Enhancing Financial Inclusion in Nigeria: The Role of Digital Banking Platform
Abstract
This study examined the effect of digital banking platforms on financial inclusion in Nigeria, with a specific focus on the contribution of mobile money, USSD, internet banking, agency banking, and POS terminal transactions to account ownership. Using quarterly time-series data from 2016Q1 to 2025Q4, the study employed the Autoregressive Distributed Lag (ARDL) bounds testing approach to analyze both short-run dynamics and long-run relationships. The empirical results revealed a stable long-run cointegrating relationship between digital banking activities and account ownership. In the short run, USSD transactions exerted the strongest positive and significant effect on account ownership, while mobile money transactions showed a statistically significant negative (substitution) effect. Agency banking transactions demonstrated a delayed positive impact, becoming significant after two quarters. POS terminals and internet banking transactions had positive but statistically insignificant effects in both the short and long run. The error correction term was negative and highly significant, indicating a slow adjustment speed of approximately 3.86% per quarter toward the long-run equilibrium. The findings highlight the differential effectiveness of digital banking channels in driving financial inclusion. While low- barrier channels such as USSD deliver rapid gains in account ownership, agency banking holds greater long-run potential, particularly for rural and underserved segments. The study concludes that digital banking platforms have significantly expanded access in Nigeria, but their ability to achieve deep, equitable, and resilient inclusion remains constrained by structural barriers. The study recommends enhanced interoperability between mobile money and formal accounts, sustained support for USSD services, aggressive expansion and incentivization of agency banking networks, and comprehensive digital financial literacy programs. These measures are essential for translating digital transaction growth into meaningful formal account ownership and achieving the objectives of NFIS 4.0.