ABSTRACT

The study examined the effect of financial inclusion on commercial banks’ performance in Nigeria. Annual time series data spanning from 1990 to 2018 were sourced from Central Bank of Nigeria Statistical Bulletin, Federal Reserve Economic Data and NDIC Annual Report (various issues).It is a causal study design to investigate the effect of financial inclusion measured by four variables which includes; number of rural commercial banks’ branches, deposits in rural commercial banks, commercial banks’ credit to SMEs and microfinance banks’ loans on commercial banks performance measured by return on assets. For the data analysis, the autoregressive distributed lag (ARDL) model was used since the data exhibited mixed level ofintegration, that is, levels and first difference. Results obtained from the analysis revealed that a long-run cointegration relationship existed between commercial banks performance and measures offinancial inclusion based on the F-statistic of 8.647701 associated with ARDL bounds test which was higher than the upper and lower bounds critical values. Specifically, in the long-run, only deposits in rural commercial banks and commercial banks’ credit to SMEs had p-values that were less than 0.0s5. This implied that deposits in rural commercial banks and commercial banks’ credit to SMEs had significant long-run influence on commercial banks’ performance in Nigeria. On the other hand, number of commercial banks’ branches in rural areas and microfinance banks’ loans had p-values that were greater than 0.05 which implied that the two variables were insignificant in explaining long-run changes in commercial banks’ performance in Nigeria. However, number of commercial banks’ branches and deposits in rural commercial banks had negative influence on commercial banks’ performance while commercial banks’ credit to SMEs and microfinance banks’ loans had positive influence on commercial banks’ performance in the long-run. Also, the speed of adjustment from short-run discrepancies to long-run equilibrium was -0.368637 which indicated that approximately 36.86% of deviation from long-run equilibrium is corrected each year. Based on the findings, it was recommended, among other things, that managers of commercial banks spearhead reforms in the financial sector that would accelerate financial inclusion through enhancing availability, accessibility and usage offinancial services in Nigeria The study concludes that commercial banks performance in Nigeria was influenced by financial inclusion measures..