International Journal of Economics, Commerce and Management

United Kingdom ISSN 2348 0386 Vol. VII, Issue 8, August 2019

http://ijecm.co.uk/

THE IMPACT OF FINANCIAL INNOVATION ON

ECONOMIC GROWTH IN NIGERIA

Cynthia O. Ozurumba
Department of Finance, University of Lagos, Nigeria
ozurumbacynthia@gmail.com

Onyeiwu Charles
Department of Finance, University of Lagos, Nigeria
chasonyeiwu@yahoo.com

Abstract
Financial innovation has introduced a new dimension to modern financial services and its
impact cannot be underestimated. Various scholars and researchers have conducted empirical
analysis to determine the relationship between financial innovation and the economic growth of
a country, though very few of them relate to Nigeria. The main objective of the study is to
investigate the impact of financial innovation on economic growth in Nigeria over the period from
2012 to 2018. Data was sourced from the Central Bank of Nigeria (CBN), the Nigeria Interbank
Settlement System (NIBSS) and the National Bureau of Statistics (NBS). During this study,
three proxies of financial innovation (NIBSS Instant Payment, ATM and AGENT BANKING) was
regressed on a growth indicator (RGDP). Regression analysis was performed using the E-views
statistical package to find out whether the variables are related to each other in the model.
Based on analysis, it was found that the regression coefficient of the value of transactions via
the Nigerian Interbank Settlement System (NIBSS) and Agent banking are positively signed
indicating that they positively influence economic growth, though not in a significant way during
the period studied. However, the value of ATM transactions surprisingly showed a negative and
significant relationship with economic growth. Based on the findings, the study concluded that
Financial innovation would increase economic growth. In line with the findings of the study, the
study portrays the urgent need for regulatory bodies such as the central bank to introduce more

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innovative payment solutions in the economy, because the speed to transaction and ease of
payment goes a long way to impact economic growth.

Keywords: Financial innovation, financial inclusion, economic growth, financial literacy

INTRODUCTION
Innovation originates from the Latin word “innovatus” which means “to make something new”.
Financial innovation is an ongoing process which entails the introduction and promotion of
financial products and services, the development of new processes, as well as the interaction
with customers and the development of new structures for financial institutions to respond to the
continuously changing economic environment, (Mention, 2011). Financial innovation raises the
efficiency of financial intermediation by increasing the variety of financial products and services,
resulting in improved matching of the needs of individual savers with those of firms raising funds
for expanding future product. It spurs economic growth and transformation of the financial
system of a country. The Nigerian financial system can be broadly divided into two sub-sectors,
the informal and formal sectors. The informal sector has no formalized institutional framework,
no formal structure of rates and comprises the local money lenders, thrifts, savings and loans
associations and all forms of „esusu‟ associations. According to Olofin and Afandigeh (2008) this
sector is poorly developed, limited in reach and not integrated into the formal financial system.
Its exact size and effect on the economy remain unknown and a matter of speculation. The
formal sector, on the other hand, could be clearly distinguished into the money and capital
market institutions.
The financial services industry across the globe has transformed over the years from the
traditional system of carrying out transactions and incorporated modern innovative methods of
carrying out their services more efficiently to reach a wider range of consumers. The
developments in the financial sector have not only contributed to increase in the number of
financial institutions, but also the development in the payments system, better investment
opportunities and asset alternatives to holding money. This has allowed innovative solutions to
emerge, ranging from cashless payments to better investment opportunities and this has
contributed to the economic growth and wellbeing of Nigerian inhabitants by permitting them to
make better economic decisions.
The Nigeria financial system which comprise of the formal and informal sector
contributes 3.00% to the country's GDP (Nigeria GDP report 2018). Nigeria and many
developing economies operate a cashed based financial system, where the use of cash is the

