Impact of Financial Inclusion on Household Consumption Expenditure in Nigeria

Abstract: This study examined the effect of four financial inclusion variables namelyCommercial Bank Lending Rate (CBLR), Commercial Bank Advances and Loans (CBAL),Microfinance Bank Advances and Loans (MBAL), the Number of Commercial Bank Branches(NCBB) in Nigeria on Household Consumption expenditure in Nigeria. The estimationtechnique deployed is the Autoregressive Distributed Lag (ARDL) technique and its BoundsTest for the determination of a long run relationship between the variables. Specifically, theBounds Test revealed the existence of a long run relationship between the financial inclusionvariables and household consumption expenditure in Nigeria. The results further showed that inthe long-run, a unit change in MBAL will instigate a significant change in householdconsumption expenditure by 0.002036 while a unit change in NCBB will cause a significantchange in household consumption expenditure by 0.145708. In the short-run, a one unit changein CBAL and NCBB will result in a significant change of 0.000125 and 0.025867 respectivelyin household consumption expenditure. The R-squared of 89% showed that the independentvariables have high influence on the dependent variable. Likewise, on the basis of the F-statisticof 0.0000 in the model, the study concluded that the financial inclusion variables havesignificant impact on household consumption expenditure in Nigeria. Among other things, thestudy recommended that government and monetary authorities should ensure microfinancebanks advances and loans get to the hands of those intended as this will encourage more to enterformal banking so that they can benefit from such loans. Also efforts should be made by bothgovernment and commercial banks to increase the quantity of loans through innovative meansand also increase the presence of the commercial banks in remote areas as this will go a longway in attracting people into the banking system.