Financial Inclusion and Poverty Reduction in Nigeria
The urge to ascertain whether financial inclusion is driving poverty downwards in Nigeria prompted the study to examine the impact of financial inclusion on poverty reduction in Nigeria over the period 1981-2021 using three measures, namely, commercial bank loan to SMEs (CBLSME), deposit mobilization of rural bank branches (DRB), and loans granted by rural bank branches (LRB). We used a dynamic autoregressive distributed lag method and found that CBLSMEs has a significant positive impact on poverty rate, and a unit positive shock produces a mean poverty rate of about 70 per cent over a 30-year period; DRB has a significant negative impact on poverty rate as it falls by 12% in the long run and 19% in the short run; with a unit positive shock producing a mean poverty rate of about 58 per cent; LRB has significant positive long-run impact on poverty rate but has the desired negative impact in the short run, and a unit positive shock produces a mean poverty rate of about 62% per cent over the same 30-year period. The study concludes that financial inclusion can curb poverty rate in Nigeria through direct short-term loans by rural bank branches. Banks in rural areas should therefore ensure that loans to SMEs are used productively to ensure poverty reduction. Also, the Central Bank of Nigeria should guarantee direct lending to rural dwellers by rural banks to increase the volume of such lending and thus lower poverty rate.