IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/124265.html
   My bibliography  Save this paper

Determinants of Financial Inclusion in Nigeria: The Monetary Policy and Banking Sector Factors

Author

Listed:
  • Ozili, Peterson K

Abstract

This study investigates the determinants of financial inclusion in Nigeria. The study extends the empirical debate on the determinants of financial inclusion by focusing on the monetary policy and banking sector factors that influence the level of financial inclusion in Nigeria. The study employs the two-stage least squares regression method to estimate the determinants of financial inclusion in Nigeria during the 2007–2021 period. The results show that the central bank monetary policy rate, the savings deposit rate, and the loan to deposit ratio of banks are significant determinants of financial inclusion in Nigeria. Specifically, increase in the central bank interest rate decreases the level of financial inclusion, increase in the savings deposit rate increases the level of financial inclusion, and increase in the loan-to-deposit ratio decreases the level of financial inclusion. These determinants are robust to alternative estimation using the quantile regression method. There is further evidence that the interbank lending rate, inflation rate and the nominal interest rate are also determinants of financial inclusion in Nigeria based on the two-stage least squares estimation.

Suggested Citation

  • Ozili, Peterson K, 2025. "Determinants of Financial Inclusion in Nigeria: The Monetary Policy and Banking Sector Factors," MPRA Paper 124265, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:124265
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/124265/1/MPRA_paper_124265.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Dyna Heng & Serey Chea & Bomakara Heng, 2021. "Impacts of Interest Rate Cap on Financial Inclusion in Cambodia," IMF Working Papers 2021/107, International Monetary Fund.
    2. Sanjaya Kumar Lenka & Arun Kumar Bairwa, 2016. "Does financial inclusion affect monetary policy in SAARC countries?," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1127011-112, December.
    3. Roger Koenker, 2017. "Quantile regression 40 years on," CeMMAP working papers CWP36/17, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    4. Tarek Eldomiaty & Rasha Hammam & Rawan El Bakry, 2020. "Institutional determinants of financial inclusion: evidence from world economies," International Journal of Development Issues, Emerald Group Publishing Limited, vol. 19(2), pages 217-228, April.
    5. Ibrahim Bozkurt & Rıfat Karakuş & Melek Yildiz, 2018. "Spatial Determinants of Financial Inclusion over Time," Journal of International Development, John Wiley & Sons, Ltd., vol. 30(8), pages 1474-1504, November.
    6. Elhadj Ezzahid & Zakaria Elouaourti, 2021. "Financial inclusion, mobile banking, informal finance and financial exclusion: micro-level evidence from Morocco," International Journal of Social Economics, Emerald Group Publishing Limited, vol. 48(7), pages 1060-1086, April.
    7. Mr. Adolfo Barajas & Thorsten Beck & Mohammed Belhaj & Sami Ben Naceur, 2020. "Financial Inclusion: What Have We Learned So Far? What Do We Have to Learn?," IMF Working Papers 2020/157, International Monetary Fund.
    8. Mohammed Ait Lahcen & Pedro Gomis‐Porqueras, 2021. "A Model of Endogenous Financial Inclusion: Implications for Inequality and Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 53(5), pages 1175-1209, August.
    9. João Jungo & Mara Madaleno & Anabela Botelho, 2022. "The Relationship between Financial Inclusion and Monetary Policy: A Comparative Study of Countries’ in Sub-Saharan Africa and Latin America and the Caribbean," Journal of African Business, Taylor & Francis Journals, vol. 23(3), pages 794-815, July.
    10. Ghosh, Saibal & Vinod, D., 2017. "What Constrains Financial Inclusion for Women? Evidence from Indian Micro data," World Development, Elsevier, vol. 92(C), pages 60-81.
    11. Fareeha Adil & Abdul Jalil, 2020. "Determining the Financial Inclusion Output of Banking Sector of Pakistan—Supply-Side Analysis," Economies, MDPI, vol. 8(2), pages 1-20, May.
    12. Ebenezer Bugri Anarfo & Joshua Yindenaba Abor & Kofi Achampong Osei & Agyapomaa Gyeke-Dako, 2019. "Monetary Policy and Financial Inclusion in Sub-Sahara Africa: A Panel VAR Approach," Journal of African Business, Taylor & Francis Journals, vol. 20(4), pages 549-572, October.
    13. Roger Koenker, 2017. "Quantile Regression: 40 Years On," Annual Review of Economics, Annual Reviews, vol. 9(1), pages 155-176, September.
    14. Angella Faith Lapukeni, 2015. "The impact of financial inclusion on monetary policy effectiveness: the case of Malawi," International Journal of Monetary Economics and Finance, Inderscience Enterprises Ltd, vol. 8(4), pages 360-384.
    15. Olubanjo Michael Adetunji & Olayinka David‐West, 2019. "The Relative Impact of Income and Financial Literacy on Financial Inclusion in Nigeria," Journal of International Development, John Wiley & Sons, Ltd., vol. 31(4), pages 312-335, May.
    16. Dabla-Norris, Era & Ji, Yan & Townsend, Robert M. & Filiz Unsal, D., 2021. "Distinguishing constraints on financial inclusion and their impact on GDP, TFP, and the distribution of income," Journal of Monetary Economics, Elsevier, vol. 117(C), pages 1-18.
