Financial Inclusion, Internet Banking and Financial Performance of Deposit Money Banks in Nigeria

This study examined the effect of financial inclusion and internet banking on the financial performance of deposit money banks in Nigeria. Two concerns motivated the enquiry. The first is that financial exclusion has persisted in Nigeria despite a decade of regulatory effort, which raises the question of whether inclusion delivers commercial value to the banks expected to deliver it. The second is that the empirical literature has treated inclusion and digital banking as separate questions, so that each construct has been tested against undifferentiated measures of profitability rather than against the performance dimension it most plausibly affects. Anchored on the Financial Intermediation Theory, the study specified two constructs and matched each to a distinct outcome: financial inclusion, measured as a composite index of active banking agents and deposit mobilization, was matched to return on assets, while internet banking, measured as the proportion of customers actively transacting on internet and mobile platforms, was matched to return on equity. Seventeen deposit money banks with active inclusion programmes were selected purposively and observed over the period 2020 to 2026, yielding a balanced panel of 119 bank-year observations drawn from audited annual reports and Central Bank of Nigeria publications. Bank size, measured as the natural logarithm of total assets, entered both models as a control. Data were analysed using descriptive statistics, Pearson correlation, panel unit root tests and panel regression, with the Hausman test used to select between the fixed and random effects estimators. The random effects estimator was preferred in both cases. Financial inclusion exerted a positive and significant effect on return on assets (β = 0.0107, t = 4.82, p = 0.0000), and internet banking exerted a positive and significant effect on return on equity (β = 0.1782, t = 6.47, p = 0.0000). The two models accounted for 43.5 and 37.6 per cent of the variation in their respective dependent variables. The study concludes that inclusion and digital channel adoption are separate and complementary determinants of bank performance rather than interchangeable expressions of a single strategy, and recommends that banks deepen agent networks and deposit mobilization, invest in secure digital platforms alongside customer digital literacy, and that regulators treat inclusion mandates as commercially rewarding rather than as a compliance burden.

Financial Inclusion; Internet Banking; Financial Performance; Deposit Money Banks; Bank Size; Nigeria

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