Empirical Analysis of the Relationship Between Financial Inclusion and Economic Growth in Nigeria: A Panel Data Approach

Financial inclusion has been identified as a critical enabler of sustainable economic growth in low- and middle-income economies, yet the empirical evidence on the magnitude and causal direction of this relationship remains contested in the Nigerian context. This study employs panel data econometric methods, specifically the fixed effects model, random effects model, and system Generalised Method of Moments estimator, to examine the relationship between financial inclusion indicators and economic growth across Nigeria's 36 states and the FCT over the period 2012 to 2022. Financial inclusion is measured using a composite index constructed from account ownership rates, credit penetration, mobile money transaction volumes, and bank branch density data obtained from the Central Bank of Nigeria and Enhancing Financial Innovation and Access surveys. State-level GDP per capita growth rates are sourced from National Bureau of Statistics estimates. The GMM estimator addresses endogeneity concerns arising from reverse causality between financial depth and growth. Results indicate a statistically significant positive effect of the financial inclusion index on GDP per capita growth, with a one-unit increase in the index associated with a 0.43 percentage point increase in annual growth rate. The effect is significantly stronger in states with initially low financial access, confirming a convergence dynamic. Mobile money transaction penetration emerges as the single most growth-enhancing financial inclusion dimension. Keywords: financial inclusion, economic growth, panel data, GMM estimator, Nigeria.