Poverty Reduction in Nigeria: Is Financial Deepening Beneficial?

Abstract

This study investigated the impact of Financial Deepening in reducing Poverty in Nigeria. Human Development Index was used as proxy for reducing Poverty due to its multidimensional nature while the ratios of Credit to the Private Sector, Broad Money Supply and Market Capitalization to GDP were used to proxy financial deepening. Data sourced from Central Bank of Nigeria Statistical Bulletin (2015) and World Development Indicators published by the World Bank from 1981 to 2015 were used to analyze this relationship by adopting the multilinear econometric model and using the Error Correction Model. It was found that there is a unidirectional causality running from financial deepening to Poverty Reduction. The study concluded that financial deepening is beneficial in reducing poverty in Nigeria. The study therefore recommended that Policy Makers should embark on a policy of financial inclusion and financial intervention programmes in Nigeria.

Keywords: Financial Deepening, Poverty Reduction and Human Development Index