Financial Deepening Indicators and Economic Growth in Nigeria: A Causality and Impact Analysis

Okafor, I; Onwumere, Josaphat Uchechukwu Joe; Chijindu, Ezeaku Hillary

doi:10.9734/ajeba/2016/29411

Cited by 11 publications

(10 citation statements)

References 11 publications

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“…Furthermore, the study disclosed that there is no causality between banking system liquidity and financial deepening variables. These findings agree with those of [29].…”

Section: Conclusion and Recommendationssupporting

confidence: 92%

“…Yet [28] having examined if changes in the financial structure explain economic growth dynamics in Nigeria using VECM finds that changes in financial structure in Nigeria do not particularly have any significant consequential effects on its real growth rate. However, [29] while analyzing the connexion between economic growth and financial deepening ratios in Nigeria, find mixed results. Their findings reveal that though along run relationship exists between economic growth, broad money and banks advances to private sector, broad money supply exerts a positive and insignificant effect on economic growth whereas private sector credit has negative and insignificant effect on economic growth.…”

Section: Empirical Reviewmentioning

confidence: 99%

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Does Financial Deepening Cause Liquidity Problems for Banks? Evidence from Nigeria

Kayode

Ajayi

Awosusi

2021

SAJSSE

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Attempt to facilitate economic growth makes the Central Banks to formulate monetary policies that seek to deepen the provision of financial resources to target sectors. Since Banks are the main channels through which monetary policies are executed, we attempted to examine whether financial deepening cause liquidity problem among Nigerian banks in this study. We employed time series analytical techniques to analyze selected financial deepening indicators and data for banking system liquidity between 1981 and 2019. The financial deepening variables used include of broad money to the gross domestic product (GDP) ratio; credit to private sector to the GDP ratio; ratio of commercial banks liabilities to the GDP; financial sector contribution to the GDP and ratio of market capitalization to the GDP. On the other hand, the liquidity of the banking system is proxy by its loan/deposit ratio for the period under study. We estimated the statistical properties of the variables examined and conducted some pre-estimation tests (stationarity and co-integration) to ascertain choice estimation techniques. We used a vector error correction mechanism to investigate long and short-run effects of financial deepening on Nigerian banking system liquidity. Both the long run vector autoregressive (VAR) and the short run and vector error correction (VEC) models results showed that there is a positive but statistically insignificant relationship between banking system liquidity and financial deepening variables. In addition, the results of the Granger causality between the dependent and independent variables revealed that there exists no causal relationship between the liquidity of the banking system and financial deepening. These findings imply that financial deepening did not impair banks’ liquidity position in Nigeria during the years under review. The study concluded that financial deepening does not cause liquidity problem for banks in Nigeria; rather, if well managed, can have positive effect on it. In the light of this, the study recommends that banks should re-strategize in the implementation of financial deepening policies that are liquidity friendly and that the Central Bank of Nigeria, should formulate policies that will not only focus on credit and loan beneficiaries, but also on the banks.

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“…Furthermore, the study disclosed that there is no causality between banking system liquidity and financial deepening variables. These findings agree with those of [29].…”

Section: Conclusion and Recommendationssupporting

confidence: 92%

Section: Empirical Reviewmentioning

confidence: 99%

Does Financial Deepening Cause Liquidity Problems for Banks? Evidence from Nigeria

Kayode

Ajayi

Awosusi

2021

SAJSSE

View full text Add to dashboard Cite

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“…Literature on financial development majorly focussed on its contribution to economic growth (Okafor, Onwumere, & Chijindu, 2016;Tayssir & Feryel, 2018;Werigbelegha & Nwamaka, 2015), on trade flows and performance (Akinyemi et al, 2019;Osabuohien, Efobi, Odebiyi, & Fayomi, 2017;Osabuohien et al, 2019) without much emphasis on the determinants of financial development (Osuagwu & Nwokoma, 2017;Takyi & Obeng, 2013;Trinugroho, Agusman, Ariefianto, Darsono, & Tarazi, 2015) and these studies established the importance of financial development in achieving trade flows, economic growth, and inclusive growth for both advanced and emerging economies.…”

Section: Issues In Extant Literaturementioning

confidence: 99%

ICT adoption, innovation and financial development in a digital world: empirical analysis from Africa

Ejemeyovwi

Osabuohien

Bowale

2021

Transnational Corporations Review

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As a response to a digital era that is seen as a core element of global digitalisation, financial development in many countries including those in the African continent experienced varying patterns. These have made some countries to be categorised as relatively high and others relatively low in terms of their scale on digital economy. Thus, this study empirically investigates the interaction of information and communication technology (ICT) adoption and innovation, and the role of this digitalisation interaction on financial development in Africa, and across the sub-regions. It utilises the Bayesian Vector Auto-Regressive (BVAR) modelling to simulate the impulse response function and variance decomposition across Africa. The study finds that ICTinnovation interaction shock positively drives financial development across all of 6 datasets. This implies that for multinational corporations (MNCs) and other economic agents, ICTinnovation interaction should be strongly applied across all sectors to drive financial development since all sectors require finances to improve performance. Thus, contributes to the empirical testing of the theoretical reflections of digitalisation and digital economy interaction in African countries.

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“…Okafor et al [10] Undertook a research on financial deepening and economic growth in Nigeria between 1981 and 2013. This research utilized the Phillips-Peron test for unit root to evaluate if the variables in the model were stationary or not.…”

Section: Empirical Reviewmentioning

confidence: 99%

The Impact of Financial Deepening on the Economy of Nigeria (1981-2018)

Efanga

Ogochukwu

Ugwuanyi

2020

AJEBA

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This study was carried out to investigate the impact of financial deepening on the Nigerian economy between 1981 and 2018. Data employed for this study was elicited from Central Bank of Nigeria Statistical Bulletin of 2018. This study employed real gross domestic product as proxy for economic growth in Nigeria (regress and), while ratio of money supply to gross domestic product, ratio of private sector credit to gross domestic product and ratio of market capitalization to gross domestic product were adopted as regressors. The co-integration test and Fully Modified Least Squares (FMOLS) Model were utilized to analyze data. Inferential results generated there from indicated that financial deepening had positive impact on the Nigerian economy within the period under review. To boost economic growth, we recommend at this time that monetary authorities implement monetary policies to increase money. In the same vein, Nigerian commercial banks should be encouraged to improve upon credit facilities made available to the private sector. Recognizing the positive impact of international capital, this study also recommends that Nigerian policy makers ease some of the many restrictions that currently limit entry of international capital. This singular act would most definitely lead to more companies being listed on the exchange. The result would be the attainment of even more depth to Nigeria’s economy.

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Financial Deepening Indicators and Economic Growth in Nigeria: A Causality and Impact Analysis

Abstract: This work was carried out in collaboration between all authors. Author JUJO designed the study. Author IGO managed the literature searches and the background of the study.

Cited by 11 publications

References 11 publications

Does Financial Deepening Cause Liquidity Problems for Banks? Evidence from Nigeria

Does Financial Deepening Cause Liquidity Problems for Banks? Evidence from Nigeria

ICT adoption, innovation and financial development in a digital world: empirical analysis from Africa

The Impact of Financial Deepening on the Economy of Nigeria (1981-2018)

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