Financial Sector Development In Nigeria Research Articles

Revisiting the nexus between remittances and financial sector development in Nigeria

Purpose ― The study aims to investigate the impact of remittances on financial sector development in Nigeria using data from 1990 to 2021.Method ― The study examines the variables' relationship using the Autoregressive Distributed Lag (ARDL) and Toda Yamamoto (TY) Causality.Findings ― The study finds that remittances have a positive and significant long-run impact on financial sector development. Total reserves and imports of goods and services have a negative and significant long-run impact. In the short run, remittances and deposit interest rates positively and significantly impact financial sector development, while total reserves and total population have negative and significant impacts. The Toda-Yamamoto causality result indicates a two-way causal relationship between financial sector development and remittances.Implication ― The study recommends that the government employs policies encouraging channeling remittances through a formal banking system, as well as ensuring that such remittances received are channeled to finance productive investment, hence financial development.Originality ― The novelty of this research relates to the use of the three main indicators of remittances in an economy, which are the import of goods and services, total reserves, and deposit interest rates, to examine its impact on financial sector development in Nigeria

EFFECT OF FINANCIAL DEVELOPMENT ON FINANCIAL INNOVATION IN NIGERIA

Financial sector is crucial for the development of a well-functioning market as it facilitate capitalinflows, mobilize savings for productive investment and facilitates the conduct and growth of aneconomy in the world. Despite the importance of financial sector development in Nigeria, financialinstitution operating in financial market were confronted with drastic changes where by old waysof doing business were no longer profitable and sustainable and unable to acquire fund with theirtraditional financial instruments. Against this background, the study investigated the effect offinancial sector development on financial innovation in Nigeria. The study employed secondarydata obtained from central bank of Nigeria statistical bulletin and World Bank database between2011 and 2017. The data obtained was subjected to system General Method of Analysis (GMM)estimator. The study concluded that upward trend of process innovation significantly influence thein depth of finance. The study recommends policy makers should design policies which willpromote and enhance the relationship between financial innovation and financial development inother to increase the supply and provision of financial service.

Financial Sector Development in Nigeria: Do Financial Reform, Output Size and Resource Dependence Matter?

The study examined the determinants of financial sector development in Nigeria in an error correction modelling framework, and with OLS for robustness checks, using data from 1980 to 2017. The results show that, banking sector reform, gross capital formation, government expenditure, interest rate spread, output size and trade openness were significant determinants of financial sector development in both the short- and long run. Proxy for economic misery was only significant in the ECM equation, while literacy and human development metric was significant in the long-run equation. Natural resource dependence, proxy by ratio of natural resource rent to GDP, was negatively related to financial sector development in Nigeria, though the coefficient was not significant at conventional levels. Economic misery, interest rate spread and inflation were observed to undermine financial development in Nigeria. The study recommends the continuation of the process of financial liberalization because of its immerse benefits of promoting competition amongst financial institutions with attendant positive effects of reducing interest rate gap. Domestic output, measured by the real GDP, should be enhanced with appropriate stabilising policy, whether fiscal or monetary policy. Additionally, efforts should be enhanced to limit the effects of macroeconomic instability on financial sector development. Lastly, the study recommends efficient management of natural resources to enjoy a non-declining contribution to the development of an inclusive financial system in Nigeria.

Institutional Quality and Financial Sector Development: Empirical Evidence from Nigeria

In view of the indispensable role of financial sector in both emerging and developing economies, there has been a notable spotlight on the financial sector development over the years in most African countries. Nonetheless, there are only a few studies on this topical issue, particularly for Nigeria. Hence, this study examines the long – run and short – run dynamic relationship between institutional quality and financial development in Nigeria over the period of 1984 – 2015 using Auto-Regressive Distributed Lag (ARDL) bounds test approach to cointegration. Using two different indicators (Private credit and M2) of financial development, the results consistently show that institutional factors do not have significant effect on financial development in the long – run as well as in the short – run. Furthermore, the empirical evidence indicates that regulatory quality and governance system (institutions) do not necessarily contribute to financial development in a feeble institutional environment, specifically in Nigeria. Thus, our findings suggest that whilst weak institutions could increase the risk of limiting the functioning of financial system, good governance and strong institutions are the essential ingredient of financial development in Nigeria. As a consequence, policies aimed at strengthening the quality of institutions and governance should form the major policy thrust of government (policy makers). These could help improving financial sector development in Nigeria.

Do Financial and Trade Openness Lead to Financial Sector Development in Nigeria?

Abstract With so many countries of the world now open to global capital and trade, this study identifies whether financial and trade openness contribute to the development of Nigeria’s financial system by considering both financial depth and access to finance indicators. To achieve this objective, we applied the Simultaneous Openness Hypothesis as our theoretical framework and the Generalized Method of Moments (GMM) as our estimation method. Our findings reveal that opening trade while neglecting capital (vice versa) may be detrimental to the development of Nigeria financial system. In view of this evidence, we recommend that the simultaneous opening of trade and finance is a more guaranteed way of ensuring improved financial development in Nigeria.

Inflation and Financial Sector Performance: The Case of Nigeria

Abstract The paper examines the long run and short run relationships between inflation and the financial sector development in Nigeria over the period between 1970 and 2012. Three variables, namely; broad definition of money as ratio of GDP, quasi money as share of GDP and credit to private sector as share of GDP, were used to proxy financial sector development. Our findings suggest that inflation presented deleterious effects on financial development over the study period. The main implication of the results is that poor macroeconomic performance has deleterious effects to financial development - a variable that is important for affecting economic growth and income inequality. Moreover, we observed a negative effect of the measures of financial development on growth, suggesting that impact of inflation on the economic growth passes through financial sector. Therefore, low and stable prices, is a necessary first step to achieving a deeper and more active financial sector that will enhance growth as predicted by Schumpeter.