Social Protection, Financial Depth, Soundness and Inclusive Growth in Nigeria

ABSTRACT: This paper examines the effect of social protection on inclusive growth in Nigeria, focusing also on the role of financial depth and soundness on inclusive growth using a time series data from 1981 to 2019. The System Generalized Method of Moments (SYSTEM – GMM) estimator was used in estimating the model. It was found that social protection had a positive and significant effect on inclusive growth. We also found a positive and significant effect of the size of financial intermediaries in the financial system on inclusive growth, but the effectiveness of social protection in enhancing inclusive growth was not dependent on the size of financial intermediaries in the financial system. A negative and insignificant effect of bank credit to the private sector to GDP on inclusive growth was also found, nevertheless, the credit to the private sector channel has the wherewithal to complement social protection to raise the inclusive growth. The liquidity ratio had a positive and significant effect on inclusive growth and complements the effectiveness of social protection in raising the inclusive growth rate. The study recommends expansion of the government social safety net measures to accommodate more beneficiaries especially the small entrepreneurs and the poor unemployed. In this way, growth will be distributive to enhance inclusiveness. Also, the government social safety net policies cannot work effectively in isolation with a sound financial system. Therefore, measures should be in place to ensure a sound and sustainable financial system in the economy.

Keywords: Social protection, financial depth, financial soundness, inclusive growth, generalized method of the moment.