E-Banking and Financial Development in Nigeria

Despite the rapid expansion of electronic banking (e-banking) channels in Nigeria, financial development remains shallow and uneven, raising concerns about the effectiveness of digital financial innovations. This study examines the effect of electronic banking on financial development in Nigeria over the period 1999–2024, using the International Monetary Fund’s Financial Development Index (FDI), which captures financial depth, access, efficiency, and stability. Principal Component Analysis (PCA) was employed to construct composite indices, while the Auto-Regressive Distributed Lag (ARDL) model is used to estimate short- and long-run relationships. The results show that ATM and Internet Banking exert positive and statistically significant effects on financial development in both the short and long run, indicating improved financial access, inclusion, and transactional efficiency. Specifically, a 1% increase in ATM and INB usage raises financial development by approximately 6% and 3% in the short run. In contrast, POS transactions and GDP growth exhibit negative and significant effects, reflecting infrastructural inefficiencies and growth driven by non-financial sectors. Mobile banking, interest rate, and exchange rate effects remain weak or insignificant. The study concludes that e-banking is a key driver of financial development in Nigeria, but its impact is constrained by infrastructural, technological, and regulatory challenges. The study recommended an increased investment in digital infrastructure, enhanced financial literacy, and stronger regulatory and cybersecurity frameworks.