Financial Deepening and Economic Growth in Nigeria: Evidence from 1982 – 2019

Abstract

This paper examines the impact of financial deepening on economic growth in Nigeria from 1982 – 2019. The objective of the study is to look at the impact of credit to private sector, money supply and gross domestic savings on the economic growth in Nigeria. Secondary data were collected based on the model used in the research work and unit root test was conducted on the data to test their stationary, after which we perform co-integration test to analyze the long run relationship among the variables. The result obtained from our empirical analysis shows that all financial deepening variables possesses a significant impact on the economic growth in Nigeria, that is, money supply, credit to private sector and gross domestic savings financial deepening proxies has significant and positive effect on economic growth. The study therefore recommends that government and the monetary authorities should make policies which would help to boost the saving culture of the people. This could be done by increasing the deposit rate which would lure the people to deposit their money in banks thereby increasing the supply of loanable funds. This would lead to a fall in interest rate and eventually rise in investment.