This study examines the long run and short run dynamics between financial intermediation development and economic growth in nigeria using annual time series data spanning the period 19702015 by employing the var testing approach, johansen co. The problems of lack of efficiency and effectiveness of mobilizing resources lead to unemployment, instability, and underdevelopment of the nigeria economy. In our paper we capture the four aspects of finance depth, access, efficiency and stability to. Thus, the objective of this study is to examine the longrun effect of financial intermediation on economic growth in nigeria.
Pdf financial intermediation and economic growth in nigeria. Department of banking and finance, covenant university, ota, nigeria. Pdf effect of financial intermediation on economic. But financial structure the particular blend of the two intermediation channels varies across countries.
The nature of the relationship between intermediation function of financial sector and economic growth has been one of the debated in the recent past, thus, for with a little consensus. The role of financial intermediation in economic growth has been widely recognized in theoretical and empirical research. We test the efficiency of financial intermediation in nigerias economic growth performance using the two stage least square tsls technique of regression analysis. To examine the relationship between financial sector development and economic growth in nigeria. These models have identified the capital market as an institution that contributes to the economic growth of emerging economies, they are also considered as a variable in explaining the economic growth. Pdf financial intermediation development and economic.
The book analyses the role financial intermediation plays in the economic growth of nigeria. There is a growing concern as to whether the cost of financial intermediation. This paper uses new data and new econometric procedures to shed considerably more light on the issue of causality while also illuminating a close empirical association between key. Using a crosscountry data analysis of 71 less developed countries ldcs for the period 1960 to 1980. This paper tries to fill that gap, by using causality tests to empirically examine the relationship between finance and economic growth. The main objective of this study is to investigate the effect of financial intermediation on economic growth in nigeria. On the other hand, in turkey the impact of financial. Financial intermediation and economic development in nigeria. On the efficiency of financial intermediation in nigerias.
Functions and examples of financial intermediaries. The impact of financial sector development on economic. The effect of financial sector reforms on nigeria s economic growth awoyemi, s. Using an annual time series data spanning the period of 1992 2014 with the application of the estimation techniques of ordinary least square ols, co integration test, alongside granger causality test. Empirical evidence from nigeria 37 mckinnon 1973 in his study argued that there is a complimentary relationship between physical capital and money that is reflected in money demand. Financial sector development and economic growth in. Financial intermediation is an important activity in the economy because it allows funds to be channelled from people who might otherwise not put them to productive use to people who will. In this way financial intermediation helps promoted a more efficient and dynamic economy.
Financial intermediation development and economic growth. Effect of financial intermediation on economic development. Central bank of nigeria the nigerian financial system. Financial intermediation by banks and economic growth in. I use data of aggregate deposit money bank credit over time. A financial intermediary helps to facilitate the different needs of lenders and borrowers. This study examines the long run and short run dynamics between financial intermediation development and economic growth in nigeria using annual time series data spanning the period 19702015 by employing the var testing approach, johansen co integration testing technique and. In this article, we discuss some of the determinants of financial structure, and how that structure might affect economic growth. Pdf on jan 1, 2012, ayodele ibrahim shittu and others published financial intermediation and economic growth in nigeria find, read and. Similarly, adams, 1998 36 studied financial intermediation and economic growth in nigeria. This paper set out to empirical investigate the relationship between financial intermediation and economic growth in nigeria using time series data spanning from 1986 to 2014. Stock market development indicators and economic growth in. This contrasts with the practitionersview of financial intermediation as avaluecreating economic process.
A financial intermediary is a financial institution such as bank, building society, insurance company, investment bank or pension fund. The intermediation functions of finance companies and. Until recently, the literature has focused mainly on the role of financial intermediation in the process of economic growth and capital accumulation. Ardl empirical insights on financial intermediation and economic growth in nigeria 1 onwe joshua chukwuma, 2 adeleye ngozi and 1 okorie williams 1 department of economics, university of nigeria. The impact of financial intermediation on economic growth. Shittu 2012 in a country specific study investigated the impact of financial intermediation on economic. Financial development is not simply a result of economic growth. The relationship between finance and economic growth has received considerable attention in economic development literature during recent decades. Impact of financial intermediation on nigeria economic growth. Odedokun 1998, in his study, emphasised that even though financial intermediation promotes economic growth, the growthpromoting effects are more pronounced in the lowincome countries. Nwite, acii, acib department of banking and finance, faculty of management sciences, ebonyi state university. The paper examines the empirical relationship between the level of development by financial intermediaries and economic growth in nigeria. Long run analysis and test of demand following hypothesis nigerian experience edori iniviei simeon1, edori daniel simeon2, needam best baridam2 1department of finance and banking, faculty of management science, university of port harcourt, port harcourt, nigeria. Thus, this study focuses on examining the effect of financial intermediation on economic development in nigeria.
The study made use of ordinary least square regression analysis. Financial development and economic growth in ghana. D, hcib department of accountingfinance, faculty of management and social sciences godfrey okoye university, enugu abstract. Sulaiman, luqman adedamola south africa, aluko, olufemi adewale nigeria financial intermediation and economic growth. Financial intermediation as a financial system aims at the enhancement of mobilization of. However, little interest has been devoted to african countries, and specifically, to west african countries. Pdf financial intermediation and economic growth in. Financial intermediation and its implications on economic growth in nigeria ass.
