The youth population represents a vital force for economic growth and innovation. Comprising individuals transitioning from education to employment, they embody creativity, adaptability, and the potential for productivity gains. Over 50% of the global population is under 30, with youths aged 16 to 24 making up 16% of this demography. Nigeria’s case is rather peculiar having one of the youngest populations in the world with 70.6% of its population under the age of 30 and youths aged 16 to 24 representing 18.2% of its population according to the UNDP’s 2024 World Population Prospects. In Nigeria, where unemployment and underemployment rates among youths are alarmingly high, empowering this demography is essential for sustainable economic growth. Nigerian youths, despite their potential, face challenges that hinder their ability to contribute optimally to the economy. Highlighted below are some of these challenges: Inadequate Education: Less than 20% of undergraduate applicants gain admission to tertiary institutions. The curricula of these institutions do not equip young graduates with critical employability skills necessary for success in the workplace , leaving many graduates unprepared for the job market and exacerbating youth unemployment and underemployment. Economic Barriers: Nigeria’s current macroeconomic situation characterized by high interest rates, inflation and infrastructure deficiencies adversely affecting businesses has resulted in insufficient job creation and therefore fewer job opportunities for youths. Government including policymakers and regulators and the private sector, play crucial roles in addressing these challenges and creating a sustainable and viable economic environment for fostering youth development and empowerment as well as engendering increased job creation by entrepreneurs. Some strategic stakeholder interventions are proposed: Government: Prioritizing Education and Skills Development To address the challenges in education, the Nigerian government must invest in modernizing the curricula in tertiary institutions to include the relevant skills and trainings required in today’s world. Finland’s education system and Rwanda’s YouthConnekt initiative, which link young people with skills training and funding, provide examples of how targeted interventions can boost youth employability. Similar initiatives in Nigeria would help develop a workforce that is adaptable and capable of driving innovation. Private Sector: Fostering Innovation and Creating Opportunities The private sector must play a more active role in youth development through partnerships with educational institutions and the Government. Programmes like EnterpriseNGR’s Youth of Enterprise (YOE) Internship Programme are already making strides by placing over 2000 young Nigerians in high-value internships. Programmes like this focus on improving the employability of Nigerian youth. Regulators: Ensuring Fair Labor Practices Regulators must enforce laws that support youth employment and protect workers’ rights. In Denmark, labor laws ensure fair treatment and compensation which enable young workers to thrive. Nigeria can adopt similar practices to ensure that youths are paid fair wages and have access to job security. Empowering Nigerian youths for sustainable economic growth requires coordinated efforts from the Government, private sector, and regulators. By investing in education, fostering entrepreneurship that would lead to more job creation, and improving infrastructure, Nigeria can reduce youth unemployment and drive long-term economic growth. Our youth population is a key asset and leveraging their potential will certainly boost the country’s economic prosperity. EnterpriseNGR is a policy and advocacy group established to promote the Nigerian financial and professional services sector with the primary objective of catalysing economic transformation in Nigeria. One of our initiatives is the Youth of Enterprise (YOE) internship programme which focuses on improving the employability of the Nigerian youth by providing trainings on soft skills and placing them in internships with leading organisations.
Tag: Sustainable Development
Generative AI: Opportunities for Value Creation in the Financial Services Sector
In the financial services sector, generative AI (gen AI) is emerging as a transformative tool, reshaping traditional methods and amplifying efficiency in ways that were once unimaginable. Generative AI is a type of artificial intelligence designed to create new content, such as text, images, audio, video, or even code, that resembles human-made output. It uses machine learning models trained on vast amounts of data to understand patterns, structures, and relationships, enabling it to generate creative and original outputs based on prompts or inputs. The technology unlocks growth potential by providing innovative solutions in customer service, fraud detection, compliance, asset management and a lot more areas. Leading global financial institutions are deploying gen AI capabilities to provide transformative business solutions that add to the bottom lines. A 2024 McKinsey report estimates that generative AI could generate between $2.6 trillion and $4.4 trillion in annual global business value, with the banking industry alone poised to see contributions of $200 billion to $340 billion – (McKinsey, The Economic Potential of Generative AI: The Next Productivity Frontier.) According to a report released in December 2024 by Boston Consulting Group, up to 20% of companies performed better on operational costs due to their investment in AI compared to their counterparts – With an unprecedented capacity to process data, generate insights, and automate complex tasks, generative AI has become a core component for organisations aiming to stay competitive in a technology-driven economy. In this Policy Insights we explore how generative AI is being utilized across domains of financial services, examining the benefits and transformative impact on operational efficiencies, customer experience, and market innovation; how industry operators can start reaping its benefits. In the financial services