Financial Deepening and Economic Growth in Nigeria

Abstract

The study empirically examined the impact of financial deepening on Nigeria's economic growth from 1986 to 2020 with time series data from 1986 –2020 gotten from the Central Bank of Nigeria Statistical Bulletin employed. A model was drawn and the variables were subjected to a unit root test with stationarity achieved at either order zero I(0) or order one I(1). The model was thus analysed using the Auto-regressive Distributed Lag Model (ARDL) and the Error Correction Mechanism estimation techniques. The estimates from ECM and the long run show that money supply, market capitalization and liquid liabilities positively impact economic growth in Nigeria while credit to private sector and lending rate has no significant impact on economic growth in Nigeria during the period under study. In light of the empirical findings, it was recommended by changing the lending rate, financial service providers will be able to lend to the private sector at reasonable rates, which will boost savings and investment necessary for growth. Raising the interest provided to depositors on their savings will serve as a perk to attract customers to save more money with commercial banks, savings and borrowing for investments will be encouraged as a result.