The Relationship between Financial Inclusion and Economic Growth: Evidence from ARDL Modeling
Abstract
ABSTRACT
This study examines the impact of financial inclusion on economic growth in Nigeria from 1986 to 2020. The statistical properties of data were tested using Zivot-Andrew unit root test. The Zivot Andrew unit root test indicates that gross domestic product, commercial bank branches and mobile phone-based transactions are stationary at first difference while Automated Teller Machines and foreign direct investment are stationary at level. Bound test for long run shows that there is a long run relationship among the variables of interest. The Auto regressive Distributive Lag (ARDL) result indicates that in the short run, commercial bank branches have positive and statistically significant impact on gross domestic product in Nigeria. Automated Teller Machine has negative but statistically insignificant impact on gross domestic product in Nigeria. The long run coefficient shows that commercial bank branch has positive and statistically significant impact on gross domestic product in Nigeria. Automated Teller Machine has positive and statistically significant impact on gross domestic product in Nigeria. Mobile phone-based transaction has positive and statistically significant impact on gross domestic product in Nigeria. Foreign direct investment has positive and statistically significant impact on gross domestic product in Nigeria. The error correction term (ECT) meets all the theoretical and statistical requirements both in the sign and size. The ECT coefficient is -0.522626and significance at 5%. This indicates that at 52.26% of the disequilibrium due to the shock in the previous years is adjusted back to the long run equilibrium in the current year. The Granger causality test shows that commercial bank branches, automated teller machine domestic depositors’ money in banks and foreign direct investment granger causes gross domestic product while mobile phone-based transactions do not granger cause gross domestic product. The study recommend that Central Bank of Nigeria should compel commercial banks to add the number of Automated Teller Machine in each branch and ensure constant service delivery service of the machines for customer to have access to their funds.
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