FINANCIAL DEVELOPMENT AND ECONOMIC GROWTH IN NIGERIA

Eunice T. OLUGANNA (B.Sc., M.Sc., ACIB), Olusegun O. ONI (B.Sc., M.Sc., MBA, Ph.D.), Abdulrasaq A. A. YAHAYA (B.Sc., M.Sc., MBA, PGDE), Gabriel G. BABANIYI (B.Agric., PGD)

Abstract

The functioning of an economy depends on its financial system. Therefore, this study examined the impact of financial development on economic growth in Nigeria. Time series data were collected from the Central Bank of Nigeria (CBN) 2018 financial statistical bulletin that covered the period 1986 to 2018. The study adopted Auto-Regressive Distributed Lag (ARDL) technique. The findings of the study revealed that, both the current and lag form of financial development variables: Money Supply (MS), Stock Market Capitalization (SMC) and Credit to Private Sector (CPS) alongside current Government Expenditure (GE) introduced as control variable were found to be statistical significant on economic growth in Nigeria. The study recommends among others, that to accelerate inclusive growth, it is necessary for the Nigerian government to strengthen its financial sector through policies and reforms with regards to domestic credit to private sector and broad money supply in order to reposition the economy for inclusive growth. In conclusion, the development of financial sector in form of increase credits by banks to the private sectors, increase in money supply to the economy, robust capital market and effective government expenditure will increase the flow of investment into the economy and enhance economic development in Nigeria.

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