The Relative Impact of Income and Financial Literacy on Demand for Financial Services in Nigeria

This study provides evidence for the impact of income and financial literacy on the demand for financial services in Nigeria. While findings from extant studies provide support for the positive relationship between financial... [ view full abstract ]

This study provides evidence for the impact of income and financial literacy on the demand for financial services in Nigeria. While findings from extant studies provide support for the positive relationship between financial access and economic growth, there have been little or no studies providing evidence for the drivers of financial access in developing countries of Africa. This study uses data from a survey of over 20,000 respondents in Nigeria and shows that income and financial literacy significantly determine how often individuals save either formally or informally. The results show that frequency of savings increases with financial literacy. However, as income rises, formal savings amongst banked individuals reduce while informal savings of under-banked individuals increase. The findings will guide financial services providers with improved market segmentation and improved performance. It will also help the government and financial services regulators in formulating policies that will improve and deepen financial access.