FINANCIAL DEVELOPMENT, INCOME INEQUALITIES, AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT This study examined the relationship between FINANCIAL DEVELOPMENT, INCOME inequality, AND ECONOMIC GROWTH IN NIGERIA. Time series data spanning 1980 to 2020 were obtained from the Central Bank of Nigeria (CBN) Statistical Bulletin and the International Monetary Fund (IMF) Statistical Bulletin 2022. Research on the relationship between financial development, income inequalities, and economic growth has garnered significant attention, particularly in developing economies like Nigeria. Previous studies have explored various dimensions of financial development, including access to financial services, the role of banking institutions, and capital market efficiency, to understand their impact on economic performance. Presently, examination of the dual nature of financial systems, analyzing both their potential to stimulate growth and their propensity to exacerbate income inequalities, leading to a growing discourse on the need for inclusive financial policies. The analysis employed descriptive statistics, unit root tests, and models such as Autoregressive Distributed Lag (ARDL) to explore the intricate relationships among the variables. The Augmented Dickey-Fuller tests established that variables such as Gross Domestic Product (GDP) and Domestic Credit to Private Sector (CPS) are stationary at level, significant at the 5% level, while Broad Money to GDP (BRD), Gini Coefficient (GINI) are stationary at the first difference, significant at the 5% level. The regression results show a correlation among the levels of financial development, income inequality, and GDP growth, highlighting the influence of financial development on economic growth in Nigeria. Additionally, there is a positive relationship between GDP and financial indicators such as Broad Money to GDP and Domestic Credit to the Private Sector, suggesting that an increase in GDP is associated with corresponding rises in these financial metrics. Conversely, the analysis reveals a positive correlation between income inequality and GDP, indicating that an increase in GDP tends to lead to a reduction in income inequality in Nigeria. In this study, Financial Development, income inequalities, and Economic Growth, findings show that financial development plays a crucial role in stimulating economic growth, as evidenced by positive correlations between GDP and financial metrics. Additionally, the analysis reveals that increased. GDP can contribute to reduced income disparities. Based on these findings, it is recommended that policymakers prioritize expanding access to financial services for underserved populations, particularly through strengthening microfinance institutions and promoting financial literacy Regulatory frameworks should support fair lending practices to ensure that financial institutions serve diverse demographics effectively. Additionally, implementing social safety nets and targeted education and training programs can directly address income inequality, fostering a more inclusive and sustainable economic environment in Nigeria. Keywords: Financial Development, Domestic Credit to Private Sector (CPS), Broad Money to GDP (BRD), Gini Coefficient (GINI), GROSS DOMESTIC PRODUCT (GDP), Nigeria. Word Count: 413.