Acta Universitatis Danubius. Œconomica, Vol 12, No 4 (2016)

Abstract

This study investigates the relationship between financial development and inclusive growth in Nigeria for the period 1980 – 2013. The technique of analysis is the quantile regression; which is to obtain a threshold for which the former impacts on the latter. Our result shows a threshold level of 90th percentile. Interestingly, we also found that the impact of financial development on inclusive growth depends on the measure of the former up to the threshold level and not beyond. Through a granger causality test, the direction of causality is through the inclusive growth rather than through financial development. While we found that either a low level or high level of openness on trade and capital investment that are desirable for inclusive growth in Nigeria, the results also reveal that government involvement in the workings of the Nigeria economy and financial openness are sensitive to the pattern of financial development. With financial deepening, both are negatively related to inclusive growth but positively related to inclusive growth when financial widening is considered. This suggests that regulating the activities of the private sector is not necessary when government engages them to facilitate financial development. However, the involvement of government in financial widening through the central bank produces a positive impact on growth.