Impact of financial development on inclusive growth in Nigeria

Abstract

This study examined the impact of financial development on inclusive growth in Nigeria using a time
series data obtained from secondary sources between 1999 and 2019. Financial development was measured
using broad money supply and domestic credit to private sector, while inclusive growth was measured
from income perspective using per capita GDP and from expenditure perspective using household
consumption expenditure. The data were mainly obtained from World Development Indicators data base
for various years. The data were analysed using Autoregressive Distributed Lag Bound test approach. The
results of the ARDL revealed that financial development proxy with broad money supply exert significant
positive impact on per capita income and household consumption expenditure in both short and long run.
On the contrary, domestic credit to private sector has significant negative impact on per capita income in
short and long run while the impact on household consumption expenditure was not significant in both
short and long run. The study therefore recommends that the government can use broad money supply as
one of the financial development instruments to promote inclusive growth in Nigeria. in addition, attention
should be paid to the allocation of funds to private sector and the efficiency of such fund in order to reverse
unproductive impact of fund allocated to private sector on inclusive growth in Nigeria.
Key words: inclusive growth, financial development, trade openness, broad money supply.