Financial Inclusion and Poverty Alleviation in Nigeria: Evidence from an ARDL Analysis (1992–2023)

Abstract

The issue of poverty alleviation has been attracting global attention especially as economic challenges become more complex. Empirical evidence suggests that meaningful poverty alleviation is achievable particularly in countries that have experienced sustained economic progress. This study investigated the short- and long-term effects of financial inclusion on poverty alleviation in Nigeria over the period 1992–2023. The data were sourced from the Central Bank Statistical Bulletin and World Development Indicators. For the purpose of statistical analysis, the study used the Auto-Regressive Distributed Lag (ARDL) model. The results revealed a strong and positive link between key financial inclusion indicators and poverty reduction in the long run. In particular, expanding the number of commercial banks’ rural branches showed a significant exerted a diminishing influence on poverty levels. Increased rural deposit mobilisation, greater access to agricultural credit under the guarantee scheme and higher lending to small and medium-sized enterprises (SMEs) also contributed meaningfully to reducing poverty. In contrast, loans provided by microfinance banks displayed a negative but statistically insignificant effect over time. Short-run findings presented varied outcomes across the variables. In general, the study demonstrated that targeted financial inclusion strategies especially those focused on rural communities, agriculture, and SMEs play a crucial role in achieving sustained poverty reduction in Nigeria. The analysis and findings are restricted to Nigeria and this may limit the extent to which it is generalized to other developing economies with different financial structures.