The Effect Of Digital Finance On Financial Development In Nigeria 2010–2024

This study is about the role of digital finance on financial development with specific emphasis on Nigeria. Despite the rapid growth of digital financial platform and other technological based innovations in finance, the extension of formal financial services remains elusive. The main aim of this study is to determine the level of impact digital finance could have on financial development and the causality between digital financial services and some financial indicators. This study employs secondary data such as quarterly data from the first quarter of 2010 to the last quarter of 2024. The independent variable for the study is e-payment transaction value while credit to the private sector is the dependent variable; other control variables are broad money supply and inflation. The study adopts the ARDL (Auto regressive Distributed lag) bounds testing approach for co-integration test (long-run and short-run) between the variables and an ECM (Error Correction Model) for short-run effects. Also, the study uses Granger causality test to determine the causality between the variables. The empirical finding of the study reveals that digital finance negatively affects financial development significantly both in the long and short-run; likewise, money supply positively influences financial development significantly in the long and short-run, however, inflation may negatively influence financial development in the long and short-run. This shows that Nigeria's digital financial system is largely transactional and may not be deepening financial intermediation, hence reforms may be necessary.