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prevalent method of making payments. However, in 2012, the Central Bank of Nigeria adopted
a modern financial system which is termed „‟cashless policy‟‟ characterized by the adoption and
emergence of innovative methods of making payments such as the Automated Teller Machine
[ATM], Point of Sale [POS], electronic payment system, internet banking, mobile money and
easier processes of transfer of funds from net savers to investors of funds. This innovation in
the financial system has made banking operations easier for both the banks and their
customers, it has reduced the risk associated with traditional methods of banking and has
promoted continuous growth and development of the financial services industry in Nigeria.
Recently, the Central Bank of Nigeria (CBN) collaborated with groups, such as the
Nigerian Communication Commission (NCC), commercial banks, mobile money operators and
telecommunications companies to introduce new regulations to guide the licensing and
operations of Payment Services Banks (PSBs) in the country. The PSBs are projected to
facilitate high-volume low value transactions in remittance services, micro-savings and
withdrawing services in a secured technology-driven environment to further deepen financial
inclusion and help in attaining the policy of 20% inclusion rate by 2020 (CBN, October 2018).
Furthermore, the financial market under the regulation of the Nigeria Stock Exchange
(NSE) and Securities and Exchange Commission (SEC) has grown tremendously since
inception. There has been a great deal of reform, which to some extent has enhanced market
liquidity, introduced alternative trading platforms and created an enabling environment
supportive of new products like e-Dividend, trading alert market making, Exchange Traded
Funds (ETFs), Real Estate Investment Trusts (REITs),etc, channeled towards promoting
innovation in the financial market. The well-functioning financial market, both the money market
and capital market, immensely influence the financial development process with optimal
allocation, diversified investment opportunities (Wang, 2013).
Although financial innovation play a positive role on the growth of the Nigerian economy,
some of the problems that have been associated with the adoption of financial innovation are;
lack of adequate financial literacy education, low rate of financial deepening and financial
inclusion, gender gap in account ownership, poor telecommunication service in rural areas, low
level of infrastructural development and inadequate security measures.
According to statistics, ownership of an account with a financial institution or a mobile
money provider dropped by 4 percentage points from 44% in 2016 to 40% in 2017 (The Global
Findex Database, 2017). The report further states that the gender gap in account ownership
widened by 24%, with 51% men owning an account compared to 27% women. One of the
factors behind this is that Nigeria is ranked 124th in gender literacy inequality worldwide and

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initiatives that boost supply of financial services in Nigeria are more likely to benefit Nigerian
men.
All financial institutions in Nigeria have adopted financial technology innovation platform
in a bid to promote financial deepening and financial inclusion in the economy, but a large
percentage of the Nigeria population remain unbanked (Akinwunmi, Muturi&Ngumi, 2017),
therefore the rate of financial innovation adoption is slow. Recent data shows that in 2016,
58.4% of the Nigeria 96.4 million adults were financially included and only 48.6% of all adults
used formal financial services (Nigeria Financial Inclusion Strategy, 2018). This has set Nigeria
off-track to meet the projected 80% adult financial inclusion by the Nigeria Financial Inclusion
Strategy (NFIS) in 2020.
Furthermore, the effect of financial innovation on the economic growth of the Nigerian
economy cannot be improved without adopting adequate financial literacy education. There is a
need to ensure that a large percentage of the Nigeria population are financially literate. Recent
studies reveal that 68% of the Nigeria adult population live in rural areas and most of them has
either no formal educational qualification or has only completed(some) primary education
(Nigeria Financial Literacy Baseline Survey Report, 2015). This suggests that majority of the
financially excluded are educationally disadvantaged and are rural dwellers who are not
interested in owning bank accounts or carrying out transactions with mobile money agents.
They consider the procedures and technologies involved in adopting financial innovation
products and services too ambiguous and overwhelming for people who do not know how to
read and write.
According to Okafor, Ezeaku and Anyalechi, (2017), technological advances has
facilitated the banking system to invest hugely in electronic and internet banking facilities;
Automated Teller Machines (ATM), Point of Sale (POS), Mobile banking software and
applications, digital database etc. The effectiveness of these investments has been hindered by
inadequate power supply and deficiencies in Nigeria's telecommunication services.
This research will investigate the growth of financial innovation, its impact on economic
growth in Nigeria and whether increased financial innovation can be good for the economy. In
order to investigate the problems and evaluate the cited objectives, the following hypotheses will
be tested:
1. Ho: There is no significant effect of the value of NIBBS instant payment transactions on
economic growth
2. Ho: There is no significant relationship between the Automated Teller Machine (ATM)
innovation and economic growth
3. Ho: There is no significant relationship between financial inclusion and economic growth

