Main Article Content

Abstract

Nigeria is a developing nation with a population of over 200 million. Of this aggregate, approximately 106 million are aged 18 years and above. Of this adult population, 70 million live in rural areas, and many do not have adequate access to relevant financial products and services. The proportion of individuals and firms that use or have access to financial services can be referred to as financially inclusive. This study analyzes the impact of financial inclusion and domestic investment on Nigeria’s financial development. Multiple regression analysis was employed in this study which spanned over the period, 1982-2021. The empirical results reveal that financial inclusion and domestic investment have positive impacts on financial development; however, domestic investment has a more significant impact to a larger extent. The study recommended that policies should be directed towards creating a more inclusive financial system to improve the current level of financial inclusion to achieve better financial development in Nigeria. This study concludes that governments should formulate policies that boost financial inclusion and investment to deepen the level of financial development in the economy.

Keywords

financial development financial inclusion direct investment Nigeria

Article Details

How to Cite
Anthony-Orji, O., Orji, A., Jude, I. O. ., & Ogbuabor, J. E. (2023). Investigating the Financial Inclusion, Domestic Investment, and Financial Development Nexus in Nigeria. Unisia, 41(1), 1–16. https://doi.org/10.20885/unisia.vol41.iss1.art1

References

  1. Abbas, S., Sohag, K., & Suleman, S. (2023). Income from international tourism and domestic investment in South Asia: Evidence from heterogeneous panel econometrics. Current Issues in Tourism, 26(11), 1845–1860. https://doi.org/10.1080/13683500.2022.2071681

  2. Adedeji, Y. M. D., & Olotuah, A. O. (2012). An evaluation of accessibility of low-income earners to housing finance in Nigeria. European Scientific Journal, 8(12), 80–95. https://www.idosi.org/aejsr/7(1)12/5.pdf

  3. Adeola, O., & Evans, O. (2017). Financial inclusion, financial development, and economic diversification in Nigeria. The Journal of Developing Areas, 51(3), 1–15. https://doi.org/10.1353/jda.2017.0057

  4. Adepoju, A. (1981). Military rule and population issues in Nigeria. African Affairs, 80(318), 29–47. https://www.jstor.org/stable/721429

  5. Adu, G., Marbuah, G., & Mensah, J. T. (2013). Financial development and economic growth in Ghana: Does the measure of financial development matter? Review of Development Finance, 3(4), 192–203. https://doi.org/10.1016/j.rdf.2013.11.001

  6. Agbese, P. O. (1992). With fingers on the trigger: The military as custodian of democracy in Nigeria. Journal of Third World Studies, 9(2), 220–253. https://www.jstor.org/stable/45197260

  7. Akanbi, O. A. (2012). Role of governance in explaining domestic investment in Nigeria. South African Journal of Economics, 80(4), 473–489. https://doi.org/10.1111/j.1813-6982.2012.01320.x

  8. Alene, A. D. (2010). Productivity growth and the effects of R&D in African agriculture. Agricultural Economics, 41(3–4), 223–238. https://doi.org/10.1111/j.1574-0862.2010.00450.x

  9. Ali, M., Nazir, M. I., Hashmi, S. H., & Ullah, W. (2022). Financial inclusion, institutional quality and financial development: Empirical evidence from OIC countries. The Singapore Economic Review, 67(1), 161–188. https://doi.org/10.1142/S0217590820420084

  10. Allen, F., Carletti, E., Cull, R., Qian, J. Q., Senbet, L., & Valenzuela, P. (2014). The African financial development and financial inclusion gaps. Journal of African Economies, 23(5), 614–642. https://doi.org/10.1093/jae/eju015

  11. Anthony-Orji, O., Orji, A., Ogbuabor, J., & James, E. (2019). Financial inclusion and monetary policy shocks nexus in Nigeria: A new empirical evidence. Journal of Academic Research in Economics, 11(2), 364–388. http://www.jare-sh.com/downloads/jul_2019/orji2.pdf

  12. Anthony-Orji, O., Orji, A., Ogbuabor, J., Mba, P., & Onwe, I. (2021). Financial inclusion and financial stability in Nigeria: A new empirical evidence. Journal of Xi’an Shiyou University, Natural Science Edition, 17(12), 138–160. https://www.xisdxjxsu.asia/V17I12-17-1.pdf

