IIARD International Institute of Academic Research and Development

INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT (IJEFM )

E-ISSN 2545-5966
P-ISSN 2695-1932
VOL. 7 NO. 5 2022
DOI: https://doi.org/10.56201/ijefm.v7.no5.2022.pg21.35

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Financial Inclusion and Economic Growth in Nigeria

Adolphus Joseph Toby, & Samuel Dibiah

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Abstract

The purpose of this study is to empirically examine the relationship between financial inclusion and economic growth in Nigeria. The study examined the Central Bank of Nigeria quarterly data from 1981Q1 to 2017Q4 with the E-views software package (version 9.0). The Vector Auto Regression (VAR) methodology was used to analyse the data, while Block Exogeneity Wald test was used to test the hypothesis. The specified models included stationarity tests, reduced form VAR estimate and structural analysis. The Augmented Dickey Fuller Test indicates that the study variables are stationary at first difference or I(1). The VAR roots plot in relation to unit circle indicates that our specified reduced form VAR models are stable. The Lagrange Multiplier (LM) diagnostic tests indicate that our specified VAR models are correctly specified. The results from the granger causality Wald test show that, at 5% significance level, conglomerate of indicators of financial inclusion; currency in circulation, currency outside bank, quasi money jointly have a causal influence on real GDP, but individually, only the effect of currency outside bank ratio is statistically significant. The study recommends that the Central Bank should as matters of policy persuade commercial banks to key into the federal government financial inclusion programmes by increasing their presence in the rural areas and reducing the cost of using financial services. This would give more rural adult population access to formal financial services and significantly reduce the degree of monetization of the economy.

keywords:

Financial Inclusion, Currency in Circulation, Currency Outside Bank, Quasi Money and Economic Growth

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