Pdf financial sector development and economic growth. Pdf is there a link between financial sector development. Only when this grows, the people will experience growth in the form of improved standard of living, namely economic development. Luintel and khan 1999, rousseau 1999, xu 2000, among others. The ordinary least square ols regression method of analysis was used for this study. Basically, the banking sector and the nonbank institutions make up the financial system in nigeria which is responsible for the development of economic growth in the country.
In the early 1960s, the agricul tural sector suffered from low commodity prices while the oil boom contributed to the negative growth of agriculture in the 1970s. Nonoil sector growth percentage of government spending on employee salaries. Ajide1 this paper investigates the role of frazer economic freedom index on fdi growth relationship over the period spanning 1980 through 2010 using annual time series data. Financial sector development and economic growth the connection between the operation of the financial system and economic growth has been one of the most heavily researched topics in development economics. Economic report on nigeria 2015 1 introductory remarks this special edition of the economic report on nigeria aims at serving a dual purpose.
Regional development a nations comparative status in its region of the world will impact its ability to develop. The onestopshop for existing information would make fsdi serve as the clearinghouse for financial sector statistics. Financial sector development takes place when financial instruments, markets, and intermediaries work together to reduce the costs of information, enforcement and transactions. H o1 there is no significant relationship between financial sector development and economic growth in nigeria. Even though the country experienced substantial growth in the economy before the economic recession in mid of 2016, the growth had not improved unemployment and poverty rate. Financial sector development and economic growth in.
However, the expected investment boom after the structural adjustment programme was not feasible and not much was recorded in terms of domestic investment. Impact of financial sector development on nigeria economic growth. A developed financial sector is a major tools for developing an economy. E31, o11, o47, o55, q10 1 introduction with 75% of the worlds poor in rural areas and most of them dependent on farming, agriculture must be part of world economic growth, poverty reduction, and environmental sustainability undp, 2012. The nigeria experience adegboyega soliu bidemi 1 and odusanya ibrahim abidemi 2 1,2 department of economics, olabisi onabanjo university, p. Financial sector development in developing countries and emerging markets is part of the private sector development strategy to stimulate economic growth and reduce poverty. Evidence from panel unit root and co integration test, journal of developmen t economics 7320045574.
Financial intermediation development and economic growth. Leave a comment economics project materials by emmanuel joseph noko. Impact of financial sector development on economic growth. Agricultural sector performance and nigerias economic growth. A multivariate regression approach was employed to estimate augmented growth models. The project is comprehensive and contained detailed analysis of nigeria financial sector development. Financial depth, financial access and economic growth in nigeria adeniyi o. Economic development in nigeria, although has been rocked back and forth by various political, sociocultural, financial and infrastructural setbacks, the economic development of a country like nigeria cant be said to have totally been where it used to be, or to have back tracked as some people insinuate. Nzotta and okereke 2009, olofin and afengideh 2008, adekunle, salami and adedipe 20, and kolawole 2011 have all examined differing linkages between financial sector development and economic. The debate in economics whether financial development causes economic growth or whether it is a consequence of increase in economic activity seems unending. The importance of financial sector development for growth and. This investigation was carried out using three common indicators of financial development broad money, depositgdp and domestic. The study therefore, recommended amongst others that banking sector reforms should be sustained so as to enhance economic growth in nigeria. This paper examined the effect as well as the causal relationship between financial sector.
Banking sector, efficiency, banking consolidation, trade openness, domestic credit, economic growth. Sound financial systems underpin economic growth and development, and are crucial to the world bank groups mission of alleviating poverty and boosting shared prosperity. According to hussain 2004 banking system plays an important role in financial sector and accounts for 95% of this sector and demonstrated a positive relationship with economic growth of pakistan. The financial sector as a prime mover of economic development. To this end, we shall be looking at the role of the banking sector in economic growth in nigeria. Also, tapping into capital markets is needed to attract additional sources to help finance global development goals, which are projected to require trillions of dollars. Hence, a well functioning banking sector is a necessary condition for economic growth.
Institutions a nation must be perceived as being politically stable before it can hope to increase investment in its economy education. Recent studies agreed that there exist a linear relationship between financial sector development and economic growth roija and valey 2003, iwuamyawn 20, onural and ozurumba 20. It generates local savings, which in turn lead to productive investments in. Pdf financial development and economic growth in nigeria. Financial development, granger causality, economic growth. Financial development and economic growth in nigeria. Ajide1 this paper investigates the role of frazer economic freedom index on fdigrowth relationship over the period spanning 1980 through 2010 using annual time series data. The role of financial development on economic growth has also received considerable attention at empirical level. Impact of financial sector development on nigeria economic. The impact of financial sector development on nigeria economic growth between 19812016. Therefore, the study investigates the impact of financial development indicators.
In the theoretical part of the paper, by developing a solowswan growth model augmented with financial markets in the tradition of wu, hou, and cheng 2010, we show that debt from credit markets and equity from stock markets are two long run. Financial sector growth development have a significant impact on economic growth in nigeria. Financial sector development and economic performance in. Pdf financial development, manufacturing sector and. The paper does not discuss policy implications or related issues, such as how to eliminate barriers to financial sector development. This page provides nigeria gdp annual growth rate actual values, historical data, forecast, chart, statistics, economic. The impact of financial development on economic growth in. H a1 there is significant relationship between financial sector development and economic growth in nigeria. An empirical assessment of financial sector development. First, it serves as an instrument for engaging the new administration of the federal government on the policy imperatives for sustainably transforming the nigerian economy. Domestic private investment and economic growth in nigeria. At a 2day nigeria meeting organized by the overseas development institute, london, 1617 june 2004 contact.
