Finance and Economic Growth of Nigeria (original) (raw)
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Investigating Finance-Growth Nexus: Further Evidence from Nigeria
2018
This study investigates the influence of financial sector development on economic growth in Nigeria during the period 1982 to 2015. As such, the study obtained annual secondary data from the Central Bank of Nigeria statistical bulletins and World Bank financial database. The empirical model for this study examines growth in savings, growth in exchange rate, growth in government expenditure, growth in stock market capitalization, growth in credit to private sector, growth in gross capital formation, growth in trade openness and growth in broad money on economic growth in Nigeria. The multiple regression output reveals that growth in government expenditure and growth in gross capital formation are statistically significant on economic growth in Nigeria at 1% and 10% respectively under the period under investigation while other regressors in the model prove to be statistically insignificant. VAR test shows that there is considerable short-run causality running from lags of regressors t...
Financial Development and Economic Growth Nexus in Nigeria: Further Evidence from Long-run Estimates
This study examines the impact of financial development on economic growth in Nigeria using annual time series data between 1980 and 2014. The study tests for the unit root and co-integration to determine the time series properties of our variables before using ordinary least square estimation technique to evaluate the long-run estimates and possible policy inferences. The financial development indicators are financial deepening, bank deposit liability, private sector credit ratio, stock market capitalization and interest rate, while economic growth is measured by real gross domestic product. The results show that all the indicators of financial development except private sector credit ratio have positive impact on the economic growth in Nigeria. it implies that banking sector and stock market development played critical role in the output growth of the real sector. However, the negative impact of private sector credit indicate that provision of credit to investors do not enhance output due to high interest on loan as reported in the study. Thus, the study suggests that for the country to experience finance-led growth in Nigeria, the apex bank must ensure that loans are available to local industrial investors at a low interest rate.
EFFECT OF FINANCIAL SECTOR DEVELOPMENT ON ECONOMIC GROWTH: A CASE OF NIGERIA
We investigate the effect of financial sector development on the economic growth of Nigeria with secondary data covering the period 1981 to 2013. This study is anchored on the need to fill the gap occasioned by the dearth of literature on this subject-matter, especially as it concerns Nigeria. We employ the Dickey Fuller unit root test to confirm the stationarity of the variables involved and ordinary least squares technique to determine the extent to which other variables impact on economic growth. The multiple regression results show that money supply, minimum rediscount rate and exchange rate have positive and insignificant effect on economic growth. On the other hand, banking sector credit, credit to the private sector, market capitalization and foreign direct investment discovered to be having negative and insignificant effect on economic growth. The study recommends that governments should evolve policies in favour of making the financial sector of their economies more efficient.
ACCOUNTING RESEARCH International Journal of Accounting Research (IJAR), 2018
The study was undertaken with the objective of examining the causal relationship between financial sector performance and economic development visa -vis growth of Nigeria. The variables used were GDP, Human Development Index (HDI), which represents the dependent variables for the two models. For the independent variables, Credit to the Private Sector (CPS) which represents the credit activity of the financial sector; Interest Rate Spread (IRS) which represents the efficiency, competition and concentration of the financial sector; Market Turnover Ratio (TR) which represents the liquidity of the financial sector; Other variables that influence economic growth and development were introduced Inflation (INF) and Total Government Expenditure (GE). Moreover, the study period covers 1996 to 2016 and the data collected within the period was analysed using ADF Test and Granger Causality Test. The results showed that IRS causes economic growth which conforms to the supply leading hypothesis theory; but GDP causes financial sector performance through the Credit to Private Sector (CPS), which means the more the economy grows financial sector performance through its credit allocation function increases. This conforms to the demand following hypothesis theory. However, the overall financial sector performance couldn't facilitate effective economic growth vis-à-vis economic development in Nigeria. Thus, regulatory bodies of the financial sector should set or implement monetary policy program that would be favourable for the efficient operations of financial institutions.
Impact of financial development on economic growth in Nigeria
World Journal Of Advanced Research and Reviews, 2023
The study investigated the impact of financial development on economic growth in Nigeria utilising annual data from 1985 to 2022 sourced from the Central Bank of Nigeria Statistical Bulletins and World Bank indicators. The variables used in this study were real gross domestic product (RGDP), a proxy for economic growth as the dependent variable while credit to the private sector, a proxy for financial deepening, all share index (ASI), nominal exchange rate (ER), gross savings (GS), remittances (REM) and financial technology (Fin-Tech_dum) were all used as financial development indicators which are the independent variables. The method of analysis employed was the Auto-regressive Distributed Lag (ARDL) and the pairwise granger casualty test. The ARDL long run results show that all share index, exchange rate and financial technology positively and significantly affects economic growth; credit to the private sector and gross savings positively but insignificantly impacts on economic growth. However, remittances reveal a negative and insignificant impact on economic growth in Nigeria. The Pairwise causality test shows that there are three unidirectional causality which runs from economic growth to credit to private sector, financial technology and gross savings in Nigeria. In conclusion, the findings of the study validate the demand-following theory in Nigeria. The policy recommendation suggests that the Central Bank of Nigeria should promote the adoption of advanced financial technologies and implement cautious expansionary monetary policies in specific sectors to encourage investment and economic growth. Overall, these measures would boost investment and economic growth in the country.
