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EFFECT OF FINANCIAL DEEPENING ON THE GROWTH OF NIGERIAN ECONOMY. By ADESOLA, Wasiu Adebisi, EWA, Uket Eko and OKO, Sylvanus Ushie

ABSTRACT
We examined the effect of financial deepening on economic growth in Nigeria using time series data from 1981 to 2017. To carry out this study, we used Ratio of Money Supply to GDP, Ratio of Credit to the private sector to GDP, Money supply and Interest Rate Spread as proxy for financial deepening; and gross domestic growth rate as our endogenous variable. Stationarity test result revealed that one of the variables is stationary at levels I(0) while others are stationary at first difference I(1). We therefore, employ Autoregressive distributed lag model (ARDL) for our analysis. The outcome of our analysis shows that there is neither significant long run relationship, nor short run causality among the proxies used to capture our exogenous and endogenous variables. This study reveals the sorry state of our financial system development strides (financial deepening) for the period under review viz a viz its impact on our economic growth. Based on these findings, we therefore recommend among others, total overhaul of our financial system with review of the extant laws that establish them. This study also, recommend that Policies aimed at enhancing sustainable financial system development should be implemented by the monetary authorities to boost the productivity of Nigeria, create jobs and reduce the poverty level in Nigeria.

Keywords: Financial deepening, Gross domestic product, ARDL Model

 

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