Acta Universitatis Danubius. Œconomica, Vol 13, No 3 (2017)

Financial Development and Economic Growth Nexus in Nigeria: Further Evidence from Long-run Estimates

Bukonla Grace Osisanwo


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.


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