MONETARY POLICY AND FINANCIAL INCLUSION IN NIGERIA

Abstract

Policymakers and practitioners require a nuanced grasp of financial inclusion to foster inclusive financial systems. This paper adopts a novel approach, using the Currency-in-Circulation to Money Supply/GDP ratio to aim for a more holistic assessment. The objective of this paper is to examine the impact of monetary policy variables on financial inclusion in Nigeria. It analyzes key factors such as rediscount rates, deposit rates, inflation rates, and exchange rates from 1981-2021. The Augmented Dickey-Fuller unit root test indicated the variables were stationary at I(0 and I (1). Bound test co-integration showed evidence of long run relationship among the variables. The techniques of autoregressive distributed lagged model and Granger causality analysis were used for model estimation. Results indicate that monetary policy has significant impact on financial inclusion, implying a mutual relationship between monetary policy and financial inclusion. Amongst others, it suggests that policymakers should integrate monetary policies, and prioritize financial inclusion alongside price stability and growth. Targeted interventions by monetary authorities should expand financial service access, especially for underserved populations.