The Effects of Financial Innovations on Deposit Financial Inclusion in Nigeria

Abstract

The challenge of achieving financial inclusion for all Nigerians, particularly those in rural communities, remains significant, with millions still lacking access to formal financial services. This study addresses a critical knowledge gap regarding the influence of various financial innovations in Nigeria, such as internet and mobile banking, point of service (POS), and agency banking, on the government's financial inclusion policies. To explore this topic, we conducted an econometric analysis using time series data obtained from the Central Bank of Nigeria (2023 statistical bulletin) and the World Bank (2023 World Development Index report). The Autoregressive Distributed Lag (ARDL) model was utilized for data analysis. The findings of the study reveal that internet and mobile banking has a negative but insignificant effect on deposit financial inclusion in Nigeria, while point of service has an insignificant positive effect on deposit financial inclusion in Nigeria. Similarly, agency banking was found to have an insignificant positive effect on deposit financial inclusion in the country. The study concludes that financial innovations have not made drastic improvement in financial inclusion in Nigeria. The development of technologies that encourage opening of deposit accounts with financial institutions seamlessly without much hassles or needing high level of literacy are recommended by the study. Also, the government and other stakeholders in the Nigerian financial sector are encouraged to equip financially excluded Nigerians with POS machines, mobile smart phones, and trainings in information and communication technology (ICT), especially for the rural populations. Improving network service quality in these areas is also vital for better financial inclusion.