their immediate stakeholders, thereby contributing to broader societal prosperity.