Financial Regulation and Inclusive Growth in Nigeria

Inclusive growth has become an urgent policy priority in Nigeria, where robust GDP expansion coexists with widespread poverty and inequality. This study investigates how financial regulation influences inclusive growth in Nigeria, addressing persistent gaps in empirical literature on whether financial-sector reforms and regulatory quality translate into broad-based welfare gains. Anchored on finance-led growth, inclusive growth, and institutional economics theories, the study adopts a longitudinal ex-post-facto research design using annual secondary data for 1995-2022 from World Bank World Development Indicator, Central Bank of Nigeria Statistical Bulletin, and World Governance Indicator. Descriptive statistics, Augemented Dickey Fuller and Phillip Perron unit-root tests, and Autoregressive Distributed Lag bounds-testing were applied to estimate short-run and long-run effects. Three models were formulated: inclusive growth as a function of financial development, inclusion policies, and regulatory quality, with technology, human capital, inflation, and government expenditure as controls. Findings reveal that financial depth exerts a positive, modestly significant effect on inclusive growth (β = 0.022; z = 2.21; P>z = 0.028), while private credit has a larger significant effect (β = 0.030; z = 3.00; P>z = 0.005). Bank branch density (β = 0.081; z = 2.44; P>z = 0.016) and SME credit share (β = 0.043; z = 2.03; P>z = 0.044) positively affect inclusion, indicating that targeted lending and outreach drive inclusiveness. Regulatory quality shows the strongest positive impact (β = 0.115; z = 3.78; P>z = 0.001), complemented by financial inclusion index (β = 0.074; z = 2.57; P>z = 0.011). Inflation negatively influences inclusive growth, while human capital, technology, and fiscal expenditure are positive and significant. Error-correction terms confirm a stable long-run equilibrium with 35-45% yearly adjustment speed. The study concludes that inclusive growth in Nigeria critically depends on effective financial regulation and targeted inclusion policies rather than mere financial deepening. The study recommends enhancing regulatory quality, expanding access through digital and physical inclusion channels, and fostering SME financing and macroeconomic stability to achieve shared prosperity.