Financial Inclusion and Economic Growth Nexus in Nigeria

Marshal Iwedi

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Volume 1 | Issue 1 | Year 2024 | Article Id: CE-V1I1P105

Financial Inclusion and Economic Growth Nexus in Nigeria

Marshal Iwedi

Received	Revised	Accepted	Published
30 Aug 2024	02 Oct 2024	20 Oct 2024	03 Nov 2024

Citation

Marshal Iwedi. “Financial Inclusion and Economic Growth Nexus in Nigeria.” DS Reviews of Commerce and Economics, vol. 1, no. 1, pp. 50-63, 2024.

Abstract

This empirical paper investigates the relationship between financial inclusion and economic growth in Nigeria. It draws on the Institutional Theory of Financial Inclusion, Social Capital Theory of Financial Inclusion, and Finance-Growth Nexus Theory as its theoretical foundations. Utilizing annualized data extracted from the Central Bank of Nigeria's Statistical Bulletin (2022), the study employs financial time series methodology, employing Ordinary Least Squares (OLS) and Granger Causality Techniques for comprehensive analysis. The research findings reveal a robust and positive association between financial inclusion and economic growth in Nigeria. Notably, the Granger causality test results establish unidirectional causation from the number of bank branches to Real Gross Domestic Product (RGDP), indicating that as the number of bank branches increases, there is a corresponding augmentation in RGDP. This outcome underscores a discernible cause-and-effect relationship between the two variables. Recognizing the pivotal role of the banking industry in Nigeria's economic development, acting as a crucial channel for monetary transfers within the economy, the study concludes with insightful recommendations that the federal government should facilitate the establishment of low-cost financial centers nationwide, particularly in rural areas, to provide informal banking services to underserved populations. At the same time, operators of automated teller machines should lower transaction fees, thereby fostering increased utilization of ATMs for transactions, thereby reducing dependence on traditional banking methods.

Keywords

Financial inclusion, Economic growth, Granger causality, Banking industry, Nigeria

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