Mobile Banking Adoption and Financial Deepening in Nigeria
Abstract
This study investigates the relationship between mobile banking adoption and financial deepening in Nigeria, focusing on how digital financial innovations influence the depth of the financial system. Financial deepening was proxied by the ratio of money supply to gross domestic product (M2/GDP), while mobile banking adoption was measured by the number, volume, and value of mobile banking transactions. Time-series data and the Autoregressive Distributed Lag (ARDL) modelling technique were employed to examine the magnitude and direction of the relationship between mobile banking indicators and financial deepening. The empirical results reveal mixed outcomes across the explanatory variables. Specifically, mobile banking users and the volume of mobile banking transactions had statistically significant negative effects on M2/GDP. This suggests that increases in user adoption and transaction frequency, contrary to a priori expectations, are associated with a reduction in measured financial deepening within the Nigerian economy. Conversely, the value of mobile banking transactions showed a positive but statistically insignificant relationship with M2/GDP, indicating that while higher transaction values may contribute to financial deepening, the effect is not strong enough to be statistically meaningful over the study period. Based on this, the study recommended that the Central Bank of Nigeria should strengthen the structural integration between mobile banking platforms and the formal banking system by improving interoperability between mobile money operators and deposit money banks and ensuring that increased user adoption translates into increased deposit mobilization and credit creation within the formal financial sector. Also, policies should focus on increasing the scale and efficiency of high-value digital transactions by reducing transaction costs, strengthening cybersecurity systems, and improving trust in digital payment platforms.