What Can We Infer from Financial Inclusion and Income Inequality Using Nigeria Data?

Oluwatosin Y. Akinbode and Godwin E. Akpan
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Oluwatosin Y. Akinbode: University of Uyo, Nigeria
Godwin E. Akpan: University of Uyo, Nigeria

African Journal of Commercial Studies, 2025, vol. 6, issue 6

Abstract: TThis study examines the relationship between financial inclusion and income inequality in Nigeria from 1985 to 2022. The ARDL (Autoregressive Distributed Lag) and Granger causality tests were used with data from the central bank statistical bulletin and the World Bank. The results revealed a significant and negative relationship between financial inclusion and income inequality, suggesting that increased access to financial services contributes to a reduction in income disparities in both the short and long run. Human capital variables, such as education expenditure (NE) and employment levels (UNEMP), also play crucial roles in reducing inequality, highlighting the importance of investing in education and job creation to complement financial inclusion efforts. Public health expenditure (HLTEXP) and economic growth were found to contribute to the reduction of inequality; inflation worsens it, particularly affecting low-income households. The Granger causality test indicates that financial inclusion, especially through the expansion of commercial bank branches, significantly influences income inequality, affirming the importance of financial inclusion in mitigating income inequality. The study concludes that financial inclusion, coupled with supportive investments in education, employment, health, and macroeconomic stability, can significantly reduce income inequality in Nigeria. We recommend that access to financial services be expanded and enhanced human capital development to ensure inclusive and sustainable economic growth.

Keywords: Financial inclusion; income inequality; Nigeria; ARDL (search for similar items in EconPapers)
JEL-codes: D31 G21 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:cwk:ajocsk:2025-05

DOI: 10.59413/ajocs/v6.i6.5

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