FINANCIAL INCLUSION AND CAPITAL MARKET DEVELOPMENT IN NIGERIA

Financial inclusion and capital market development are critical components for fostering sustainable economic growth and reducing poverty. Financial inclusion ensures that individuals and businesses, especially those traditionally underserved, have access to useful and affordable financial products and services that meet their needs. Capital market development, on the other hand, facilitates efficient allocation of resources by mobilizing savings and channeling them into productive investments. This study examined the impact of financial inclusion on capital market development of Nigeria. Quarterly time series data from 2000Q1 to 2024Q4 of Capital Market proxied by market capitalization (MCAP), number of microfinance banks (MFB), value of rural deposits as a ratio of total deposits (RDE), value of rural credits as a ratio of total loans (RCR) and interest rate (INT). The Dickey-Fuller unit root test and the Johanson cointegration test were carried out. The result showed that the data set were all stationary at first difference I(1)and the series had a long run relationship with dependent variable. The Fuller modified ordinary least squares (FMOLS) technique was utilized to estimate the model, the result shows that all the variables(MFB, RCR, RDE and INT) had direct relationship with the dependent variable (MCAP) and were all significant at 5% significance level . The result further revealed that the positive impact of financial inclusion on capital market growth suggests that policies aimed at stimulating financial inclusion growth can have a multiplier effect on capital market development. Furthermore, the positive relationship between rural deposits and capital market development indicate that policies aimed at mobilizing rural deposits can increase financial inclusion. This can be achieved through expanding bank branches and mobile banking services in rural areas. The study therefore recommended that Government should develop initiatives to boost rural deposits by creating accessible and attractive savings products, thereby increasing the capital base available for investment in capital markets. Also banks and other financial institutions should implement targeted credit programs that provide subsidized loans or guarantees to rural businesses, particularly in sectors with high growth potential. Banks and other financial institutions should implement monetary policies that keep lending rates low and manageable for borrowers, particularly in rural areas.