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LITERATURE REVIEW
Theoretical Literature
The theories relating to the contribution of financial innovation to economic growth are classified
into two: innovation theories and growth theories. These theories tried to establish the
relationship between innovation and economic growth.
American economist Silber (1983) proposed the constraint-induced financial innovation
theory which is one of the most influential theories of financial innovation. This theory pointed
out that the purpose of profit maximization of financial institution is the key reason of financial
innovation. There are some restrictions (including external handicaps such as policy and
internal handicaps such as organizational management) in the process of pursuing profit
maximization. Though these restrictions not only guarantee the stability of management, they
reduce the efficiency of financial institution, so financial institutions strive toward casting them
off. Scylla et al. (1982), put forward the regulation innovation theory, which explained
researching financial innovation from the perspective of economy development history. They
proposed that financial innovation has a close relationship with social regulation, and it is a
regulation transformation which has mutual influence and has mutual causality with economic
regulation. They explained that it is very difficult to have space of financial innovation in the
centrally planned economy with strict control and in the pure free-market economy, so
changes induced by regulation reform in financial system can be regarded as financial
innovation.
The Gerschenkron Growth Model created by Alexander Gerschenkron in the essay
entitled “Economic Backwardness in Historical Perspective” in 1952, postulated that the more
backward an economy is at the outset of economic development, the greater the gap between
them and the level of technology in advanced countries. Gerschenkron‟s theory rests on the fact
every historical event that takes place changes the course of all subsequent events. He holds
that from the point of view of the underdeveloped countries, the advanced countries are sources
of technical assistance, skilled labor and capital goods and think that because the
underdeveloped countries borrow these things from advanced countries, they may succeed in
the process of industrialization. The Schumpeterian growth model advanced by Schumpeter
(1940), identified innovation as key disturbance in the economic system. Schumpeter argued
that awakening in innovation is driven by competition, new technology, competition for new
supply sources and competition for cost and quality which are determinant of profit margin and
output level Innovation thus promotes growth by introducing new and most efficient ways of
doing things without sacrificing quality, at minimum possible cost and time.

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Empirical Literature
Existing literatures suggest that there is a positive long run relationship between the introduction
of financial innovation and economic growth (Qamruzzaman and Wei 2017; Okafor et al. 2017;
Pece et al. 2015). However, this relationship is dependent on the choice of proxy adopted (Ajide
2016; Bara and Mudzingiri 2016).The standard explanation for financial innovation is that it
helps to provide essential banking services and products on the platform of information technology
ICT, thereby enhancing financial deepening, financial penetration and economic growth.
Akinwunmi, et al. (2016) provides an excellent survey of the literature on financial
innovation. The study found that in Nigeria, financial incentive - interest rates were effective for
financial innovation adoption by increasing banks customers‟ deposit base, but interest rate is
not enough to draw more people to the bank (financial penetration). Increase in the customer
deposit base of banks promotes financial deepening. Nzotta and Okereke (2009) did a study to
examine the financial deepening and economic development in Nigeria between 1986 and
2007. They found that financial deepening index is low in Nigeria over the years. Leaven, Levine
and Michalopoulos et al. (2015) explored the impact of financial innovation on financial
deepening on economic development over the past few years. The study concluded that
financial innovation has been a driving force behind financial deepening and the adoption of
improved financial innovation products and services has enhanced financial deepening,
penetration and inclusion which eventually expedites a sustainable economic growth.

