From Branch to App: Assessing the Impact of Traditional and Digital Financial Inclusion on Nigeria’s Economic Growth

Abstract

This study examines the impact of traditional and digital financial inclusion on Nigeria’s economic growth using quarterly data (2009- 2023). Financial inclusion is measured by the number of depositors at commercial banks, while digital inclusion is captured through mobile banking, point-of-sale (POS), and web-based transactions. Nigeria's economic growth is proxied by real gross domestic product (RGDP). This study is based on the financial intermediation theory and employs a Vector Autoregression (VAR) model in first differences, after verifying that all variables are integrated of order one and are not cointegrated. The results show that neither traditional nor digital financial inclusion variables have a statistically significant short-run effect on real GDP. However, a strong autoregressive behaviour was observed within the financial inclusion indicators themselves, especially for deposit accounts, mobile banking, and POS usage. A substitution effect is observed between POS and web banking, indicating shifts in user preference across digital channels. The findings of this study imply that while financial inclusion systems are becoming more established, their macroeconomic impact may unfold over the long term. This study stresses the importance of strengthening infrastructure, promoting financial literacy, and integrating financial services to maximize their developmental potential.