Is there a link between financial sector development and economic growth in nigeria. Financial development for economic growth in nigeria. Incorporated as a notforprofit foundation in 1971, and headquartered in geneva, switzerland, the forum is tied to no political. The effect of financial sector reforms on nigeria s. Financial system restructuring, financial development and. The study examines the relationship between financial sector development and economic growth in nigeria. To assess the causal relationship between financial sector growth and economic growth i. Pdf we investigate the effect of financial sector development on the economic growth of nigeria with secondary data covering the period. Omotosho1 abstract financial sector development is increasingly recognised as critically important to the microfoundations of wealth creation and economic development of nations. Agricultural production and economic growth in nigeria. An overview of the nigerian economic growth and development. Similarly, 5,6 and 7 maintained that agriculture as the most critical sector of the nigerias economy shield several benefits which is capable of facilitating economic growth and development. The importance of financial sector development for growth.
It is primarily devoted to providing a portrayal of both the financial and wider economic environment in nigeria. Samson and elias 2010 studied financial sector development and economic growth in nigeria. The financial sector development indicators fsdi project aims to be the first port of call for statistics and analytical tools for assessing financial sector. Thus, advancement of the financial sector development, including diversification of financial instruments should be pursued to facilitate economic. The boom in the oil sector lured labour away from the rural sector to urban centres. Financial sector development and economic growth in india. The world economic forum is an independent international organization committed to improving the state of the world by engaging business, political, academic and other leaders of society to shape global, regional and industry agendas. The paper examines the relationship between financial sector development and economic growth in nigeria. Nigeria gdp annual growth rate 19822019 data 20202022. Economic growth in nigeria has largely been accounted for by resilient agricultural growth associated with performance in four constituent subsectors. Financial development and economic growth nexus in nigeria. This section sets the tone for the eventual data analysis and results discussion. The results showed that the financial sector development indicators have long run relationship with economic growth.
Using the bound test approach, this study finds a positive long run relationship between financial development and economic growth in nigeria. The debate on the role of the financial sector in economic growth and development has been going on for over a century now. In this reverse causality view, financial development may be a mere leading indicator of economic growth rather than a cause. Incorporated as a notforprofit foundation in 1971, and headquartered in geneva, switzerland, the forum is tied to no political, partisan or national interests. This can happen only when there is a facility for savings. While financial inclusion is typically measured by ownership of an account by individuals, financial development is measured by macrolevel indicators, such as market capitalization of the stock market or a countrys ratio of credit to gross domestic product gdp. Most empirical models generally indicate that welldeveloped financial markets enhance the efficiency of resource allocation and faster longrun growth via several channels. Investment, gdp growth, and the size of gdp are all strongly interdependent.
Goldsmith 1969 was the first to document a positive. The granger causality test showed that financial development promotes economic growth, but there is evidence of causality from economic growth to the development of financial intermediaries. The following are the roles of financial system in the economic development of a country. Challenges to economic growth in nigeria michael amati jose ardavin jeanette fershtman 14 may 2004. This paper investigates the impact of financial development on economic growth using time series data in cameroon.
Nigeria has a rich history of financial sector reforms. The impact of financial sector development on economic. For decades, african economies have embarked on financial sector reforms. Effect of financial sector development on manufacturing.
Financial sector development, growth, and poverty reduction. Generally, the nigerian financial system is divided into 2 sectors. Thus, advancement of the financial sector development, including diversification of financial instruments should be pursued to facilitate economic development in nigeria. Pesaran mh 1997 the role of economic theory in modelling the.
Accepted 30 september, 2014 the present paper examines the nexus between financial sector development and. An empirical assessment of financial sector development and. To examine the relationship between financial sector development and economic growth in nigeria. The development of any country depends on the economic growth the country achieves over a period of time. A solid and wellfunctioning financial sector is a powerful engine behind economic growth. The role of the banking sector in economic growth of nigeria. This study contributes to understanding the role of financial development on economic growth theoretically and empirically. Findings from the study revealed that there is positive relationship between financial sector development and economic growth in nigeria. The financial sector that creates sustainable economic growth must be resilient and strong, with institutional development as a priority, this sector must facilitate fund mobilization. Economic growth deals about investment and production and also the extent of gross domestic product in a country.
However, the empirical implications of these reforms have been divergent. Student at department of accounting, nasarawa state university keffi, nigeria. This study seeks to contribute to the existing studies by examining the case of nigeria using the. The study used ardl model for the analysis for robust policy recommendations. The growth of agriculture for the periods 196070 and 197078 was unsatisfactory. Second, because financial markets are forwardlooking, financial development in 1960 may be the consequence of anticipated economic growth of the next few decades. International journal of economic development research and investment, vol. The study examined the influence of financial sector development, financial deepening on economic growth. Bfp is at the forefront of driving policy reform to improve the efficiency of the financial sector, and recently launched bangladeshs first national financial inclusion policy. Role of financial system in economic development of a country. Financial sector development and economic growth in nigeria. To attain economic development, a country needs more investment and production. This investigation was carried out using three common indicators of financial development.
To analyze the impact of financial sector growth development on economic growth in nigeria. The financial sector is the set of institutions, instruments, and markets. How the finance sector can drive africas economic growth. 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. The results of the study showed that there is positive relationship between financial. Determinants of economic growth in nigeria kazeem b. Pdf the role of financial markets in economic growth. The result showed that financial sector development has a substantial positive effect on economic growth in nigeria. Dependence on the oil sector by the nigerian government has generated a question about economic sustainability. Pdf effect of financial sector development on economic growth. The impact of financial development on economic growth in nigeria.
It also includes the legal and regulatory framework that permit transactions to be made through the extension of credit. Therefore, the study investigates the impact of financial development indicators on the manufacturing sector. Abstract this study examines the effect of financial sector reforms on the nigerian economic growth. Pdf the influence of financial sector development and.
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