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Financial development and economic growth in Nigeria: Evidence from threshold modelling

Author

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  • Adeniyi, Oluwatosin
  • Oyinlola, Abimbola
  • Omisakin, Olusegun
  • Egwaikhide, Festus O.

Abstract

This paper re-examined the relationship between financial development and economic growth in Nigeria. Unlike existing studies, we attempted to assess the information content of non-linearities in the finance–growth nexus for Nigeria. We also attempted to inventively gauge the impact of financial reforms on the Nigerian economy particularly in terms of economic growth. Using annual data covering the period 1960–2010, we factored in threshold effects through the financial development (FD) measures. Following these, we unearth a number of interesting results. First, financial development negatively impacted growth but a sign reversal resulted on accounting for threshold-type effects. This is indicative of some turning points in the finance–growth association. Second, using a composite index of FD led to a similar outcome. Third, on the heels of sample splitting, the coefficients for the pre- and post-reform era are hardly distinguishable casting doubt on the efficacy of financial system reforms. On the basis of the foregoing, broader structural reforms should pervade Nigeria’s policy space if the aim of sustained, inclusive and employment-generating growth is to be ​realized.

Suggested Citation

  • Adeniyi, Oluwatosin & Oyinlola, Abimbola & Omisakin, Olusegun & Egwaikhide, Festus O., 2015. "Financial development and economic growth in Nigeria: Evidence from threshold modelling," Economic Analysis and Policy, Elsevier, vol. 47(C), pages 11-21.
    • Handle: RePEc:eee:ecanpo:v:47:y:2015:i:c:p:11-21
    DOI: 10.1016/j.eap.2015.06.003
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    More about this item

    Keywords

    Financial development; Economic growth; Non-linearities; Nigeria;
    All these keywords.

    JEL classification:

    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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