Understanding the patterns and correlates of financial inclusion in Nigeria

Abstract

Global disparities in financial inclusion (FI) exist, with financial exclusion in Nigeria on the increase. Studies on the correlates of FI in Nigeria abound, however, these studies did not examine how the socioeconomic inequalities in the country affect FI, which obscures the key correlates of FI. Conversely to past studies, the approach adopted for this study is spatial and disaggregated to better reveal the structure of FI, especially patterns that were once inconspicuous and the major drivers. Data on FI and its correlates were obtained from the records of Enhancing Financial Innovation and Access (EFINA) and other official sources. The geographical distribution of the level of FI was analysed with Global Moran’s I, Local Moran’s I and spatial regression techniques. There was evidence of geographic clustering of FI (I = 0.563223, Z = 5.679559, P < 0.05). Lagos and Ogun States emerged as high FI clusters while low cluster was detected in Kano State. Gender (female), employment, sub-national domestic debt burden and owning a bank verification number explained 68.6 (OLS model) and 71.2 (spatial error model) percent of the variation in the geographical pattern of FI in the country. The study recommends region-specific policies to improve the level of FI in Nigeria.