Implications of financial development on poverty and inequality: Evidence from Nigeria

Olohunlana, A. O
Dauda, R. O. S
JEL codes: 
G2 - Financial Institutions and Services, I3 - Welfare and Poverty, O1 - Economic Development.
This paper examines the short and long run implications of the four measures of financial development on poverty reduction and income inequality in Nigeria within the period 1996-2017. The study employs the Autoregressive distributed lag (ARDL) long run co-integration approach. The results revealed a positive but economic insignificant relationship between financial development, poverty and inequality both in the short and long run. The study further revealed that corruption and inflationary levels exhibited positive effect on poverty reduction and income inequality. These results advocate for an establishment of more bank branches as well as the development of informal/micro financial institutions in the rural areas. Since the result particularly pointed out the significance of the financial institution efficiency and stability has germane to foreign and domestic investment attraction, the government should embark on policies that strengthen the efficiency and stability of the sector. It also recommends that since the control of corruption has been highlighted as a panacea for poverty and inequality reduction, the government should tilt toward policies that would address corruption which is the most important element in institutional quality.
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