Achieving pervasive financial inclusion has remained a global challenge with less than fifty-four percent of adults worldwide being financially excluded (without access to financial services). Monetary authorities have introduced varying policies aimed at deepening financial inclusion within economies. However, their efforts have yielded little positive change especially in developing economies like Nigeria. This research work was inspired by the retardation of financial inclusion in Nigeria which has led to underdevelopment of financial activities and reduced investment activities in the country. As a result, this study empirically investigates the impact of monetary policy shocks on financial inclusion in Nigeria from 1982 to 2019. The study employed the Vector Auto-regression (VAR) technique to incorporate the stated objective. Time series quarterly data sourced from the Central Bank of Nigeria Statistical Bulletin and World Bank database for the analysis. The variables used includes; rural deposits (financial inclusion), minimum rediscount rate (MRR), broad money supply (M2) and interest rate (INT). The results of the study (analyzed using the impulse response graph) revealed that shocks to MRR, M2 and INT triggered significant responses by financial inclusion, though not towards the same direction and time. While INT and MRR triggered significant positive responses by financial inclusion, M2 triggered otherwise. All roots of the AR characteristic polynomial lie inside the unit circle, showing that the VAR model gives stable estimates. Therefore the study concludes that MRR and INT largely increase access to financial services, whereas M2 did not really prove to expand inclusion. Based on these findings, the study recommends monetary authorities should maintain favorable rates and properly monitor the supply of money in the economy.
Keywords: Finance, Shocks, Financial Inclusion and Monetary Policies