Nigerian Journal of Banking and Financial Issues (NJBFI)

DIGITAL CURRENCY AS A CATALYST FOR FINANCIAL INCLUSION: EVIDENCE FROM AN EMERGING ECONOMY

Abstract

This research explores how digital currency affects financial inclusion in Nigeria. focusing on three key indicators: mobile money penetration, digital wallet usage, and the volume of cryptocurrency transactions. As emerging economies increasingly embrace digital innovations, understanding the extent to which these technological advancements influence access to financial services is crucial for policy formulation and inclusive economic development. An Ordinary Least Squares (OLS) regression model was employed to empirically examine the relationships between these variables. Monthly data spanning from January 2018 to August 2024, comprising 80 observations, was sourced from secondary datasets. Based on the regression analysis, the model produced an R-squared value of 0.760293, indicating that approximately 76% of the variation in financial inclusion is explained by the selected digital currency variables. The outcome of the findings reveals that Mobile Money Penetration (MMP) has a weak but statistically significant positive effect on financial inclusion, with a coefficient of 0.044 at the 10% significance level. Digital wallet usage (DWU) has coefficient of 0.290294 at the 10% significance level indicating a strong and statistically significant positive relationship with Financial Inclusion. Furthermore, the Volume of Cryptocurrency Transactions (VCT) showed a statistically significant positive impact at the 5% level, with a coefficient of 0.075688, suggesting a 7.5% increase in financial inclusion for every unit rise in crypto transactions. The Durbin-Watson statistic of 1.925411 confirmed the absence of autocorrelation, validating the robustness of the model. These results collectively affirm the transformative role of digital currency tools in advancing financial inclusion in Nigeria. Although cryptocurrency transactions are still evolving within the Nigerian regulatory framework, their rising volume indicates a growing public interest and potential to drive broader financial engagement. The study concludes that digital currencies, when effectively regulated and supported by infrastructure, can serve as powerful tools for bridging the financial divide and fostering inclusive growth. Policy recommendations are made to strengthen digital infrastructure, enhance public awareness