Financial Inclusion and Poverty Reduction in Nigeria
Abstract
Financial inclusion has been widely promoted as a strategy for poverty reduction in developing economies, yet empirical evidence on its effectiveness in Nigeria remains mixed due to structural barriers and heterogeneous channels. This study examines the impact of financial inclusion on poverty levels in Nigeria from 2009 to 2024 using an autoregressive distributed lag (ARDL) bounds testing approach. Financial inclusion is proxied by total bank branches (TBR), total bank credit (TCR), total bank deposits (TDP), automated teller machines (ATM), point-of-sale terminals (POS), and mobile pay (MPY), with poverty level (POV) as the dependent variable. Data were sourced from the Central Bank of Nigeria, EFInA, NBS, and World Bank. Results reveal heterogeneous effects across channels. Mobile pay demonstrates the strongest poverty-reducing impact in both short-run (lagged) and long-run (elasticity of -0.407, p<0.05). Bank branches and credit show directionally negative (pro-poor) but mostly insignificant effects. In contrast, deposits, ATMs, and POS exhibit significant positive long-run effects on poverty, highlighting persistent urban bias, infrastructural constraints, and digital divides. The error correction term indicates rapid adjustment to long-run equilibrium. These findings underscore that financial inclusion is not automatically pro-poor; its effectiveness depends on equitable design and complementary infrastructure. The study contributes to policy discourse on Nigeria’s National Financial Inclusion Strategy (NFIS) and offers lessons for other developing countries. Targeted digital expansion, rural focus, and literacy programs are essential for achieving the 95 per cent inclusion target by 2030 and advancing SDG 1.