Abstract
AbstractThis study examines the relationship between crude oil price and financial sector intermediary development in Nigeria over the period 1975–2011, using the autoregressive distributed lag approach to cointegration analysis. Four measures of financial intermediary development are used including an index of financial intermediary development constructed from three indicators of financial intermediary development using principal component analysis. The results show that crude oil price is a key driver of financial intermediary development in Nigeria. A positive and significant long run relationship between financial intermediary development and crude oil price coexists with a negative short run relationship. The results show that even if we control for economic growth, inflation and trade openness, crude oil price still has significant influence on the development of financial intermediation in Nigeria. The findings of this study have important policy implications for financial intermediary development...
Highlights
Given the broad consensus that financial intermediaries in oil-exporting countries are weak and unable to allocate resources efficiently, it is of great importance to understand the macroeconomic drivers of financial sector intermediary development in Nigeria, a developing oil-exporting country
Conclusion and policy implications Controlling for the possible influence of macroeconomic performance and trade openness, this study examines the long run and short run relationship between crude oil price and financial intermediary development in Nigeria using the autoregressive distributed lag (ARDL) approach to cointegration analysis over the period 1975–2011
The results show that crude oil price is a key driver of financial intermediary development in Nigeria
Summary
Given the broad consensus that financial intermediaries in oil-exporting countries are weak and unable to allocate resources efficiently (see Barajas, Chami, & Yousefi, 2013; Beck, 2011; Nili & Rastad, 2007), it is of great importance to understand the macroeconomic drivers of financial sector intermediary development in Nigeria, a developing oil-exporting country. The efficient mobilization of savings and allocation of resources in the economy needs an environment of macroeconomic stability (Beck, Maimbo, Faye, & Triki, 2011; Boyd, Levine, & Smith, 2001). This study aims to fill this gap in the literature
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