Financial Inclusion and the Nigerian Economy: Empirical Evidences

Abstract

The Nigeria government and particularly, monetary authorities have over the years initiated changing policies and programmes targeted at deepening financial inclusion in the context of rural populace and with the ultimate view to enhancing the economy. This study therefore, evaluates the effects of financial inclusion in the context of banking habits of rural population on the Nigerian economy. Specially, this study evaluates the effects of deposit (RDDEPOSIT) and loan (RDLOAN) of rural dwellers with rural branches of commercial banks on Gross Domestic Product (GDP).  Secondary data were used for this study. The source of data for this study is the Central Bank of Nigeria statistical bulletin. Data were collected over a period of 33 years (1982-2014). Variables were subjected to stationarity test with the view to establishing the stationarity or nonstationarity of variables. Also, Johansen cointegration check was conducted to investigate whether variables are cointegrated or not. Results established that variables were cointegrated. Thereafter, this study estimated short run and long run Causality model using VECM.  Findings interestingly established that there is no long run causality running from RDDEPOSIT and RDLOAN to GDP. In other words, in the long run, results established that rural dwellers’ deposit and loan with rural branches of commercial banks have influence on the performance of Nigeria economy in terms of GDP. However, results demonstrated that rural populace deposit and loan with rural branches of commercial banks have no effect on the performance of the Nigeria economy in terms of GDP in the short run. Findings have both practical and theoretical implications; particularly, for policy makers and the Nigeria government at large. Based on these results, this study recommended that efforts and attention should be given to measures and policies capable of delivering formal financial services to rural dwellers by Nigeria government, particularly, policy makers.