Financial Development and Economic Growth in Nigeria: The Case Study of Nigeria
Abstract
The study analyzed the effect of financial development on economic growth in Nigeria using time series data on annual growth rate of gross domestic product, real interest rate, the ratio of gross domestic savings to GDP, ratio of domestic credit to private sector to GDP over the period 1980 and 2019. While the variables real interest rate, the ratio of gross domestic savings to GDP, ratio of domestic credit to private sector to GDP served as explanatory variable, annual growth rate of gross domestic product was used as the dependent variable. The results indicated that two of the variables (real interest rate, gross domestic savings) are inversely related to the dependent variable (GDP annual growth rate) when combined together while domestic credit to private sector is positively related to the dependent variable with the coefficient of multiple determination showing that the model is of high good fit with approximately 93% of gross domestic product being explained by the variables included in the model, while the remaining 7% are factors inducing growth but were not captured in the model. Thus, the study, therefore, concluded that there is the need to adequately deepen the financial system through innovations, adequate and effective regulation and supervision, efficient mobilization of funds and making such funds available for productive investment, and improved services in order to propel economic growth.
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