Financial Inclusion Policy and Credit to Private Sector: A Time Series Study from Nigeria
Vol.6 Issue 2
This study investigated the effect of financial inclusion policy on credit to private sector in Nigeria from 1981 to 2019. This is in reaction to the reservations being expressed in some quarters as to whether access to financial services has influenced access to credits by private sector investors given the disequilibrium in the poor outing of the private sector over the years and the increasing access to financial services. The study sourced its data from the Central Bank of Nigeria Statistical Bulletin and the World Bank Development Indicators. The Auto Regression Distributive Lag (ARDL) method was employed to develop the econometric model; ARDL Bounds Test confirmed the long-run equilibrium relationship, while the techniques of Phillips-Perron Unit Root, Johansen Co-integration and Granger Causality tests were employed respectively to determine the properties of the data sets. Commercial banks’ credit to private sector was the proxies for commercial bank intermediation while the rural commercial banks loan, rural commercial banks deposits, microfinance bank total assets, number of micro-finance bank branches and commercial bank loan to small and medium scale enterprises are the explanatory variables. The study revealed that rural commercial bank loans, rural commercial bank deposits, microfinance bank total assets, commercial bank loans to small and medium scale enterprises, and one period lagged variables of: rural commercial bank loan, rural commercial bank deposits, and commercial bank loan to small and medium scale enterprises are significantly related to broad money supply (size of the financial sector). It was also found in the study that rural commercial bank deposits, microfinance bank total assets, commercial bank loan to small and medium scale enterprises and one period lagged variables of rural commercial bank loans have strong relationship with credit to private sector. The study therefore recommends that financial players should build inclusive financial system that will facilitate financial access and use, expand the portfolio of financial services available in the mainstream beyond banking and payments and incorporate informal financial institutions into the financial services ecosystem, as a boost to private sector access to credits and investments respectively.
