FINANCIAL SECTOR POLICIES AND INEQUALITY IN NIGERIA

ABSTRACT

This study empirically examined financial sector policies and inequality in Nigeria from 1991-2019. Being a time series data, and to avoid spurious regression result in our model, a test for stationary of the data using Augmented Dickey-Fuller unit root test was carried out. The variables; household consumption expenditure (a proxy or inequality), money supply, interest rate, government expenditure, and foreign direct investment were found to be stationary at their first difference. Then Engle-Granger single equation co-integration technique was used to establish if the stationary variables are co-integrated in the long-run. The finding indicates that the variables were found to be co-integrated in the long run. Further, ECM was employed to correct for any form of dis-equilibrium in the short run. The ECM result revealed that interest rate exerts a significant influence on household consumption expenditure (a proxy for inequality) while money supply and foreign direct investment were insignificant between the period under consideration. The study recommends that the government and policy makers should ensure efforts are made towards closing the huge lacuna between the rich and the poor through transparent and inclusive governance in order to fight poverty in a sustainable manner. And there should be more concerted efforts to take financial services to the poor by encouraging the opening of bank branches or microfinance banks in the peripheral of the urban regions that is, the rural areas. The study therefore concludes that the government of the Nigerian economy should embark on the development of the semi- formal and the informal financial institutions at the grassroots level.