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Financial Stability and Credit Creation in Nigeria: An Econometric Evaluation

Author

Listed:
  • David Umoru
  • Lawrence Aghedo

Abstract

The study empirically examines a co-integrated model of financial stability of Nigerian financial sector in relation to credit financing over the sample period 1990 to 2016. The methodology of error correction was adopted in the study. The study found that credit financing and financial stability are positively linked. Nevertheless, with ecm coefficient of 1.798, the Nigeria’s financial system is unstable; any short run disturbance to the nation’s financial sector will not be restored in the nearest future. Moreover, the coefficient of financial depth is negative implying instability in money supply. As a result, level of the Nigeria’s financial deepening does not enhance the stability of the country’s financial sector. In effect, narrow financial depth causes instability of financial system in Nigeria. So, need arises for resistant and robust institutional advancement of the financial sector, while resilient emphasis on fund enlistment is needed. Also, government should ensure the adherence to credit policy by the banks.

Suggested Citation

  • David Umoru & Lawrence Aghedo, 2017. "Financial Stability and Credit Creation in Nigeria: An Econometric Evaluation," Academic Journal of Economic Studies, Faculty of Finance, Banking and Accountancy Bucharest,"Dimitrie Cantemir" Christian University Bucharest, vol. 3(4), pages 19-23, December.
    • Handle: RePEc:khe:scajes:v:3:y:2017:i:4:p:19-23
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    References listed on IDEAS

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    1. Agenor, Pierre-Richard & Aizenman, Joshua & Hoffmaister, Alexander W., 2004. "The credit crunch in East Asia: what can bank excess liquid assets tell us?," Journal of International Money and Finance, Elsevier, vol. 23(1), pages 27-49, February.
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    3. Mr. Joe Crowley, 2008. "Credit Growth in the Middle East, North Africa, and Central Asia Region," IMF Working Papers 2008/184, International Monetary Fund.
    4. Jaume Puig-Forne & Mr. Ken Miyajima & Rebecca McCaughrin & Mr. Peter Dattels, 2010. "Can You Map Global Financial Stability?," IMF Working Papers 2010/145, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Credit creation; financial stability; Sector; 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
    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium

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