IDEAS home Printed from https://ideas.repec.org/a/bcp/journl/v8y2024i8p1880-1894.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: https://www.rsisinternational.org/journals/ijriss/Digital-Library/volume-8-issue-8/1880-1894.pdf
    Download Restriction: no

    File URL: https://rsisinternational.org/journals/ijriss/articles/impact-of-financial-sector-development-trade-and-economic-growth-in-nigeria/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Hui An & Qianmiao Zou & Mohamed Kargbo, 2021. "Impact of financial development on economic growth: Evidence from Sub‐Saharan Africa," Australian Economic Papers, Wiley Blackwell, vol. 60(2), pages 226-260, June.
    2. Janice Tieguhong Puatwoe & Serge Mandiefe Piabuo, 2017. "Financial sector development and economic growth: evidence from Cameroon," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 3(1), pages 1-18, December.
    3. Yazidu Ustarz & Ashenafi Beyene Fanta & Wai Ching Poon, 2021. "Financial development and economic growth in sub-Saharan Africa: A sectoral perspective," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1934976-193, January.
    4. Ofori, Isaac K. & Gbolonyo, Emmanuel & Dossou, Marcel A. T. & Nkrumah, Richard K., 2022. "Remittances and Income Inequality in Africa: Financial Development Thresholds for Economic Policy," MPRA Paper 113015, University Library of Munich, Germany.
    5. Dagim Taddese Bekele & Adisu Abebaw Degu, 2023. "The effect of financial sector development on economic growth of selected sub‐Saharan Africa countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2834-2842, July.
    6. Michael Appiah & Bright Akwasi Gyamfi & Tomiwa Sunday Adebayo & Festus Victor Bekun, 2023. "Do financial development, foreign direct investment, and economic growth enhance industrial development? Fresh evidence from Sub-Sahara African countries," Portuguese Economic Journal, Springer;Instituto Superior de Economia e Gestao, vol. 22(2), pages 203-227, May.
    7. Khaled Batayneh & Wasfi Al Salamat & Mohammad Q.M. Momani & David McMillan, 2021. "The impact of inflation on the financial sector development: Empirical evidence from Jordan," Cogent Economics & Finance, Taylor & Francis Journals, vol. 9(1), pages 1970869-197, January.
    8. 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.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Oliver Asiamah & Samuel Kwaku Agyei, 2023. "Information sharing offices and economic growth in sub‐Saharan Africa," African Development Review, African Development Bank, vol. 35(2), pages 211-225, June.
    2. Khalil Mhadhbi & Chokri Terzi, 2022. "Shadow economy threshold effect in the relationship finance–growth in Tunisia: A nonlinear autoregressive distributed lag approach," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(3), pages 636-651, April.
    3. Prempeh Kwadwo Boateng & Frimpong Joseph Magnus, 2024. "Financial Development-International Trade Nexus in Ghana: The Role of Sectoral Effects," Zagreb International Review of Economics and Business, Sciendo, vol. 27(1), pages 7-30.
    4. Hamdi Becha & Maha Kalai & Kamel Helali, 2023. "Smooth transition regression model relating inflation to economic growth in Tunisia," Journal of Economic Structures, Springer;Pan-Pacific Association of Input-Output Studies (PAPAIOS), vol. 12(1), pages 1-26, December.
    5. Ikhsan Ikhsan & Khairul Amri, 2023. "Sectoral Growth Impacts of Bank Credit Allocation: The Role of COVID-19 Pandemic as Moderating Variable," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 5, pages 32-50.
    6. Mansur, Alfan & Nizar, Muhammad Afdi, 2023. "Supply-leading or demand-following financial sector and economic development nexus: evidence from data-rich Indonesia," MPRA Paper 119132, University Library of Munich, Germany, revised 10 Nov 2023.
    7. Yugang He & Chunlei Wang, 2022. "Does Buddhist Tourism Successfully Result in Local Sustainable Development?," Sustainability, MDPI, vol. 14(6), pages 1-15, March.
