Financial Inclusion And Economic Development In Northern Nigeria: Empirical Evidence And Policy Implications

Abstract

This study investigates the relationship between financial inclusion and economic development in Northern Nigeria using quarterly secondary data from 2012 to 2024, focusing on ten states with the highest multidimensional poverty rates. Financial inclusion indicators include bank branches per capita, ATM penetration, mobile money usage, and rural loans, while economic development is measured by GDP per capita, poverty rates, employment, and household income. Unit root tests reveal mixed orders of integration among the variables, justifying the use of the Autoregressive Distributed Lag (ARDL) approach. The bounds test confirms a stable long-run cointegrating relationship between financial inclusion and economic development. Long-run ARDL estimates indicate that bank branches, ATM penetration, and rural loans positively affect economic development but are statistically insignificant, suggesting limited impact of traditional financial inclusion channels, whereas mobile money usage has a negative and marginally significant effect, implying that it is mainly used for consumption rather than productive investment. Short-run results show that the lagged dependent variable is significant and the error correction term is negative and statistically significant, with approximately 50 percent of deviations from long-run equilibrium corrected within one quarter, indicating a relatively fast speed of adjustment toward a stable long-run relationship. Post-estimation diagnostics confirm model robustness, showing no serial correlation, heteroscedasticity, or non-normality. Based on these findings, the study recommends that policies not only expand access to financial services but also promote their productive use through entrepreneurship programs and investment incentives; enhance financial literacy for low-income and rural populations; and strengthen institutional and regulatory frameworks to improve transparency, credit allocation, and monitoring of financial services.