NIGERIA’S EXPERIENCE ON FINANCIAL INNOVATION

Nigeria formerly operated a cash based financial system, where the use of cash is the prevalent
method of making payments. In 2012, the Central Bank of Nigeria introduced a modern financial
system which is termed „‟cashless policy‟‟ characterized by the adoption and emergence of
innovative methods of making payments such as the Automated Teller Machine [ATM], Point of
Sale [POS], electronic payment system, internet banking, mobile money and easier processes
of transfer of funds from net savers to investors of funds. There has been a rise in the volume
and value of payment on different payment platforms attributed to increased consumer
confidence and awareness in the use of financial innovative payment channels. The financial
system plays a key role in the mobilization and allocation of savings for productive use, provide
structures for monetary management and the basis for managing liquidity in the system. It also
assists in the reduction of risks faced by firms and businesses in their productive processes,
improvement of portfolio diversification and the insulation of the economy from the vicissitudes
of international economic changes. In addition, the system provides connections for the different
sectors of the economy and encourages a high level of specialization expertise and economies

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of scale. The capital market has also experienced a lot of reforms over the years, especially as
regards the capital requirements of the operators, the operational and ethical standards of the
institutions and the modalities of the market mechanism.
Furthermore, the apex bank adopted policies aimed at promoting financial inclusion,
financial deepening and financial innovation in the country, for instance, Nigeria launched its
own National Financial Inclusion Strategy (NFIS) in October 2012. The predominant objective of
the strategy is to reduce the number of Nigerian adults without access to formal financial
services to 20% by 2020 from the base line figure of 46.3% in 2010 (CBN exposure draft
2015).The strategy is being implemented by a wide range of stakeholders and managed by a
Governing Committee through a streamlined governance structure.
The Nigeria Inter-Bank Settlement System (NIBSS), incorporated in 1993 has promoted
platforms that facilitates efficient payment system in the country. The NIBSS acts as the Nigeria
Central Switch, responsible for the Interoperability between the various players in the financial
system. Interoperability involves the ability of the various players Banks, Mobile Payment
Operators, Non-Banking Financial Institutions, Payment Terminal Providers, Card Acquirers,
Government Institutions etc., and their customers to send, receive and process funds,
documents and other instruments electronically through a common channel (NIBSS website).
The NIBSS also introduced the Instant Payment system which is an innovative and ground-
breaking e-payment solution designed by NIBSS to service the banking industry. The service is
offered through bank‟s internet banking, mobile and bank branch platforms for corporate and
individuals as well as through the banks‟ branch network. NIP is an on-line instantaneous bank
account numbers based Inter-bank credit transfer. NIBSS also ensures that the central switch
facilitates the entry of new players into the financial industry to effortlessly plug into the financial
services sector for easy operations thus creating an equal opportunity environment for all
financial institutions and their customers.
In the Nigeria capital market, the exchange has established an innovation hub to
incubate and fast-track ideas that meet market requirements, technology has assisted in
improvement of processes like the use of block chain to enhance settlement, the use of
technology to drive investment platforms, establishing a department dedicated to engaging
Fintech, companies, among others. With the advent of digital technology in the global market
ecosystem and its impact in Nigeria, the financial market regulators are adopting innovations in
a bid to promote the nation‟s capital market with the use of technology.
Nigeria has continued to see a rise in the number of financial products and services created by
the financial system, and this trend will obviously continue to take strengthened dimensions as
the market continues to get developed.