sectors, gen AI finds application in customer service/relationship management, sales and marketing, compliance and risk management. Others include fraud detection, portfolio selection and management, claim assessment and evaluation, and research and development. We now turn to each of these domains: Customer service and relationship management: Gen AI acts as a copilot in customer relationship management and general interaction with clients, delivering solutions such as lead generation, email prompts, and automated calls. The customer transaction history can be analysed to create personalised financial products and services for each unique customer. For instance, banks can use generative AI to create customized savings plans for customers based on their income, spending habits, and future financial goals, automating the process of financial planning. The loan approval process can be time-consuming and prone to errors. Generative AI can streamline this process by automatically reviewing applications, generating risk profiles, and making approval recommendations based on predefined criteria. Bank of America’s (BOA) Erica is an AI virtual assistant that provides personalized and efficient services to customers. Portfolio selection and management: In asset management and investment banking, gen AI could leverage existing market information to provide intelligence on portfolio selection and management. An asset management firm can use generative AI to simulate different investment options, offering clients an investment strategy that maximizes returns and minimizes risk. BondGPT by LTX, and Aladdin by Black Rock are examples of custom gen AI tools driving value in asset management. In capital markets, AI-driven algorithms could predict stock performance by analysing vast amounts of historical data and current market conditions, allowing investors to make data-driven decisions with greater accuracy. Compliance and risk management: Compliance and risk officers can deploy generative AI to summarise policy and regulation documents, update the risk management and compliance activities when a change occurs in policies and regulation. It can spot risk activities from organisation-wide operations data and prompt risk officers to take immediate action. Generative AI can aid the creation of Shariah-compliant financial products that meet Islamic financial principles. By analysing religious texts and financial regulations, gen AI can help an Islamic bank to design new financial instruments that comply with Shariah law, such as sukuk (Islamic bonds). Claim assessment and evaluation: Generative AI can streamline the claims processing workflow in the insurance sector by automatically generating claim assessments. An insurance company could deploy AI to assess damages in an auto insurance claim by analysing photos submitted by the policyholder, generating an accurate repair estimate, and automating the payout process within hours. The technology can read through a medical report or damage documentation and propose compensations based on the amount of the damages spotted. This ensures that inconsistences are identified, and any indication of fraud is eliminated. The adoption of generative AI in claim process gives faster response to claim demand and thereby creating better customer experience and a responsible company. Research and product development: Gen AI helps the financial services industry to improve time-to-market. The technology can offer varied initial concepts that product managers can further put through iteration process to achieve fit within a short possible period, thereby cutting down the design development lifecycle by up to 70 percent according to McKinsey. In addition, generative AI can stimulate possible cyberattacks and risks and suggest measures right during the product development process. Marketing and sales: Generative AI can generate blog articles, social media posts, and landing page content that include targeted keywords, helping companies improve their search engine rankings. Sales and marketing unit can easily generate diverse ad variations and messaging that resonate best with target audiences. It could support sales teams in identifying and qualifying leads. When a generative AI model is embedded in chatbots that engage website visitors in real-time, it can identify potential leads based on user responses, nurture the leads, helping sales teams know which leads are most likely to convert, and to prioritize efforts. Lastly, generative AI can generate and simplify marketing and sales performance reports, with a clear view of campaign success and areas for improvement. Fraud detection: Generative AI can be leveraged to detect and prevent fraudulent activities by analysing transaction patterns, user behaviour, and financial anomalies in real-time. AI models analyse vast amounts of transaction data and identify activities that deviate from established patterns, such as unusual transaction sizes, locations, or timings. For instance, if a customer’s typical transactions… Continue reading Generative AI: Opportunities for Value Creation in the Financial Services Sector
Sustainable Finance: Enhancing Participation Today
A profound transformation is sweeping through the world of investments as investors, once solely focused on financial returns, are now seeking something more, exploring opportunities that promise competitive financial returns and carry the banner of sustainability. Industry leaders are fast recognising that a balanced approach to wealth accumulation, one that considers not just profits but also the well-being of our planet and society — going beyond the dollars and cents to the broader repercussions of our actions — is the way forward. This realization is wildfire igniting the growth of sustainable finance, a field that integrates Environmental, Social, and Governance (ESG) criteria into the heart of investment decision-making. Sustainable finance scrutinizes investment impact on the environment, society, and the ethical governance of the entities invested in. This holistic approach is leading to a significant realignment of business models as capital holders