Financial Inclusion and Economic Growth in Nigeria: An Empirical Study

Abstract

The study investigates the effects of financial inclusion on economic growth in Nigeria from 1992 to 2018. Selected variables for financial inclusion include; currency outside banking, currency in circulation, microfinance banks’ deposits, number of commercial bank branches, commercial banks’ credit to private sector, loans and deposits of rural branches of commercial banks. On the other hand, nominal GDP was the selected measure of economic growth. The research design used is the ex-post facto. The study examined the relationship between the variables using regression and then examined the effects using the Grander Causality test. The results of the test revealed that currency in circulation has an insignificantly positive relationship as well as a causal effect on economic growth in Nigeria. Likewise, loans extended by rural branches of commercial banks also have a positive and significant relationship and causal effect on economic growth in Nigeria. Deposits of rural branches of commercial banks have causal effect on GDP in Nigeria and a positive relationship though not significant. The study recommends that the government and monetary authorities should ensure the promotion of banking service and the establishment of bank branches deeper in the rural areas and equally support these banks to meet the demands of these areas efficiently.