  13. Asamoah, G. N. (2008). The impact of the financial sector reforms on savings, investments and growth of gross domestic product (GDP) in Ghana. International Business & Economics Research Journal (IBER), 7(10), Article 10. https://doi.org/10.19030/iber.v7i10.3302

  14. Asif, M., Khan, K. B., Anser, M. K., Nassani, A. A., Abro, M. M. Q., & Zaman, K. (2020). Dynamic interaction between financial development and natural resources: Evaluating the ‘Resource curse’ hypothesis. Resources Policy, 65, 101566. https://doi.org/10.1016/j.resourpol.2019.101566

  15. Beck, T. (2016, November 21). Financial Inclusion –  Measuring progress and progress in measuring. Fourth IMF Statistical Forum “Lifting the Small Boats: Statistics for Inclusive Growth.” https://www.imf.org/external/np/seminars/eng/2016/statsforum/pdf/beck_paper.pdf

  16. Borensztein, E., De Gregorio, J., & Lee, J.-W. (1998). How does foreign direct investment affect economic growth? Journal of International Economics, 45(1), 115–135. https://doi.org/10.1016/S0022-1996(97)00033-0

  17. Brownbridge, M. (1998). Financial distress in local banks in Kenya, Nigeria, Uganda and Zambia: Causes and implications for regulatory policy. Development Policy Review, 16(2), 173–188. https://doi.org/10.1111/1467-7679.00057

  18. Central Bank of Nigeria. (2018). National financial inclusion strategy (Revised). Central Bank of Nigeria.

  19. Dacanay, J., Nito, B., & Buensuceso, P. (2011, July 13). Microfinance, financial inclusion and financial development: An empirical investigation with an international perspective. MSKE 2011- II International Conference on Managing Services in the Knowledge Economy. https://www.researchgate.net/publication/216506808_Microfinance_Financial_Inclusion_and_Financial_Development_An_Empirical_Investigation_with_an_International_Perspective

  20. Dash, R. K. (2022). Do remittances crowd-in or crowd-out domestic investment? An empirical analysis of 24 low-income countries. Journal of the Knowledge Economy. https://doi.org/10.1007/s13132-022-00948-5

  21. De Gregorio, J., & Guidotti, P. E. (1995). Financial development and economic growth. World Development, 23(3), 433–448. https://doi.org/10.1016/0305-750X(94)00132-I

  22. Dries, L., & Swinnen, J. F. M. (2004). Foreign direct investment, vertical integration, and local suppliers: Evidence from the Polish dairy sector. World Development, 32(9), 1525–1544. https://doi.org/10.1016/j.worlddev.2004.05.004

  23. Enhancing Financial Innovation & Access (EFInA). (2022, November 24). EFInA Report on MSME financing. EFInA: Enhancing Financial Innovation and Access. https://efina.org.ng/publication/efina-report-on-msme-financing/

  24. Evans, O. (2015). The effects of economic and financial development on financial inclusion in Africa. Review of Economics and Development Studies, 1(1), 21–32. https://doi.org/10.26710/reads.v1i1.113

  25. Gloukoviezoff, G. (2007). From financial exclusion to overindebtedness: The paradox of difficulties for people on low incomes? In L. Anderloni, M. D. Braga, & E. M. Carluccio (Eds.), New frontiers in banking services: Emerging needs and tailored products for untapped markets (pp. 213–245). Springer. https://doi.org/10.1007/978-3-540-46498-3_6

  26. Han, R., & Melecky, M. (2013). Financial inclusion for financial stability: Access to bank deposits and the growth of deposits in the global financial crisis (SSRN Scholarly Paper No. 2312982). https://papers.ssrn.com/abstract=2312982

  27. Ibekwe, A. O., Anusui, A. O., & Ibekwe, A. I. (2021). Financial inclusion and entrepreneurship development in Nigeria. JOURNAL OF EMERGING TRENDS IN MANAGEMENT SCIENCES AND ENTREPRENEURSHIP, 3(1), Article 1. https://metatags.io/