Effect of financial intermediation on economic development of nigeria. While past work shows that the level of nancial development is a good predictor of economic growth king and levine, 1993a, b. The longrun effect of the financial intermediaries on economic growth in nigeria was not considered in previous studies. Annual time series data covering 1970 to 20 were used to analyze the long run and short run relationships between the development of financial intermediaries. To determine the causal relationship between total market capitalization, banking sector credits, foreign direct investment inflow to financial sector, and real gross domestic product in nigeria. Journal of economics and sustainable development, vol. The effect of financial sector reforms on nigerias. M2nominal gdp as measures of financial intermediation and real gdp as a proxy for economic growth. Additional aspects of financial system such as access, efficiency and stability should be taken into account in order to shed light into the relationship between finance and economic growth. This paper seeks to examine the impact of financial intermediation on economic growth in nigeria. This paper investigates the financial intermediation and economic growth relation in nigeria using the autoregressive distributed lagardl approachfrom 1985 to 2016. We also present evidence concerning the legal, regulatory, and policy determinants of nancial development.
Impact of financial intermediation on nigeria economic growth chapter one introduction 1. The study employed the 2sls method to show that the financial intermediation process is suboptimal and caused by a high lending rate, high inflation rate, low per capita income, and inadequate bank branches. T he study therefore recommends that the monetary authorities should p roperly control and. The evolution of banks and financial intermediation. Financial inclusion fi, a feature of fi nancial development, is a process that marks improvement in quantity, quality, and effi ciency of fi nancial intermediary services. The importance of the financial sector of an economy in stimulating economic growth is widely recognized. Financial intermediation and economic growth in nigeria. Time series data from 1970 to 2010 were used and were gathered from the cbn publications. By running the regression of economic growth rates on labour force growth, capital stock growth, and capital stock growth multiplied by real.
Empirical evidence from nigeria 39 jayaratne and strathan 1996 affirmed that financial development impacts positively on economic growth but with a clause that there is an improvement in the quality of bank lending. A financial intermediary offers a service to help an individual firm to save or borrow money. All financial systems combine bankbased and marketbased intermediation. This study tests for causality between financial intermediation and economic growth in nigeria between 1990 and 20. The impact of financial intermediation on economic growth ssrn. Relying on a tripartite simultaneous equation regression model, the results show that financial intermediation process in nigeria has been partly effective but suboptimal.
Data for the study are collected mainly fromsecondary sources such as statistical bulletins of the central bank of nigeria c. Utilising the todayamamoto granger noncausality test, it reveals that. Pdf impact of financial intermediation on economic growth in. The role of the banking sector in economic growth of nigeria. It seeks to know the impacts of the sector in the nigerian economy and whether the sector has been able to achieve its main objective of intermediation. Globally, activities of banks reflect their unique role as the engine of financial growth which can ultimately lead to real economic growth. Onaolapo 2015 studied the effects of financial inclusionon the economic growth of nigeria 19822012. This study examined the effect of financial intermediation on economic growth. It also conflicts with the continuing and increasing economic importance of financial intermediaries. Pdf on jan 1, 2017, dumani markjackson and others published impact of financial intermediation on economic growth in nigeria. Effects of financial inclusion on economic growth in. The output of our empirical analysis reflect that all the data used in the process of research are stationary after first differencing in the order of 1 1, the output of the ols shows that m2 and iir has a positive and. I trace the origin of trade from the primitive barter system to its evolution through money to the dominant economic system of capitalism and the role of financial intermediation in such a system.
Acha, ikechukwu anthony, financial intermediation by banks and economic growth in nigeria, 1990 2008 2011. The study concludes that m2 to gdp exert more influence on the nigeria economy than the credit to private to gdp. For the analysis, the unit root test and cointegration test. Mandel, and lindsay mollineaux 3 regulations role in bank changes peter olson 21 the rise of the originatetodistribute model and the role of banks in financial intermediation.
The main objective of this study is to determine the implications of cost of financial intermediation on economic growth in nigeria. Therefore, there is a growing concern as to whether the cost of financial intermediation is having commensurate beneficial implication on economic growth in nigeria. The importance of the financial sector in any economy cannot be overemphasized given the. Judging by the output of this research, it show that in the nigeria context, economic growth determine financial sector development. Pdf impact of financial intermediation on economic. Utilising the todayamamoto granger noncausality test, it reveals that causality is absent between financial intermediation and. The nigerian financial system central bank of nigeria. Abstract this study examines the effect of financial sector reforms on the nigerian economic growth.
This questions the effectiveness of the intermediation process. Ardl empirical insights on financial intermediation and. This paper examines the linkage between finance companies intermediation functions and economic growth in nigeria. Besides the performance of specialized tasks, several theoretical models posit that they mitigate the costs associated with information acquisition and the conduct of financial. Financial intermediation is the process in which financial institutions particularly commercial banks mobilize money from surplus economic units in the form of savings and channel such funds to the deficit units or sectors of the economy who are in need of funds to carryout useful economic activities through loans or mortgages. The study considered credit to private sector, lending rate and money supply as independent variables, while real gdp growth rate and. Pdf ardl empirical insights on financial intermediation. This means that there is significant and positive effect of financial intermediation on economic growth in nigeria. The justification for using banks as our financial intermediaries is based on the fact that banking system plays a crucial role in economic growth. The role of financial intermediation in the growth process of nigerian economy the book analyses the role financial intermediation plays in the economic growth of nigeria.
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