Financial Inclusion and Output: Empirical Evidence from Nigeria

Abstract

The study is on the effect of financial inclusion on output in Nigeria. It made use of time series data sourced from Central Bank of Nigeria statistical bulletin for the period of 1992 to 2018. The Co-integration, Causality, Unit Root and the Ordinary Least Square tests were used for the analyses. The Causality test result shows a unidirectional causality flowing from Microfinance Bank Deposit to the Output, whereas a unidirectional causality existed between Loan and Advances and Output, with causality flowing from Output to Loan and Advances. The unit root test result shows that all the variables are stationary at first differencing. Besides, Output recorded a significant positive relationship with Bank Deposit but an insignificant relationship with Loan and Advances. However, there exists a long-run equilibrium relationship among the variables. This means that what existed in the short-run persisted in the long-run in the case of Bank Demand Deposit and Output. It goes on to show that the effect of Loan and Advances on Output is best felt at the long-run when companies that acquired the loan must have produced goods and services in the economy. The study recommends that Central Bank Nigeria and Commercial Banks should encourage financial inclusion since it has proven to have a great influence on the output. Also, Banking Services when extended to the remote areas will not only reduce financial exclusion but will enhance the output in the economy.