Financial Inclusion and Poverty Reduction in Nigeria (2004-2022)

Abstract

This paper presents an empirical investigation into the impact of financial inclusion on poverty reduction in Nigeria from 2004 to 2022. Employing an ex-post facto research design, the study constructs a Financial Inclusion Index (FII) using Principal Component Analysis and utilizes the Fully Modified Ordinary Least Squares (FMOLS) technique to estimate long-run relationships. The findings reveal that financial inclusion has a statistically significant and negative effect on poverty, with a one-unit increase in the FII leading to a 15.23% reduction in the poverty headcount ratio. The study also confirms that inflation significantly exacerbates poverty, while GDP growth contributes to its reduction. Based on these results, the study recommends that policymakers intensify financial inclusion drives beyond mere account ownership to active usage of diverse financial products and prioritize macroeconomic stability to enhance the poverty-reduction effects of financial inclusion.