strive to meet evolving customer expectations, adapt to shifting economic landscapes, and adhere to the ever-evolving sustainability standards. This wave is about channeling financial resources into projects that promote environmental well-being and directly support the transition to a zero-carbon economy. The entire financial industry has a critical role to play! It requires financial operators to play offense and respond to sustainability market demands and be ahead of the green supply curve, operating within the global standards and frameworks of the United Nations Principles for Responsible Investment (PRI), United Nations Sustainable Development Goals (SDGs), United Nations Global Compact (UNGC), United Nations Environment Programme Finance Initiative (UNEPFI) Principles for Responsible Banking, Equator Principles, UNEPFI Principles for Sustainable Insurance, and Green Bond Principles, among others. ESG integration is the flagship strategy, reflecting a holistic viewpoint of investors that are not just dipping their toes in the water; they are refining their strategy, moving beyond basic screening to embrace more advanced approaches like thematic and impact investing. Most investors prefer active ESG integration. They are looking for companies and securities that actively incorporate ESG principles and are willing to engage with investee companies to ensure the positive impacts are real. A survey report in December 2020 by NAVEX Global revealed some fascinating insights. It disclosed that 88% of publicly traded companies had already embraced ESG initiatives; roughly two-thirds of privately owned companies were treading a similar path. Furthermore, in October 2023, Capital Group reported that 90% of investment professionals are weaving ESG considerations into their investment approaches. This is not a passing fad; the proportion of investors consider ESG as core of their investment philosophy is at 33% in Europe, Middle East and Africa (EMEA), 25% in Asia-Pacific, and 9% in North America. And, indeed, the numbers are compelling. In Q3 of 2023, global ESG fund assets had ballooned to approximately $2.7 trillion. The winds of change are blowing, but not every region is experiencing them equally. Europe was at the forefront of this movement, with ESG fund assets commanding an impressive 84% share, followed by the United States with an 11% share. Nigeria’s sustainable finance market is relatively small, but there are significant potential opportunities for tapping into the global sustainability-themed market. While the benefits are widespread, the costs of not taking action could be as high as $450 billion by 2050, according to the Africa Development Bank report. Some growth has been recorded on the back of the government and corporate sector’s efforts. As of 2022, five corporate green bonds valued at ₦32.83 billion and two sovereign green bonds valued at ₦25.69 billion were listed on Nigeria’s exchanges. Total investment in sustainability-focused mutual funds amounted to ₦2.4 billion. Based on the African Development Bank’s estimate, for 2020-2030, Nigeria requires $247.3 billion for its climate finance needs, averaging $22.5 billion annually. With Nigeria’s Climate Change Act and the National Council on Climate Change (NCCC) launched, some vital legal frameworks and structures for building nation-wide sustainable practices are in place, but like many other slow-to-decarbonise economies, there are potential challenges to attracting global sustainability-themed funds. One of the significant hurdles is the heavy reliance on fossil fuels for foreign exchange earnings. A staggering 80% of the government’s revenues come from oil exports. With financial institutions, an additional challenge emerges from the “disproportionate importance on the “Governance” aspect in investors’ decision-making processes, over the “Environmental” and “Social” dimensions of ESG investing.” Hence, “in spite of progress in governance, advancement in the environmental aspect is on the back burner.” A scarcity of expertise in sustainable finance practices presents another hurdle for banks and financial institutions in meeting vital requirements in ESG impact investing and reporting. Limited access to finance in Nigeria constitutes a different set of challenges. While opportunities for sustainable investments exist, such ventures often require substantial financial commitments over medium to long terms. The prevailing short-term financing options in the financing system underscores the need for alternative medium- to long-term funding options, especially for sustainable infrastructure development projects. The prospects of embracing sustainable finance offer compelling advantages for Nigeria. Improved risk management and long-term good financial performance are potential benefits. It also provides a wide range of non-financial benefits. Embracing sustainable finance paves the way for more innovative financial products, such as green bonds and sustainability-linked loans, particularly for financing critical national development projects. Sustainable reporting enhances transparency and accountability, building the reputation of financial institutions as responsible entities. Global investors and lenders increasingly support organizations committed to sustainability. Aligning with the Sustainable Development Goals (SDGs) allows Nigerian financial services players to demonstrate commitment to a sustainable future, impacting economic development and environmental and social well-being locally and globally. Nigeria stands at the crossroads of sustainable finance. This path must now align with global trends to prepare for a future that is economically, socially, and environmentally sustainable. To pave the transition pathways for the country and accelerate progress, below is how stakeholders can drive participation. 1. Develop and implement a national sustainable finance plan: In line with its commitment to global carbon reductions, the federal government has enacted the Climate Change Act and set up the National Council on Climate Change (NCCC).… Continue reading Sustainable Finance: Enhancing Participation Today