Effect of Financial Deepening on Economic Growth in Nigeria: A Time Series Appraisal (1986-2018) (original) (raw)
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Financial Deepening Indicators and Economic Growth in Nigeria: A Causality and Impact Analysis
This paper is a causality and impact study on financial deepening and economic growth in Nigeria for a-33-year period covering 1981 – 2013. The study used the Phillips-Peron test for unit root to ascertain whether the variables are stationary or not. The VEC residual normality test and the Histogram-Normality test were utilized in other to determine if the data set were normally distributed. Test for a long run relationship was conducted with the aid of the Johansen cointegration test. The Error Correction Model as well as the Granger causality test was also employed. The findings revealed that there is a long run relationship between economic growth, broad money supply and private sector credit, with high speed of adjustment towards long run equilibrium. The results also revealed that while broad money has positive and non-significant impact on economic growth, private sector credit has negative and non significant impact on growth. The Granger causality test results showed that neither broad money supply nor private sector credit is granger causal for economic growth and vice versa. The study therefore recommends that private sector friendly policies should be implemented to ensure that investors do not only have access to Original Research Article
The Impact of Financial Deepening on Economic Growth in Nigeria (1981-2018)
WSEAS TRANSACTIONS ON BUSINESS AND ECONOMICS, 2020
Different academics and experts have acknowledged that developing the financial sector positively impacts economic growth by increasing productivity, progress and national investment. Expanding the financial sector allows financial intermediaries to carry out functionalities of deploying, aggregating and directing a country’s savings into an investment which contributes to domestic progression. This research explores the effect of financial deepening on Nigeria’s growth for 38 years covering 1981- 2018. The main research goals were to investigate the linkages among time and savings deposit of commercial banks, money supply and credit to the private sector on the economy’s growth. Data was obtained from CBN Bulletin different issues and analyzed using Autoregressive Distributed Lag. From the result of analysis, we found out that long run relationship existed but no regressor was found to be significant. Credit to the private sector to GDP was inversely related to GDP growth whereas m...
Financial Deepening and Sustained Economic Growth in Nigeria
Universal Journal of Accounting and Finance, 2021
The growth-finance nexus in Nigeria is investigated in this research. Prior studies used time-series data and classical linear regression mainly, as well as various financial deepening indexes and methodologies. These studies produced a mixed bag of results. This study is unique as it adopts quarterly data from the three arms of the financial industry (banks, stock markets, and insurance companies) which most previous studies neglected to focus solely on the banking sector. The Autoregressive Distributed Lag (ARDL), Error Correction Model, and the Granger causality test were used to examine the convergence and divergence technique. Prior researches overlook a variety of pre-and diagnostic tests. The findings revealed a long-short run co-integrating nexus. Financial indices respond to economic growth in a linear fashion. The insurance industry has a 28% impact on economic growth. The short-run finding demonstrates a 74% speed of convergence from explanatory variable-induced disequilibrium to long-run equilibrium. Economic growth reacts more quickly to the financial climate's shocks and dynamics. A bi-directional association was discovered using causality testing. Recapitalization of the banking and insurance sectors, as well as a review of the Monetary Policy Rate to enhance lending to the private sector and boost savings and investment, is among the recommendations.
A Causality Analysis of Financial Deepening and Performance of Nigerian Economy (1990-2013)
African Research Review, 2015
The study examines the causal relationship between financial deepening and performance of Nigerian economy using time series data (1990-2013). Secondary data was used and collected from the central bank of Nigeria statistical bulletin and national bureau of statistics. Hypotheses were formulated and tested using a causality econometrics model and the study reveals that the variables do not have unit roots. There is also a longrun equilibrium realationship between financial deepening and performance of Nigerian economy and the result confirms that about 70% short-run adjustment speed from long-run disequilibrium. The study reveals that there is a causal relationship between financial deepening and performance of Nigerian economy. The coefficient of determination indicates that about 63% of the variations in performance of Nigerian economy can be explained by changes in financial deepening variables. The study therefore recommends that Government policies should be directed towards manipulating the money supply in such a way that will facilitate economic growth and development. The monetary authority CBN should implement policies that will increase the flow of funds and improves the capacity of banks to extend credit to the economy. Security and Exchange Commission should be diligent in the supervision of the operators in the capital market to ensure that efficiency and discipline is restored in the market, so as to increase investors confidence, expand liquidity, mobilize savings and enhances capital accumulation.
