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Impact of Financial Sector Development, Trade and Economic Growth in Nigeria

Author

Listed:
  • Michael S. Akpan

    (Department of Economics, Bingham University, Karu, Nigeria)

  • Marvelous Aigbedion

    (Department of Economics, Bingham University, Karu, Nigeria)

  • Joshua Jeremiah Dandaura

    (Department of Economics, Bingham University, Karu, Nigeria)

  • Irimiya Christabel Musa

    (Department of Economics, Bingham University, Karu, Nigeria)

Abstract

This paper investigated the impact of financial sector development and trade sector development on economic growth in Nigeria using quarterly data between 2010Q1 and 2023Q4. The paper adopted the Fully Modified Least Squares (FMOLS) technique, to regress real gross domestic product on the independent variables which included credit to private sector (measured as financial development), foreign trade balance (measured as value of exports minus value of imports), exchange rate spread and inflation rate which were used as proxied for trade sector development. The coefficient of credit to private sector (CPS) and exchange rate spread (EXR) had positive influences on real GPD and were statistically significant while trade balance (TB), had positive influence on real GPD and was statistically insignificant. However, the result of inflation rate revealed a negative and significant relationship with real GDP. Therefore, the paper concluded that financial sector development, exchange rate spread, trade balance are positive and statistically significant variables that influence real GPD growth while inflation rate negatively influences real output growth in Nigeria. The paper recommended that the exchange rate liberalization and increase in credit to the private sector should be sustained by the monetary policy authorities to sustain growth. At the same time the Nigerian Export Promotion Council should create incentives to promote exports to improve the country’s trade balance to correct its insignificant influence on growth. It is also recommended that inflation targeting should be adopted to anchor inflation.

Suggested Citation

  • Michael S. Akpan & Marvelous Aigbedion & Joshua Jeremiah Dandaura & Irimiya Christabel Musa, 2024. "Impact of Financial Sector Development, Trade and Economic Growth in Nigeria," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(8), pages 1880-1894, August.
    • Handle: RePEc:bcp:journl:v:8:y:2024:i:8:p:1880-1894
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    References listed on IDEAS

    as
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    2. Hao Chen & Duncan O. Hongo & Max William Ssali & Maurice Simiyu Nyaranga & Consolata Wairimu Nderitu, 2020. "The Asymmetric Influence of Financial Development on Economic Growth in Kenya: Evidence From NARDL," SAGE Open, , vol. 10(1), pages 21582440198, February.
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