Academy of Strategic Management Journal (Print ISSN: 1544-1458; Online ISSN: 1939-6104)


The Effect of Financial Development on Economic Growth in Nigeria

Author(s): Alexander Ehimare Omankhanlen, Divine Chinyere Samuel-Hope, Benjamin Ehikioya

The growth of the financial sector allows financial intermediaries to conduct functionalities of distributing, aggregating and steering the resources of a country into an investment that leads to domestic development. The analysis of the manufacturing sector found that the industry was operating below estimates and contributing around 4 per cent to Nigeria's Gross Domestic Product (GDP). It has resulted in reduced productivity in the industry. Although the decline in the productivity of the sector was linked to the deterioration of the financial sector, this indicates that earlier efforts to grow financial markets may result in resource misuse that would have been disbursed in prior development phases to higher priority intentions. This research explores the effect of financial development economic growth in Nigeria covering 1990-2019. The main research goals were to investigate the linkages among market capitalization, money supply and credit to private sector on the economy’s growth. Data was obtained from CBN Bulletin different issues and analyzed using Autoregressive Distributed Lag. The result showed that the market capitalization and ratio of money supply to GDP of the financial development have a bigger impact on the economic growth in Nigeria. However Ratio of credit to the private sector to GDP of financial development is inversely not significant to economic growth in Nigeria. The study recommended that there is an urgent need to sustain a higher level of macro-economic stability in Nigeria, reduce the high incidence of non performing credits to ensure that private sector credits are channeled to the real sector of the economy, enhance the level of corporate governance in the financial system and strengthen risk management in the financial system.

Get the App