Financial Inclusion, ICT and Economic Development: Evidence from Nigeria

Abstract

In this study, we investigate the impact of financial inclusion, ICT on economic development in Nigeria using the structural VAR methods. Yearly time series data from 1981 to 2016 are used. The results show that financial inclusion, measured by the number of commercial bank branches, loans and advances of commercial banks and total market capitalization as a ratio of GDP, has positive impact on economic development, measured by the real per capital income. However, if financial inclusion is measured by loans and deposits of rural branches of commercial banks, the impact on economic development is negative and the effect size is very small, suggesting that the impact is insignificant. The results also show that ICT, measured by the percentage contribution of ICT to nominal GDP, has positive impact on the real per capita income. Further, most of the variations in per capita income are explained by own shock as financial inclusion and ICT jointly account for only approximately 6% of the total variation in the real per capita income in the second impact period, with the number of bank branches being the highest contributor. Thus, more bank branches should be deployed across the country to improve access to formal financial services for an inclusive economic growth and development.