Effect of Financial Inclusion on the Performance of the Nigerian Economy

Abstract

This research examined the influence of financial inclusion on the performance of the Nigerian economy using quarterly time series data from 2010 to 2024. The investigation adopted an ex post facto research design and relied entirely on secondary data obtained from the Central Bank of Nigeria and the Nigeria Inter-Bank Settlement System. Real Gross Domestic Product was used to measure economic performance, while financial inclusion was represented by total savings, credit to the private sector, mobile banking transactions and Point of Sale transactions. The Augmented Dickey Fuller and Fisher unit root tests confirmed that all variables were integrated at first difference. The Johansen cointegration test established the presence of long-run equilibrium relationships among the variables. The Vector Error Correction Model was applied to determine both the short-run and long-run effects of financial inclusion on economic performance. The short run results indicated that total savings, credit to the private sector and Point of Sale transactions exerted positive but insignificant effects on real output, while mobile banking transactions exerted a negative but insignificant effect. The error correction term was negative and highly significant, showing strong adjustment towards long-run equilibrium. The study concluded that although financial inclusion indicators showed weak short-run influence on economic activity, they remained important in the long run because the financial system consistently corrected deviations towards equilibrium. The study recommended improvements in financial intermediation, credit accessibility and digital infrastructure to maximise the long-term contribution of financial inclusion to Nigeria’s economic performance.