The impact of financial deepening in Nigeria (1981-2018)
Keywords:
Autoregressive Distributed Lag, Economic Growth, Financial deepeningAbstract
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 money supply to GDP
had positive relations with economic growth rate, time and savings deposits in commercial banks negatively affected
national growth. Policies favoring credit lending to the private sector should be encouraged by stakeholders in the
economy, for instance, higher savings interest rates would encourage more savings. More importantly, policies should
be enacted to make sure that savings are transmitted into productive investments that can yield financial deepness. .
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