FINANCIAL TECHNOLOGY AND FINANCIAL DEEPENING IN NIGERIA

Abstract

The financial sector in Nigeria, has continued to witness slow development pace in recent times, albeit, the socio-economic peculiarities of the country, occasioned by weak institutional quality, poor governance, corruption and insurgency in some parts of the country, among others. The post-independence experience with financial sector development in Nigeria was characterized by weak institutions that operated under the ambit of direct control policies which negatively affected financial intermediation. Nigeria’s efforts at promoting economic growth over the years have indeed highlighted the importance of financial deepening. However, the level of deepening of the financial system in Nigeria still remains low, despite government efforts. Therefore, this study examined the effect of financial technology on financial deepening in Nigeria from 2007 to 2022. Financial deepening was proxy by ratio of broad money supply to GDP (RMGDP) and the ratio of private sector credit to GDP (RPCGDP), fintech was proxied by Digital Payment Platform (LDPP), Digital Remittance (LDRR) and Digital Investment (LDIN). The studies utilized Fully Modified Least Squares (FMOLS) regression analysis, the results indicated that LDPP had a significant negative impact, LDIN had a significant positive impact, and LDRR did not have a significant impact on RMGDP. These findings suggest that while digital payment platforms may negatively affect the ratio of broad money supply to GDP, digital investment positively influences broad money supply to GDP. From the RPCGDP, the results showed that LDRR had a significant positive effect while LDPP and LDIN did not have significant effects on RPCGDP. These findings suggest that digital remittances positively affect the ratio of private sector credit to GDP in Nigeria. Based on the findings, the study recommended that the policymakers and financial institutions should focus on promoting and supporting digital remittance services. This can be achieved through partnerships with fintech companies, regulatory frameworks that facilitate cross-border remittances, and incentives for using digital remittance platforms.