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METHODOLOGY
This study adopted descriptive research design which enables the researcher to demonstrate
the relationship between the variables as it is. Ordinary least square regression technique was
used to evaluate the relationship between financial innovation and economic growth. Unit root
test using the Augmented Dickey Fuller test was carried out to check for stationarity or non-
stationarity of the data while cointegration test was carried out to check for cointegration
between nonstationary variables.This study experienced unbiased analysis. Secondary data
was used through time series data from 2012-2018.All data are collated on quarterly basis from
the Central Bank of Nigeria Statistical database, the NIBSS e-fact sheet and the National
Bureau of Statistics (NBS) report for the period 2014-2018. Choice of the chosen period is
based on data availability.
Multiple linear regression model was adopted. The Regression model is usually of the
form below;

Y= β0+β1X1+β2X2 +β3X3+ e

Where:
Y = Dependent variable
β0 = Constant; the value Y assumes when the independent variable is zero
β1, β2 andβ3 = Intercepts; the rate of change in Y
X1, X2 andX3 = The independent variables
The model then becomes:

RGDP = β0 + β1NIBSS + β2AGNT + β3ATM + e ………………………………………(i)

Where:
RGDP= Real quarterly GDP Growth rate in Nigeria between 2012 and 2018
NIBSS NIP= Amount of quarterly payment transacted through the NIBSS instant payment
between 2012 and 2018 financial years in Nigeria
AGENT = Amount of quarterly transactions performed through the agent banking function in
Nigeria between 2012 and 2018 financial years in Nigeria
ATM = amount of quarterly transactions performed through the Automated Teller Machine
(ATM) in Nigeria between 2012/2018 financial years
The study variable was derived from central bank of Nigeria payment statistics and the
Nigeria Inter-Bank Settlement System (NIBSS). regression analysis will also be performed using
the Eviews statistical package to find out whether the variables are related to each other in the
model.

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ANALYSIS AND DISCUSSION OF RESULTS

Table 1 explains the statistical stance of the series. From the results obtained it is indicated that
the mean values of all the variables used were reported to be positive. This implies that all the
variables used have recorded an increasing trend for most of the study period.
The maximum and minimum values indicate the highest points and lowest points of the
variables throughout the study period. The highest value for NIBSS transactions was N23.5
trillion which occurred in quarter 4, 2018 while its lowest value of N0.3 trillion occurred in quarter
1, 2012 showing a consistent increase since inception.
The highest value for Agent banking transactions was N7.2 trillion which occurred in
quarter 2, 2014 while its lowest value of N726 million occurred in quarter 3, 2012 showing a no
trend since inception.
The highest value for ATM transactions was N1.8 trillion which occurred in quarter 4,
2017 while its lowest value of N0.5 trillion occurred in quarter 1, 2012 showing a no trend since
inception.
The highest real GDP growth was 7.0% which was experienced in quarter 4, 2012 and it
was driven by high crude oil prices and production while the lowest growth rate of -2.3% was
experienced in quarter 3, 2016 and was caused by the recession as a result of lower crude oil
prices and output.
The kurtosis value of AGENT (25.4) which is above the critical mark of 3, the normal
distribution point, indicates that the variables are mostly clustered around their mean (that is
they are leptokurtic). Also, the Jarque-Bera probability of Agent (0.00) which is less than the 5%
level of significance (P < 0.05) indicates that the variable significantly deviates from normality.

Table 1: result of descriptive statistics

NIBSS AGENT ATM RGDP
Mean 8.395581 0.421315 1.084638 0.031675
Median 6.426965 0.127360 1.021735 0.026100
Maximum 23.57471 7.216000 1.832550 0.069900
Minimum 0.306720 0.000762 0.454790 -0.023400
Std. Dev. 6.471990 1.340488 0.418965 0.029502
Skewness 0.739611 4.899294 0.163783 -0.296844
Kurtosis 2.511260 25.35810 1.788146 1.848087
Jarque-Bera 2.831458 695.2131 1.838540 1.959265
Probability 0.242749 0.000000 0.398810 0.375449
Sum 235.0763 11.79682 30.36986 0.886900
Sum Sq. Dev. 1130.940 48.51652 4.739358 0.023500
Observations 28 28 28 28