Econometrics Analysis of Financial Development and Economic Growth: Evidence from Nigeria
Journal of Finance and Accounting, 2018
This work explored the relationship between financial development and economic growth in Nigeria. Specifically it investigated the extent to which financial development engenders economic growth. It also verified the existence of supply leading and/or demand following hypotheses in Nigeria. To evaluate these, the researchers firstly determined the stationarity of the variables which informed the use of co integration and then the vector error correction model to finding the long run impact of financial development variables on the growth of the economy. The diagnostic test was employed to determine the authenticity and stability of our model. The researchers also employed the Granger Causality test to investigate the existence of supply leading and/or demand following hypothesis. The results of the analyses show that there is a long run relationship between financial development and economic growth in Nigeria and that besides the metric for banking system financing of the economy variable which is significantly inadequate, all other financial development indicators engender economic growth. Our diagnostic test shows that the model is adequate, plausible, and stable.
Asia Proceedings of Social Sciences
The financial sector is considered as vital in the process of growth of economies both developed and developing. Economists and researchers have sough to investigate the relationship between duo with conflicting and incnclusive results. Hence, in a developing country like Nigeria, the results remains same. Example, Akinlo (2010) finds a significant positive relationship between development of the financial sector and economic growth. Other studies like Nyong (1997) find a significant negative relationship between finance and economic growth.Therefore, this study seeks to re-examine the relationship between Nigeria’s finance and economic growth using annual time series data from 1981 to 2015. Similarly, it seeks to find out if there exist a structural break in the data and whether it matters in determining the relationship between finance and economic growth.The study finds a signifcant negative relationship between finance and econmic growth after accounting for structural break a...
DOES FINANCIAL SECTOR DEVELOPMENT CAUSE ECONOMIC GROWTH? EMPIRICAL EVIDENCE FROM NIGERIA
The debate in economics whether financial development causes economic growth or whether it is a consequence of increase in economic activity seems unending. This paper examined the effect as well as the causal relationship between financial sector development and economic growth in Nigeria. This study focused on two focal variables, depth of the financial sector (M2/GDP) ratio of broad money stock to GDP and level of financial intermediation ratio of private sector credit to the GDP PC/GDP. Ensuring data stationarity using Phillips-Perron test permitted OLS and Granger causality to ascertain relationships, effects and causal relationship. Findings suggest positive long run relationship between government consumption and trade openness while the measures of financial development show negative relationships with economic growth. The outstanding results are true for the two major indicators we used M2/GDP and PC/GDP to capture the development of the financial sector, showing that they actually deepen the financial sector but failed to cause economic growth in Nigeria.
Financial Development and Economic Growth Nexus in Nigeria
International Journal of Business and Management Invention (IJBMI) , 2019
This study investigated the relationship between financial development and economic growth in Nigeria during the period of 1986-2017. Specifically, it seeks to examine the effect of financial deepening measured as the ratio of broad money supply to GDP, interest rate, stock market recapitalization and credit to private sector to GDP on economic growth in Nigeria. The study adopted recent econometric techniques such as Augmented Dickey-Fuller (ADF) and the Phillip-Perron (PP), Unit Root Tests, cointegration test as well as the Toda-Yamamoto causality test was used to accomplish its objectives. The results revealed that financial development has significant positive relationship on economic growth in Nigeria only in the short-run while negative impact in the long-run and that causality runs from financial development to economic growth. Furthermore, the study revealed that the stock market capitalization have significant positive impact on economic growth in Nigeria in the short run while negative significant in long run. The interest rate has positive insignificant effect on economic growth in Nigeria only in the short run while negative significant effect in the long run. The ratio of domestic credit to private sector to GDP have positive significant impact on economic growth in Nigeria only in the long run while positive insignificant in the short run. Causality also runs from stock market development, interest rate, banking sector development and recapitalization to financial development in Nigeria. The policy implication of these findings is that financial development is one of the desired panaceas to achieving both long-run and short-run sustainable economic growth in Nigeria and any policy targeted on financial development is expected to positively affect the level of economic growth in Nigeria. Based on these findings, the study therefore recommends among other things that the government should redirect its policy efforts towards the promotion of an efficient financial system while discouraging the elements of bureaucratic bottlenecks in the system as this will help accelerate the pace of growth of the economy. KEYWORDS: Financial development, economic growth, ratio of broad money supply to GDP, interest rate, stock market recapitalization, credit to private sector to GDP
THE IMPACT OF FINANCIAL DEVELOPMENT ON ECONOMIC GROWTH IN NIGERIA
2022
This study examines the relationship between financial development and economic growth in Nigeria, employing an Autoregressive Distributed Lag (ARDL) model to analyze data sourced from the Central Bank of Nigeria and World Bank. It aims to investigate the impact of various financial development indicators, such as domestic credit to the private sector, broad money, market capitalization, and gross fixed capital formation, on economic growth. The research utilizes the ARDL Bound test for cointegration and error correction modeling to provide accurate long-run and short-run elasticity estimates. Preliminary findings reveal a complex interplay between these financial indicators and economic growth, with both positive and negative relationships identified across different measures. Additionally, Granger causality tests are conducted to determine the direction of causality between financial development and economic growth, highlighting significant bidirectional influences. The study contributes to the existing literature by employing a robust methodological framework to capture the dynamics of financial development's role in an emerging economy like Nigeria, offering valuable insights for policymakers to enhance financial sector efficacy and overall economic prosperity.