Financial Deepening and Deposit Mobilization of Commercial Banks in Nigeria: A Time Variant Model

Abstract

The purpose of this study was to examine the effect of financial deepening on customer deposit of Nigerian commercial banks. Time series data was sourced from Central Bank of Nigeria Statistical Bulletin, from 1981-2017. Percentage of total customers’ deposit to total assets was used as dependent variables while percentage of narrow money supply, broad money supply, money market development, money outside the bank and private sector credit to gross domestic product was used as independent variables. Multiple regression with ordinary least square properties of cointegration, augment Dickey Fuller unit root test, Granger causality test and vector error correction model was used to examine the relationship between the dependent and the independent variables. The regression result found that narrow money supply and money market development have negative effect on total customer’s deposit of commercial banks while private sector credit, broad money supply and money outside the bank have positive effect on customer’s deposit of commercial banks in Nigeria. The unit root test shows that the variables are stationary at first difference; the cointegration test validates the existence of long run relationship while the causality test found no causal relationship. The study concludes that financial deepening has significant impact on total customer deposit. We recommend that policies should be deepened to enhance the performance of the Nigeria financial market.