    17. Haftu Girmay Giday, 2023. "Financial inclusion and its demand-side determinants: Evidence from Ethiopia," Cogent Economics & Finance, Taylor & Francis Journals, vol. 11(1), pages 2186031-218, December.
    18. Evans, Olaniyi, 2016. "Determinants of Financial Inclusion in Africa: A Dynamic Panel Data Approach," MPRA Paper 81326, University Library of Munich, Germany.
    19. Roger Koenker, 2017. "Quantile regression 40 years on," CeMMAP working papers 36/17, Institute for Fiscal Studies.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Simona Elena Ciobanu, 2024. "Financial Inclusion and Monetary Policy: A Review of Literature," Economics and Applied Informatics, "Dunarea de Jos" University of Galati, Faculty of Economics and Business Administration, issue 3, pages 314-324.
    2. Chen, Zhao & Cheng, Vivian Xinyi & Liu, Xu, 2024. "Reprint: Hypothesis testing on high dimensional quantile regression," Journal of Econometrics, Elsevier, vol. 239(2).
    3. Sulkhan Chavleishvili & Simone Manganelli, 2024. "Forecasting and stress testing with quantile vector autoregression," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 39(1), pages 66-85, January.
    4. Tram, Thi Xuan Huong & Lai, Tien Dinh & Nguyen, Thi Truc Huong, 2023. "Constructing a composite financial inclusion index for developing economies," The Quarterly Review of Economics and Finance, Elsevier, vol. 87(C), pages 257-265.
    5. Shi, Zheng, 2023. "The impact of regional ICT development on job quality of the employee in China," Telecommunications Policy, Elsevier, vol. 47(6).
    6. Sara Alida Volkmer & Susanne Gaube & Martina Raue & Eva Lermer, 2023. "Troll story: The dark tetrad and online trolling revisited with a glance at humor," PLOS ONE, Public Library of Science, vol. 18(3), pages 1-21, March.
    7. Pietro Colombo & Raffaele Mattera & Philipp Otto, 2025. "Simple Yet Effective: A Comparative Study of Statistical Models for Yearly Hurricane Forecasting," Environmetrics, John Wiley & Sons, Ltd., vol. 36(3), April.
    8. Amina Ika Micah, 2022. "Three essays on access to credit and financial shock in Nigeria," Economics PhD Theses 0422, Department of Economics, University of Sussex Business School.
    9. Mingshu Li & Bhaskarjit Sarmah & Dhruv Desai & Joshua Rosaler & Snigdha Bhagat & Philip Sommer & Dhagash Mehta, 2024. "Quantile Regression using Random Forest Proximities," Papers 2408.02355, arXiv.org.
    10. Hatice Jenkins & Ezuldeen Alshareef & Amer Mohamad, 2023. "The impact of corruption on commercial banks' credit risk: Evidence from a panel quantile regression," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 1364-1375, April.
    11. Vidal-Llana, Xenxo & Guillén, Montserrat, 2022. "Cross-sectional quantile regression for estimating conditional VaR of returns during periods of high volatility," The North American Journal of Economics and Finance, Elsevier, vol. 63(C).
    12. Chong-Chuo Chang & Oshamah Lin Lin & Oshamah Yu-Cheng Chang & Oshamah Kun-Zhan Hsu, 2023. "Impact of Financial Liberalization on Firm Risk," Advances in Decision Sciences, Asia University, Taiwan, vol. 27(3), pages 14-45, September.
    13. Driss Tsouli, 2022. "Financial Inclusion, Poverty, and Income Inequality: Evidence from High, Middle, and Low-income Countries," Scientific Annals of Economics and Business (continues Analele Stiintifice), Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, vol. 69(1), pages 69-98, March.
    14. Thereza Balliester Reis, 2022. "Socio‐economic determinants of financial inclusion: An evaluation with a microdata multidimensional index," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 587-611, April.
    15. Wang, Xuqin & Li, Muyi, 2023. "Bootstrapping the transformed goodness-of-fit test on heavy-tailed GARCH models," Computational Statistics & Data Analysis, Elsevier, vol. 184(C).
    16. Chen, Le-Yu & Lee, Sokbae, 2023. "Sparse quantile regression," Journal of Econometrics, Elsevier, vol. 235(2), pages 2195-2217.
    17. Murshed, Muntasir & Ahmed, Rizwan & Al-Tal, Raad Mahmoud & Kumpamool, Chamaiporn & Vetchagool, Witchulada & Avarado, Rafael, 2023. "Determinants of financial inclusion in South Asia: The moderating and mediating roles of internal conflict settlement," Research in International Business and Finance, Elsevier, vol. 64(C).
    18. Xianling Ren & Xinping Yu, 2024. "Hedging performance analysis of energy markets: Evidence from copula quantile regression," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(3), pages 432-450, March.
    19. Wei, Bo & Tan, Kean Ming & He, Xuming, 2024. "Estimation of complier expected shortfall treatment effects with a binary instrumental variable," Journal of Econometrics, Elsevier, vol. 238(2).
    20. Chen, Zhao & Cheng, Vivian Xinyi & Liu, Xu, 2024. "Hypothesis testing on high dimensional quantile regression," Journal of Econometrics, Elsevier, vol. 238(1).

    More about this item

    Keywords

    Financial inclusion; determinants; monetary policy; index; inflation; central bank; Nigeria; interest rate; savings; interbank lending;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:124265. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.