Bank Branch Closures Could Deepen Financial Exclusion, Experts Warn

Economic experts have warned that the closure of 476 bank branches and cash centres across Nigeria between 2022 and 2025 could deepen financial exclusion in communities that still depend heavily on physical banking.

Figures contained in the Central Bank of Nigeria’s 2025 Statistical Bulletin for the Financial Sector, published recently, showed that the number of bank branches and cash centres declined from 5,410 in 2022 to 4,934 in 2025.

While the decline has largely been linked to the rapid adoption of electronic payments, mobile banking, banking applications and agent banking, experts said the development should not be viewed solely as a sign of technological progress.

Speaking in an interview with LEADERSHIP, an Economic expert at the Department of Economics, University of Nigeria, Nsukka, Dr Tony Orji, said the development is a structural shift towards digital banking, but warned that it also presented a financial inclusion risk if not properly managed.

Orji said the closure of branches should not automatically be interpreted as declining access to banking, stressing that the key issue was whether digital and alternative channels were effectively replacing the services previously provided through physical branches.

According to him, the CBN figures showed that the 476-location reduction represented an 8.8 per cent decline, with about 92 per cent of the reduction occurring in 2024 and 2025.

He said, “The CBN’s policy direction reflects both banking-sector transformation and a potential financial-inclusion challenge. Branch closures should not, however, be interpreted automatically as declining access to banking.

“The critical issue is whether digital and alternative channels are effectively replacing the services previously provided through physical branches.”

Orji noted that banks had strong incentives to reduce their dependence on physical branches because mobile banking, USSD, POS, agency banking and electronic payments enabled them to serve customers at lower operating costs.

However, he said Nigeria was still far from being a completely digital economy, with rural residents, elderly people, low-income earners, small traders and people with limited digital literacy continuing to depend significantly on physical banking facilities.

He said the geographical distribution of bank branches was also important in assessing the impact of the closures.

“While Lagos lost 158 banking locations between 2022 and 2025, it still had 1,444 locations in 2025. In contrast, states such as Yobe, Taraba and Zamfara had only 23, 26 and 28 locations respectively.

“Therefore, closing an underutilised branch in a highly banked urban centre is fundamentally different from closing one of the few banking outlets serving a rural or underserved community,” he added.

Orji also described the trend as “digital transformation with a financial-inclusion warning,” saying that the objective should not necessarily be to preserve every physical branch but to ensure that customers had access to reliable, affordable, secure and accessible alternatives whenever a branch was closed.

He identified greater convenience for digitally capable customers, increased reliance on agents and POS operators, rising cybersecurity risks, lower operating costs for banks and a changing role for physical branches as some of the likely implications of the trend.

He added that branches might increasingly focus on complex transactions, relationship management, business advisory services and customer support, while routine transactions moved online.

“In sum, I would not regard the closure of 476 banking locations as inherently negative. A modern banking system does not necessarily require thousands of physical branches if customers can access reliable financial services through digital platforms, USSD and agency networks.

“The concern is that digital banking should not become a substitute for financial inclusion; it should be an instrument for achieving it,” he added.

He further warned that if branches disappeared faster than alternative channels developed, Nigeria could end up with a two tier financial system consisting of highly digitised banking for connected urban customers and increasingly limited access for rural and digitally excluded Nigerians.

He therefore advocated a banking model based on branches plus digital plus agency banking, with each channel serving customers according to their needs and circumstances.

Also speaking, an Economist and staff of Benue State Board of Internal Revenue, Julius Moji, said the growing preference for digital transactions was changing the economics of banking, but warned that branch closures could have wider implications for financial inclusion.

Moji said banks were increasingly responding to changing customer behaviour as more transactions were carried out through mobile applications, transfers, USSD platforms and other electronic channels.

“Banks are responding to the reality that a large proportion of their customers no longer need to visit a branch for routine transactions.

“From the banks’ perspective, maintaining a physical branch comes with significant costs, while digital platforms allow them to serve more customers at a lower operational cost.”

However, he cautioned that the reduction in physical banking infrastructure could create challenges for customers who were less digitally connected.

“The concern is that digital banking cannot automatically replace physical banking for everybody. There are still people, particularly in underserved communities, who depend on branches for basic banking services, account-related issues and transactions that they may not be able to complete digitally,” he added.

Moji said the issue was particularly important to Nigeria’s financial-inclusion efforts, arguing that branch closures should be accompanied by stronger alternative channels capable of serving customers who might otherwise be left behind.

“If a branch is closed in a community, there must be a reliable alternative. It could be a strong agent network, accessible digital banking infrastructure or another formal financial service point,” he said.

A business owner, Grace Ene, who operates a POS business in Lugbe, said the growing adoption of digital payments, POS services, banking applications and transfers had changed the way people conducted financial transactions.

According to her, the reduced foot traffic at bank branches was understandable as more customers now carried out routine transactions electronically.

“Financial transactions are digital. I can’t remember the last time I went to a bank. Most things are done online, so some branches are no longer relevant,” Ene said.

She also noted that the convenience of transfers, mobile applications and other electronic payment channels had made it possible for many customers to conduct transactions without visiting a bank.