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Table 2 table deployed Augmented Dickey-Fuller (ADF) unit root test to examine the stationarity of
the time series and test the null hypothesis of unit root. It is expected that the series do not contain
unit root in order to find relationship among the variables in the long run. The test was carried out
at level, and first difference and second difference using 5% critical value. Again, all the variables
including NIBSS Instant Payment, AGENT BANKING, ATM and RGDP were all tested.
The levels of statistics of the ADF test reported none of the variables to be stationary at
level and first difference. We then turn to test the remaining series at their second differences.
At the 5% critical value, ADF test now reported all the economic variables to be stationary
series. This finding implies that the series contains no unit root; hence, their seasonal variation
has been corrected for, making them fit for regression. The result which shows more than one
variable to be stationary at the same order also indicates the suspicion of co-integration among
the variables and so the author subjected the economic series co-integration using the
Johansen co-integration test.

Table 2 Unit root Test

Critical Level of
VARIABLES ADF Value Prob Remark Order
value (5%) Stationarity
D(NIBSS,2) -4.847496 -1.956406 0.0000 Stationary Second Difference I (1)
D(AGENT,2) -5.758327 -1.956406 0.0000 Stationary Second Difference I (1)
D(ATM,2) -7.975541 -1.956406 0.0000 Stationary Second Difference I (1)
D(RGDP,2) -8.965242 -1.955020 0.0000 Stationary Second Difference I (1)

Table 3 showed the result of the co-integration test. Johansen‟s co-integration test was carried
out to test the long run co-integration among the variables. Before any useful conclusion could
be made regarding relationships between the series it is of importance that co-integration first
exists. In table 3, the result shows that at 5% critical value, six (2) co-integrating vectors exist
among the economic variables. We therefore must reject the null hypothesis of no co-integration
amongst the time series. Hence, the variables are interrelated with each other in the long run
that is, they could move together in the long run and their existing relationships are not spurious.

Table 3: Johansen Co-Integration Test

Hypothesized No. of CE(s) Eigenvalue Trace Statistic 0.05 Critical Value Prob. **
None * 0.740762 70.67891 47.85613 0.0001
At most 1 * 0.646781 36.92872 29.79707 0.0064
At most 2 0.352953 10.91207 15.49471 0.2169
At most 3 0.001146 0.028662 3.841466 0.8655
Trace test indicates 2 cointegratingeqn(s) at the 0.05 level
*denotes rejection of the hypothesis at the 0.05 level **MacKinnon-Haug-Michelis (1999) p-values

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Table 4 Regression Analysis

Dependent Variable: RGDP

Method: Least Squares
Date: 05/14/19 Time: 07:56
Sample: 2012Q1 2018Q4
Included observations: 28
Variable Coefficient Std. Error t-Statistic Prob.
C 0.100919 0.018515 5.450627 0.0000
NIBSS 0.002217 0.001959 1.131447 0.2690
AGENT 0.003340 0.003014 1.108158 0.2788
ATM -0.082298 0.030268 -2.718994 0.0120
R-squared 0.550035 Mean dependent var 0.031675
Adjusted R-squared 0.493790 S.D. dependent var 0.029502
S.E. of regression 0.020990
Sum squared resid 0.010574
Log likelihood 70.61125
F-statistic 9.779168
Prob(F-statistic) 0.000212

