Financial Deepening and Economic Growth of Nigeria (1981-2018)

International Journal of Economics and Management Studies

© 2020 by SSRG - IJEMS Journal

Volume 7 Issue 2

Year of Publication : 2020

Authors : F.O.C. Osunkwo

10.14445/23939125/IJEMS-V7I2P109

How to Cite?

F.O.C. Osunkwo, "Financial Deepening and Economic Growth of Nigeria (1981-2018)," SSRG International Journal of Economics and Management Studies, vol. 7,  no. 2, pp. 1-5, 2020. Crossref, https://doi.org/10.14445/23939125/IJEMS-V7I2P109

Abstract:

This study analyses the effect of financial deepening on Nigeria’s economic growth between the period 1981-2018. The data were subjected toa stationarity test using the augmented dickey fuller unit root technique, and the data were found to be stationary at their first differencing. A long-term relationship between the dependent and independent variables was revealed with the Johansen cointegration technique. The data were analyzed using the vector error correction mechanism. The findings revealed that financial deepening indicators –the ratio of credit to the private sector to GDP is positively related while the ratio of the money supply to GDP is negatively related with economic growth, and also the speed of adjustment of theshort-run equilibrium was low, rightly signed and significant as shown in the error correction term. It was recommended that the government or monetary authorities should advance more credit to the private sector and as well ensure that increase in money supply is adequately monitored.

Keywords:

financial deepening, economic growth, co-integration.

References:

[1] Adelakun, O.J..,Financial sector development and economicgrowth in Nigeria.Int. J. Econ. Dev. Res. Investig 1 (2010) 25–41.
[2] Audu, N.P.; Okumoko, T.P., Financial development and economicgrowth in Nigeria. Eur. J. Bus. Manag. 5 (2013) 69–81.
[3] Age, M. The Impact of Financial Intermediation on Economic Growth:
[4] The Nigerian Perspective; Research Conference Paper for theLagos State University; Lagos State University: Lagos, Nigeria,(2004).
[5] Darrat, A. F., & Haj, M., Economic fluctuations in mena: doesfinancial market development matter? ERF 9th Annual Conference,Al-Sharjah, United Arab Emirates, (2002) 26-28.
[6] Engle, R.F.; Granger, W.J.C., Co-integration and error correction:Representation, estimation, and testing. Econometrica 55 (1987)251–276.  
[7] Ihekweme, S.C.,  Contemporary Macroeconomics (Theories andApplications). Owerri: WEBSmedia Communications ltd., (2015).
[8] Jhinghan, M.L., Macro-Economic Theory. 12th edition. India:Vrinda publications ltd., (2010)
[9] Frank, G.S.; Eric, M.N., Financial sector deepening and economicgrowth in Ghana. J. Econ. Sustain. Dev. 3 (2012) 433–448.
[10] Kar, M.; Pentecost, E.J., Financial Development and EconomicGrowth in Turkey: Further Evidence on the Causality Issue;Economic Research Paper No. 00/27; Loughborough University:Loughborough, UK., (2000).
[11] Khan, M.A., Financial development and economic growth inPakistan evidence based on Autoregressive Distributed Lag(ARDL) Approach. South Asia Econ. J. 9 (2008) 375–391.
[12] Ndebbio, John E. Udo,Financial Deepening, Economic Growth,and Development: Evidence from Selected Sub-Saharan AfricanCountries, AERC Research Paper 142, Nairobi: African EconomicResearch Consortium., (2004)
[13] Ndugbu, M.O ., Theories, Policies, and Institutions of Money.Owerri: Barloz publishers limited., (2001)
[14] Nzotta, M.S.; Okereke, J.E., Financial deepening and economicdevelopment of Nigeria: An empirical investigation. Afr. J.Account. Econ. Finance. Bank. Res. 5 (2009) 52–66.
[15] Olofin, S.O.; Afangideh, U.J., Financial structure and economicgrowth in Nigeria: A macro-econometric approach. Niger. J. Secur.Finance. 13 (2009) 1–27.
[16] Osuji, C.C.; Chigbu, E.E., An evaluation of financial developmentand economic growth of Nigeria: A causality test. Kuwait ChapterArab. J. Bus. Manag. Rev. 1 (2012) 27–44.
[17] Thornton, J., Financial deepening and economic growth:Evidence from Asian economies. Sav. Dev. 18 (1994) 41–51.