    8. Raihan, Asif, 2024. "The influences of economic progress, natural resources, and capitalization on financial development in the United States," Innovation and Green Development, Elsevier, vol. 3(2).
    9. Hung, Ngo Thai, 2023. "Green investment, financial development, digitalization and economic sustainability in Vietnam: Evidence from a quantile-on-quantile regression and wavelet coherence," Technological Forecasting and Social Change, Elsevier, vol. 186(PB).
    10. Amjad Taha & Mucahit Aydin & Taiwo Temitope Lasisi & Festus Victor Bekun & Narayan Sethi, 2023. "Toward a sustainable growth path in Arab economies: an extension of classical growth model," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 9(1), pages 1-24, December.
    11. Ofori, Isaac K. & Dossou, Marcel A.M. & Asongu, Simplice A. & Armah, Mark K., 2023. "Bridging Africa’s income inequality gap: How relevant is China’s outward FDI to Africa?," Economic Systems, Elsevier, vol. 47(1).
    12. Ofori, Isaac K. & Figari, Francesco, 2022. "Economic Globalisation and Inclusive Green Growth in Africa: Contingencies and Policy-Relevant Thresholds of Governance," EconStor Open Access Articles and Book Chapters, ZBW - Leibniz Information Centre for Economics, issue Forthcomi, pages 1-1.
    13. Simplice A. Asongu & Jean R. F. K. Bouanza & Armand F. Akpa, 2024. "Governance and Structural Transformation in Africa: Thresholds of Lifelong Gender Inclusive Education," Working Papers of The Association for Promoting Women in Research and Development in Africa (ASPROWORDA). 24/010, The Association for Promoting Women in Research and Development in Africa (ASPROWORDA).
    14. Abdala, Zédou & Goudoussou, Moumin & Timbi, Sézard, 2024. "Can Financial Development Incur Budget Deficits? An ARDL Cointegration Analysis for Cameroon," African Journal of Economic Review, African Journal of Economic Review, vol. 12(1), March.
    15. Vanessa da Silva Mariotto Onody & Ana Catarina Gandra de Carvalho & Eduardo Polloni-Silva & Guilherme Augusto Roiz & Enzo Barberio Mariano & Daisy Aparecida Nascimento Rebelatto & Herick Fernando Mora, 2022. "Corruption and FDI in Brazil: Contesting the “Sand” or “Grease” Hypotheses," Sustainability, MDPI, vol. 14(10), pages 1-18, May.
    16. Simplice Asongu & Uduak S. Akpan & Salisu R. Isihak, 2018. "Determinants of foreign direct investment in fast-growing economies: evidence from the BRICS and MINT countries," Financial Innovation, Springer;Southwestern University of Finance and Economics, vol. 4(1), pages 1-17, December.
    17. Biruk B. Ashenafi & Dong Yan, 2023. "Financial intermediation, inclusion, Fintech, and income inequality in Africa: Robust evidence from the supply and demand side data," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 52(2), July.
    18. N'GORAN Koffi Celestin, 2021. "Financial Credit in Agricultural Development in Côte D'ivoire," Journal of Agricultural Studies, Macrothink Institute, vol. 9(3), pages 363-381, September.
    19. Isaac K. Ofori & Francesco Figari & Nathanael Ojong, 2023. "Towards sustainability: The relationship between foreign direct investment, economic freedom and inclusive green growth," Working Papers of the African Governance and Development Institute. 23/023, African Governance and Development Institute..
    20. Naliniprava Tripathy & Shekhar Mishra, 2023. "The Dynamics of Cointegration Between Economic Growth and Financial Development in Emerging Asian Economy: Evidence from India," Vision, , vol. 27(4), pages 485-497, August.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bcp:journl:v:8:y:2024:i:8:p:1880-1894. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Dr. Pawan Verma (email available below). General contact details of provider: https://rsisinternational.org/journals/ijriss/ .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.