Causal Relationship between Selected Financial Development Indicators and Economic Growth in Nigeria from 1985-2016

Chukwu, Kenechukwu Origin 1 & Chimarume Blessing Ubah2
Nnamdi Azikiwe University, Awka, Nigeria
DOI – http://doi.org/10.37502/IJSMR.2022.5221

Abstract

The study examines the causal relationship between selected financial development indicators and economic growth in Nigeria. The study used quarterly data from the statistical bulletin of the Central Bank of Nigeria from (1985Q1-2016Q4). The study employs Granger causality test and Vector Autoregressive (VAR) estimation techniques. The findings show a bidirectional causality between money supply to gross domestic product on real gross domestic product. There is also the unidirectional relationship between private debt to total debt securities (domestic) on real gross domestic product while there is no causality between lending-deposits spread and liquidity ratio on RGDP. The study therefore recommends that government should further undertake financial reforms; build a robust infrastructure, legal system and an enabling business environment capable of attracting quality investments, promote real sector growth and development as well as job creation and economic growth. Government should also introduce policies aimed at enhancing financial inclusion and boosting financial access in Nigeria. Attention should be given to the money supply in the economy to ensure that the money in circulation is within the growth target in order to achieve price stability and accelerated growth.

Keywords: Financial development; economic growth; causality; Nigeria

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