Financial Inclusion and Rural Development in Nigeria

The failure of the formal banking sector to provide financial services in rural areas in the supply of credit to rural communities to engage in economic activities that may promote rural development is recurring on the development agenda as a persistent issue. In line with the above, it becomes necessary to carry out a study on the impact of financial inclusion on rural development in Nigeria. The study employed Johansen cointegration, Error Correction Model (ECM), and Granger causality test methods of analyses on data collected from the Central Bank of Nigeria and World Bank database from 1981 to 2022 to ascertain both the long and short-run relationships among the variables. The result revealed that both the short and long-run relationships confirmed the significant impact of financial inclusion on rural development in Nigeria. The ECM value of -0.45 is statistically significant and indicates a satisfactory speed of adjustment, indicating that 45 percent of the errors are corrected in each period. The study concludes that a low level of financial deepening and the small number of rural bank branches in Nigeria are retarding the promotion of financial inclusion which invariably stunts rural development. The study recommended the need for the government to introduce inclusive policies to broaden financing channels suitable for implementation in rural areas. Overall, the study provides an indispensable road map for future researchers and scholars, especially in the field of development finance.