Bank Competition, Financial Inclusion, and Welfare Outcomes in Nigeria’s Geopolitical Zones

The competitive structure of the banking industry has significant implications for the terms on which financial services are offered to the public, with theoretical predictions ranging from the market power hypothesis, which predicts higher prices under concentrated markets, to the information hypothesis, which suggests concentration may facilitate long-term lending relationships in information-opaque markets. This study investigates the relationship between bank competition, financial inclusion, and household welfare outcomes across Nigeria's six geopolitical zones. Zonal-level data on bank branch concentration, Herfindahl-Hirschman indices of deposit market competition, financial inclusion indicators, and welfare proxies are assembled from the Central Bank of Nigeria, the National Financial Inclusion Strategy reports, and the National Bureau of Statistics for the period 2015 to 2022. The study employs a spatial econometric panel model to account for geographic spillover effects in financial access across zones and a mediation analysis to estimate the welfare effects attributable to financial inclusion. The Boone indicator and the Lerner index are used as alternative competition measures to ensure robustness. The theoretical framework draws on the Schumpeterian competition-innovation-inclusion nexus, the financial access-welfare model, and the geographic financial development literature. A key contribution of the study is the zonal disaggregation of findings, which reveals that the financial inclusion-welfare pathway operates differently in fragile-state zones such as the North East compared to commercially vibrant zones such as the South West. Findings are expected to inform the Central Bank of Nigeria's financial inclusion strategy revision and competition policy considerations for the banking sector. Keywords: bank competition, financial inclusion, welfare outcomes, geopolitical zones, Nigeria