Discussions of Findings
 From the result of the analysis presented in Table above, value of transactions through
NIBSS have a positive effect on economic growth. This is shown by a regression
coefficient of 0.002217 statistical insignificant at 5%. This shows that the value of online
transactions via the NIBSS Instant Payment platform contributes to economic growth in
Nigeria. Our findings reaffirm the submission of Pece et al. (2015), that positive
relationship exist between economic growth and innovation.
 Value of transactions using agent banking also have a positive effect on economic
growth as indicated by a coefficient of 0.003340 statistically insignificant at 5% level.
This implies that the more people use agent banking, the more the economy will grow.
This conforms with the findings of Motsatsi (2016),who found evidence of a positive
relationship between economic growth and innovation attributed to the creation of the
new products such as agent banking.
 The volume of transactions via Automatic Teller Machines (ATM) have a negative effect
on economic growth. This is indicated by a regression coefficient of -0.082298. The
effect is statistically significant at 5%. This means that the increase in the more people
transact via the ATM, the less the economy will grow given the data available.
These findings are in conformity with the findings of Okafor et al. (2017) and Ajide (2016), which
concluded that financial technological innovations (ATM transactions, Web/internet transactions,
POS services, agent banking and Mobile payments) do not jointly have positive effect on growth

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but dependent n the choice of proxy used. Conclusively, the table above both shows that the
relationship existing between the dependent and independent variables are stated thus:
RGDP = 0.100919 + 0.002217*NIBSS + 0.0033402*AGENT_BANKING - 0.082298*ATM
From the two results, this means that NIBSS and Agent banking variables conform to a priori
expectation. Their coefficients of 0.0022179 and 0.0033402 indicate that the Nigerian economy
will grow by 0.002217 and 0.0033402 units if the value of transactions via these platforms
increase by 1 unit, ceteris paribus. On the contrary, ATM variable of coefficient of - 0.082298
indicates that the Nigerian economy will decline - 0.082298 units if the value ATM transactions
increase by 1 unit. This does not conform with the a-priori expectation.

Table 5 Summary of Regression result

Variables Coefficients P-Value Decision Rule Conclusion
NIBSS 0.002217 0.2690 P-value > 0.05 Insignificant
Agent Banking 0.0033402 0.2788 P-value > 0.05 Insignificant
ATM - 0.082298 0.0120 P-value < 0.05 Significant

CONCLUSION AND RECOMMENDATIONS

The roles of financial innovation in the growth of the Nigeria economy cannot be undermined.
The speed and ease of transactions especially payment goes a long way to determine peoples
spending and ultimately economic growth. The components of financial innovation in this paper,
which include the value of transactions via the Nigerian Interbank settlement System, Agent
banking and ATM transactions, together affect economic growth. The OLS estimation is
obtained from E-view 7 used for the purpose of analysis and the data were accessed from the
Central Bank of Nigeria, the Nigerian Bureau of Statistics and NIBSS and covered the quarterly
period between 2012 and 2018. Based on the hypotheses tested in the research the summary
of the results are as follows:
1. The value of NIBSS transactions (NIBSS) has a positive effect on economic growth but
insignificant.
2. The value of agent banking transactions (AGENT) has a positive but insignificant effect
on economic growth.
3. The value of Automated Teller Machine (ATM) transactions surprisingly has a negative
and significant effect on the growth of the Nigerian economic
The estimated result on the impact of financial innovation on economic growth in Nigeria; we
found that the regression coefficient of the value of instant payment transactions via the
Nigerian Interbank Settlement System (NIBSS) and Agent banking are positively signed
indicating that they positively influence economic growth, during the period studied. However,

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the value of ATM transactions surprisingly showed a negative and significant relationship with
economic growth. Based on the findings, we concluded that Financial innovation would increase
economic growth.
In line with the findings of the study, the study portrays the urgent need for regulatory
bodies such as the central bank to continue to introduce more innovative payment solutions in
the economy. This can also be done by putting in place the appropriate regulatory environment
that will encourage private players to introduce innovative solutions. This is important because
the speed of transaction and ease of payment goes a long way to impact economic growth.

SCOPE FOR FURTHER STUDIES

Further studies should be carried out spanning across a wider time period to reflect the long run
impact of financial innovation on economic growth in Nigeria. It is also recommended that
subsequent researches should incorporate variables from the Nigeria financial market in its
hypothesis.

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