FINANCIAL INCLUSION AND POVERTY REDUCTION IN NIGERIA AN AUTOREGRESSIVE DISTRIBUTED LAG MODEL APPROACH

Abstract

Financial inclusion is very important in mobilizing savings from the downtrodden and channeling same towards productive investment. If the downtrodden is financially included in financial services of a country, per capita income of the people would improve leading to poverty reduction in the economy. Thus, this study investigated the effect of financial inclusion on poverty reduction in Nigeria from 1990 to 2021. In order to achieve the objectives of this research, financial inclusion was disaggregated into money supply, number of commercial banks in the rural areas, and commercial bank deposits in the rural areas. Others include number of microfinance banks, microfinance bank deposits, point of sale and automated teller machine; with the time series data sourced from the CBN statistical bulletin, volume 32, 2021, indexmundi and world development indicators, 2021. Multiple regression analysis was utilized in the study in which the Auto-Regressive Distributed Lag (ARDL) model was the method of analysis. The ARDL model was engaged to examine the long-run relationship and short-run interactions among the variables. The results indicated that access to banks had a positive and significant effect on income per capita proxied for poverty reduction in Nigeria. Similarly, the results showed that ATM usage, bank penetration, and mobile banking exert positive and insignificant influence on poverty reduction proxy. These results imply that 1% improvement in access to banks, ATM usage, bank penetration, and mobile banking would lead to increase in poverty reduction proxy. On the above notes, the study recommended for more implementation of financial inclusion policies aimed at including more people in the remote areas into financial services. This can be done by mandating commercial banks and other financial service providers to extend their financial services to rural areas with effective monitoring. Furthermore, financial sector policies should be implemented to ensure more spread of automated teller machine in the hinterland. In so doing, automated teller machine would significantly contribute to per capita income proxied for poverty reduction in Nigeria.