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The Effect of Financial Sector Development on Poverty Reduction in Nigeria: An Empirical Investigation

Author

Listed:
  • Ishaq Saidu

    (Department of Economics, Baze University Abuja-Nigeria)

  • Abbas Abdullahi Marafa

    (Department of Economics, Baze University Abuja-Nigeria)

Abstract

This paper examines whether financial services (McKinnon conduit) or provision of credit is more effective in reducing poverty in Nigeria using data for the period 1980-2018. It employs Autoregressive and Distributed Lag Model (ARDL) Approach to estimate the parameters and cointegration analyses for income and consumption models. The results of the ARDL Bound Test to Cointegration indicate a long-run relationship among the variables in the two models. The study reveals that availability and improvement in financial services is more beneficial than credit growth. In addition, the study suggests that financial instability may hurt the poor and retards the beneficial effect of financial development particularly in the short run. The paper recommends intensification of effort towards second-generation reforms, such as, design and implementation of financial inclusion policies that involve improving access to financial services that foster inclusive-growth. Furthermore, the study recommends guided deregulation in credit market as a way of precluding or subduing its susceptibility in triggering full-blown crises that is detrimental to the poor s aggregate welfare.

Suggested Citation

  • Ishaq Saidu & Abbas Abdullahi Marafa, 2020. "The Effect of Financial Sector Development on Poverty Reduction in Nigeria: An Empirical Investigation," International Journal of Economics and Financial Issues, Econjournals, vol. 10(4), pages 9-17.
    • Handle: RePEc:eco:journ1:2020-04-2
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    Citations

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    Cited by:

    1. Clement Olalekan Olaniyi & James Temitope Dada & Nicholas Mbaya Odhiambo & Xuan Vinh Vo, 2023. "Modelling asymmetric structure in the finance-poverty nexus: empirical insights from an emerging market economy," Quality & Quantity: International Journal of Methodology, Springer, vol. 57(1), pages 453-487, February.

    More about this item

    Keywords

    Financial Sector Development; Poverty Reduction; ARDL Model; Nigeria.;
    All these keywords.

    JEL classification:

    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes

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