  28. IHS Global Inc. (2022). EViews 12 University Edition for Windows. IHS Global Inc.

  29. Iyoboyi, M., & Muftau, O. (2014). Impact of exchange rate depreciation on the balance of payments: Empirical evidence from Nigeria. Cogent Economics & Finance, 2(1), 923323. https://doi.org/10.1080/23322039.2014.923323

  30. Kama, U., & Adigun, M. (2013a). Financial inclusion in Nigeria: Issues And challenges [Occasional Paper No. 45]. Central Bank of Nigeria. https://www.cbn.gov.ng/out/2014/rsd/occasional%20paper%20no.%2045%20issues%20and%20challenges.pdf

  31. Kama, U., & Adigun, M. (2013b). Financial inclusion in Nigeria: The journey so far. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.2365209

  32. Kapingura, F. M. (2018). Relationship between foreign capital flows, domestic investment and savings in the SADC region. Development Southern Africa, 35(4), 554–568. https://doi.org/10.1080/0376835X.2018.1487279

  33. Kapsos, S., & Bourmpoula, E. (2013). Employment and economic class in the developing world (No. 994855123402676; ILO Working Papers No. 6). International Labour Office. https://www.ilo.org/wcmsp5/groups/public/---dgreports/---inst/documents/publication/wcms_216451.pdf

  34. Karanja, T. W. (2020). Effect of financial inclusion on financial development in Kenya [Thesis, School of Business , University of Nairobi]. http://erepository.uonbi.ac.ke/handle/11295/154644

  35. Keynes, J. M. (2017). The general theory of employment, interest and money: With the economic consequences of the peace (D. M. G. Spencer & T. Griffith, Eds.). Wordsworth Editions. (Original work published 1936)

  36. Koku, P. S. (2015). Financial exclusion of the poor: A literature review. International Journal of Bank Marketing, 33(5), 654–668. https://doi.org/10.1108/IJBM-09-2014-0134

  37. Krumer-Nevo, M., Gorodzeisky, A., & Saar-Heiman, Y. (2017). Debt, poverty, and financial exclusion. Journal of Social Work, 17(5), 511–530. https://doi.org/10.1177/1468017316649330

  38. Lenka, S. K. (2022). Relationship between financial inclusion and financial development in India: Is there any link? Journal of Public Affairs, 22(S1), e2722. https://doi.org/10.1002/pa.2722

  39. Mbutor, M. O., & Uba, I. A. (2013). The impact of financial inclusion on monetary policy in Nigeria. Journal of Economics and International Finance, 5(8), 318–326. https://doi.org/10.5897/JEIF2013.0541

  40. National Bureau of Statistics. (2021). Selected banking sector data: Sectorial breakdown of credit, epayment channels and staff strength (Q4 2020). National Bureau of Statistics. https://nigerianstat.gov.ng/elibrary/read/1241018

  41. Nkoro, E., & Uko, A. K. (2016). Autoregressive Distributed Lag (ARDL) cointegration technique: Application and interpretation. Journal of Statistical and Econometric Methods, 5(4), 63–91. https://www.scienpress.com/Upload/JSEM/Vol%205_4_3.pdf

  42. Obioha, E. E. (2016). Role of the military in democratic transitions and succession in Nigeria. International Journal of Social Sciences and Humanity Studies, 8(1), 251–268. https://dergipark.org.tr/tr/pub/ijsshs/issue/26211/275967

  43. Odugbesan, J. A., Ike, G., Olowu, G., & Adeleye, B. N. (2022). Investigating the causality between financial inclusion, financial development and sustainable development in Sub‐Saharan Africa economies: The mediating role of foreign direct investment. Journal of Public Affairs, 22(3). https://doi.org/10.1002/pa.2569

  44. Okere, K. I., Ogbulu, O. M., Onuoha, F. C., & Ogbodo, I. (2021). What drives the energy consumption mix in Nigeria? The role of financial development, population age groups, urbanization and international trade: insight from ARDL Analysis. OPEC Energy Review, 45(2), 161–190. https://doi.org/10.1111/opec.12193

  45. Olugbenga, A. A., & Grace, O. O. (2015). Impact of foreign direct investment on Nigerian capital market development. International Journal of Academic Research in Accounting, Finance and Management Sciences, 5(1), 136–144. https://doi.org/10.6007/IJARAFMS/v5-i1/1503

