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

Peterson K Ozili

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Financial inclusion; determinants; monetary policy; index; inflation; central bank; Nigeria; interest rate; savings; interbank lending (search for similar items in EconPapers)
JEL-codes: G20 G21 G23 (search for similar items in EconPapers)
Date: 2025
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