Effects of financial Deepening on Economic Growth of Nigeria (1981-2016)
2019
This study examined effects of financial deepening on the economic growth of Nigeria (1981 to 2016) through two of the basic arms of the financial industry (Insurance companies and Banking Industry). Secondary data from CBN statistical bulletin and Global Financial Development bulletin, 2017 as provided by the World Bank were utilized. The study adopted an ex-post facto research design. The analytical tool used was Ordinary Least Squares (OLS). It was found that insurance industry premium to GDP has positive but no significant effect while credit to private sector by commercial banks to GDP has positive and significant effect on economic growth in Nigeria. Based on the results of the study, it was concluded that credit to private sector by commercial banks to GDP has significant effect while insurance industry premium to GDP has no significant effect on economic growth in Nigeria. It was recommended, among others, that the insurance industry should undergo another round of recapital...
Financial Deepening and Economic Growth in Nigeria
ABSTRACT The study investigated the causal nexus between financial deepening and economic growth in Nigeria over the period 1981-2011 in a multivariate VAR model. Five variables, namely real gross domestic product (RGDP), ratio of money supply to gross domestic product (M2/GDP), index of openness (IOP), market capitalization (MCAP) and deposit rate (DR) were used in the study. The ratio of money supply to gross domestic product and real gross domestic product were used as proxies for financial deepening and economic growth respectively. The empirical analysis is based on cointegration, vector error correction and causality test. Both the cointegration and vector error correction tests found the presence of long run and short run equilibrium relationship between financial deepening and economic growth. The Granger causality test revealed the existence of bidirectional causality between financial deepening and economic growth, financial deepening and market capitalization, deposit rate and market capitalization. It also confirmed the unidirectional causality from economic growth to deposit rate, index of openness to economic growth. The study, however, did not find any causality between market capitalization and economic growth, index of openness and economic growth, index of openness and financial deepening and deposit rate and index of openness. Analysis of the impulse response function showed that all the variables are largely driven by own shocks. The analysis of variance decomposition confirmed the significant influence of real gross domestic product and financial deepening on each other. The policy implication of this study is that financial deepening is considered as the policy variable to enhance economic growth and economic growth could be considered as the policy variable to generate financial deepening in the economy. The study therefore recommends An enhancement of the financial sector policies, strengthening other determinants of economic growth such as increase in investment, human capital development, mechanization of the agricultural sector among others which indirectly affect financial deepening, strengthening of the operations of the Nigerian Stock Market, which serves as a source of medium for long term finance for investment. The study also recommends the sustenance of the liberal foreign trade policy as it found to impact positively on the economy.
FINANCIAL DEEPENING AND ECONOMIC GROWTH IN NIGERIA: AN EMPIRICAL ANALYSIS
Social Sciences and management international Journal, 2020
This paper examined the relationship between financial development and economic development in Nigeria using annual time series between 1981 and 2018. Financial development was captured with financial deepening indicator measured as a ratio of credit to the private sector to gross domestic product (GDP). The data were obtained from the 2018 Central Bank of Nigeria statistical bulletin. The study employed an econometric approach by incorporating granger causality test, unit root test, Bounds test, and the error correction mechanism. Findings from the Granger causality test revealed that there exists a unidirectional causality that flows from financial development to economic development in Nigeria, implying that the supply-leading finance hypothesis was prevalent. Also, there exist both a shot-run and long-run positive and significant relationship between financial development (measured as a ratio of credit to private sector to GDP) and economic growth in Nigeria within the study period. It is in this light that the paper recommended that there is need for more financial market development that favours more credit to the private sector in order to stimulate economic growth. This can be achieved through strengthening the micro finance sector so as to make credits available and accessible to the micro entrepreneurs who are often deprived of credit by the conventional credit markets.
The study examined the relationship between financial deepening and economic growth for the period 1981 to 2013 using empirical evidence from Nigeria. The Engel-Granger two-step cointegration procedures and Error Correction Model (ECM) were used as the method of estimation. The analyses of residuals of the OLS regression showed evidence in favour of cointegration between financial deepening and economic growth. Similarly, estimates from the error correction model provide evidence to show that financial deepening indicators and GDP series converge to a long-run equilibrium at a reasonably fast rate. The result points to the fact that the deepening of the financial system can engineer the Nigerian economy to greater growth.
International Journal of Financial Research, 2021
The desire to ascertain the kind of relationship between finance and growth is not new among scholars. This study attempted to give a better understanding of the type of relationship by analysing post-SAP (Structural Adjustment Programme) time-series data since the notable financial reforms began with SAP in Nigeria. The study employed the Johannsen Cointegration, error correction and granger causality as estimation techniques to determine the nexus between financial deepening and economic growth. The variables contained in the model include the ratio of credit to the private sector to gross domestic product (CPS) which proxy bank-based financial deepening, the proportion of market capitalisation to gross domestic product (MCAP) which proxy for stock market development. The result of the analysis revealed that the Nigerian economic growth is influenced by financial deepening positively and significantly, especially the bank-based financial depth.