ABSTRACT
This study investigated the empirical and causal relationship between financial inclusion (FI), economic inclusion (EI),and inclusive growth (IG). Using key financial performance indicators suggested by literature such as financial development component (FD), ratio of bank credit to deposit(BCD), and number of banks’ branches(NBB), financial inclusion was measured. Inclusive growth was measured by the aggregation method used by Hakimian (2013) and AfDB (2016). Economic inclusion on the other hand was captured using broad-based macroeconomic performance indicators, namely real GDP, Per capita income, unemployment, mortality rate, inequality, and environmental sustainability (C02). The econometric models employed in this thesis were estimated using an ARDL-Bound approach to co-integration and error correction model, an unrestricted vector error correction framework (VEC), variance decompositions, fully modified OLS (FMOLS) technique, and other stability/sensitivity analysis for the purpose of robustness after carrying out several preliminary analyses on the data spanning over 36 years, (1981 to 2018). The results suggest that financial inclusion has led to inclusive economic growth and economic inclusion with a stronger intensity observed when the FD and BCD were used as measures of financial inclusion. The results also showed that a strong and consistent interaction exists between FI and the broad-based indicators of economic inclusion. We can then say that financial inclusion has a great influence on the level of EI and IG in Nigeria. Again, the study examined the causal relationship between FI and IG, and a unidirectional association between FD and IG was found to exist, while a bi-directional causal relationship between BCD and IG was observed. Hence, we can say that financial inclusion-led inclusive growth and inclusive growth-led financial inclusion exist. This implies that FI is as important to achieving IG, as IG is to achieving FI. The study therefore recommends that for the Nigerian economy to be strategically positioned to achieve the benefits of accelerated inclusive economic growth, the government, heads of the public sector and relevant policymakers in the financial sector, need to formulate and implement policies that strengthen and ensure the proper functioning of the financial sector, to ensure that no one or sector is left behind (Economic Inclusion), as well as those that guarantee its macroeconomic stability. This way, every Nigerian will be given a chance to acquire economic power and contribute their quota towards aneconomy that grows inclusively and remains at the top.