  46. Onaolapo, A. R. (2015). Effects of financial inclusion on the economic growth of Nigeria (1982-2012). International Journal of Business and Management Review, 3(8), 11–28. http://www.eajournals.org/wp-content/uploads/Effects-of-Financial-Inclusion-on-the-Economic-Growth-of-Nigeria-1982-2012.pdf

  47. Orji, A., Ogbuabor, J. E., Okolomike, C. F., & Anthony-Orji, O. I. (2022). Capital inflows, financial development and growth in ECOWAS countries: A new empirical insight. Applied Econometrics and International Development, 22(1), 61–80. http://www.usc.es/~economet/reviews/aeid2214.pdf

  48. Orji, O. I. A., Orji, A., Ogbuabor, J. E., & Nwosu, E. O. (2019). Do financial stability and institutional quality have impact on financial inclusion in developing economies? A new evidence from Nigeria. International Journal of Sustainable Economy, 11(1), 18. https://doi.org/10.1504/IJSE.2019.096541

  49. Osuji, C. C., & Chigbu, E. E. (2012). An evaluation of financial development and economic growth of Nigeria: A causality test. Kuwait Chapter of Arabian Journal of Business and Management Review, 1(10), 27–44. https://www.arabianjbmr.com/pdfs/KD_VOL_1_10/3.pdf

  50. Oyewo, B. M., & Oyewole, O. S. (2014). Financial system, financial inclusion and economic development in nigeria. International Journal of Management Sciences, 2(3), 139–148. http://rassweb.org/admin/pages/ResearchPapers/Paper%202_1497128592.pdf

  51. Rafindadi, A. A., & Yusof, Z. (2015). Do the dynamics of financial development spur economic growth in Nigeria’s contemporal growth struggle? A fact beyond the figures. Quality & Quantity, 49(1), 365–384. https://doi.org/10.1007/s11135-014-9991-0

  52. Rasheed, B., Law, S., Chin, L., & Habibullah, M. (2016). The role of financial inclusion in financial development: International evidence. Abasyn Journal of Social Sciences, 9, 330–348. http://ajss.abasyn.edu.pk/admineditor/specialissue/papers/AJSS-9-2-RP2.pdf

  53. The International Monetary Fund. (2014). IMF Global Financial Stability Report (GFSR)—April 2014: Moving from liquidity- to growth-driven markets. The International Monetary Fund. https://www.imf.org/en/Publications/GFSR/Issues/2016/12/31/Moving-from-Liquidity-to-Growth-Driven-Markets

  54. The World Bank. (2018). World Development Indicators. The World Bank. https://databank.worldbank.org/source/world-development-indicators

  55. The World Bank. (2022, March 29). Financial inclusion overview [Text/HTML]. World Bank. https://www.worldbank.org/en/topic/financialinclusion/overview

  56. Toby, A. J. (2014). Financial fragility and performance of Nigerian banking institutions: An inter-temporal analysis. Journal of Applied Finance & Banking, 4(6), 1–8. https://ideas.repec.org//a/spt/apfiba/v4y2014i6f4_6_8.html

  57. Toby, A. J., & Peterside, D. (2014, October 10). Monetary policy, bank management and real sector finance in Nigeria: Who is to blame? First Middle East Conference on Global Business, Economics, Finance and Banking. https://doi.org/10.13140/2.1.2355.0408

  58. Tougem, T. O., Ze, T., Amowine, N., & Adiyoh, I. S. (2022). Domestic investment, foreign direct investment, and economic growth in Sub-Saharan Africa: A case of industrial investment in Cameroon. Journal of Industrial Integration and Management, 7(3), 435–454. https://doi.org/10.1142/S2424862221500032

  59. Wezel, T., & Ree, J. (2023). Nigeria—Fostering financial inclusion through digital financial services [IMF Selected Issues Papers SIP/2023/020]. The International Monetary Fund. https://www.imf.org/-/media/Files/Publications/Selected-Issues-Papers/2023/English/SIPEA2023020.ashx

Most read articles by the same author(s)

Similar Articles

You may also start an advanced similarity search for this article.

No Related Submission Found