Financial Inclusion as a Panacea for Income Inequality in Nigeria

Abstract

Given the perception that Önancial inclusion is a critical tool for the eradication of income inequality, this paper investigates its impact on income inequality in Nigeria via three Önancial variables: depth, access and stability. The study adopts the Autoregressive Distributed Lag (ARDL) methodology on selected variables from 1981 to 2021. The study found that in the short run, Önancial stability shows a negative impact which is not sta- tistically signiÖcant on inequality, while Önancial depth has a statistically signiÖcant (10%) positive e§ect. Also, standard of living has a statistically signiÖcant (1%) negative impact on inequality while economic growth reveals a statistically signiÖcant (1%) positive e§ect. How- ever, in the long run, Önancial stability shows a positive and insigniÖcant e§ect on inequality whereas both Önancial access and economic growth have positive and signiÖcant e§ect. Also, while Önancial depth has negative and insigniÖcant e§ects on inequality, standard of living has a negative but signiÖcant e§ect. This study reccomends that Önancial inclusion should focus mainly on the Önancially excluded while the government should create incentives for private Önancial institutions to extend their services and activities towards the rural dwellers and those who are likely to beneÖt more from their services.