Statistical Evaluation of Financial Inclusion Indicators and Economic Growth Linkages in Nigerian States Using Panel Cointegration

Financial inclusion is a widely promoted development strategy in Nigeria, yet the statistical evidence for a causal long-run relationship between financial inclusion indicators and economic growth at the state level has not been rigorously established using panel cointegration methods. This study statistically evaluates financial inclusion-economic growth linkages across 36 Nigerian states and the FCT from 2012 to 2022 using panel cointegration analysis. State-level financial inclusion indicators (bank branch density, ATM density, mobile money agent density, and credit-to-GDP ratio) and real per capita income were constructed from CBN, EFInA FinAccess Nigeria data, and NBS state accounts. Panel unit root tests (LLC, IPS, Pesaran CIPS) established integration orders. Westerlund panel cointegration tests accounting for cross-sectional dependence examined long-run relationships. Panel VECM estimated error correction dynamics. All financial inclusion indicators and per capita income were I(1) series. Westerlund tests confirmed cointegration between financial inclusion composite index and per capita income (Ga statistic = -3.24, p = 0.003). VECM showed that the long-run elasticity of per capita income with respect to financial inclusion composite was 0.38, statistically significant (p < 0.001). Short-run dynamics showed a 14 percent annual speed of adjustment to long-run equilibrium. Mobile money agent density showed the strongest long-run coefficient among individual indicators. The study provides panel cointegration evidence for a positive financial inclusion-growth nexus in Nigeria and recommends CBN financial inclusion strategy targeting mobile money expansion in low-inclusion states. Keywords: financial inclusion, panel cointegration, economic growth, Nigerian states, VECM