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Financial Depth, Financial Access and Economic Growth in Nigeria

Author

Listed:
  • Adeniyi O Adenuga
  • Babatunde S Omotosho

    (CBN - Central Bank of Nigeria)

Abstract

Financial sector development is increasingly recognised as critically important to the micro-foundations of wealth creation and economic development of nations. An increasingly relevant component in this relationship relates to the issue of financial access. This paper contributes to the growing debate on the relationship between financial development indicators and output growth by investigating the long run relationship between financial depth, financial access and economic growth in Nigeria. The research question is: how growth propelling is an inclusive financial system in Nigeria? This question is of significant policy relevance, as Nigeria recently launched a financial inclusion programme as a strategy for wealth creation and poverty alleviation for her citizens. By setting up an error correction model, this paper showed that increased financial depth (measured either as ratio of broad money supply to output or as ratio of credit to private sector to output) propelled output growth in Nigeria during 1975-2012. However, population per bank branch conferred significant negative effect on economic growth, implying that financial access matters for growth in Nigeria. Therefore, the study strongly endorses the current financial inclusion programme of the Central Bank of Nigeria as a way of promoting growth in the country. Also, the authors call for the inclusion of financial access questions in the General Household Survey (GHS) questionnaire of the National Bureau of Statistics (NBS) as a way forward. This is based on the author's belief that the first step to improving financial access is measuring it. It is hoped that this effort would trigger further analysis that will help policy makers identify the real constraints to financial access in Nigeria.

Suggested Citation

  • Adeniyi O Adenuga & Babatunde S Omotosho, 2013. "Financial Depth, Financial Access and Economic Growth in Nigeria," Post-Print hal-02507411, HAL.
    • Handle: RePEc:hal:journl:hal-02507411
    Note: View the original document on HAL open archive server: https://hal.science/hal-02507411
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    References listed on IDEAS

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    Cited by:

    1. Marc Audi & Chan Bibi & Khalil Ahmad, 2019. "Financial Inclusion, Economic Growth and Human Well-Being Nexus: Empirics from Pakistan, India, China, Sri-Lanka, Bangladesh and Malaysia," Bulletin of Business and Economics (BBE), Research Foundation for Humanity (RFH), vol. 8(4), pages 177-190, December.
    2. Oparah Felix Chukwudi & James Tumba Henry, 2020. "Monetary Policy and Financial Stability in the Nigerian Banking Industry," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(1), pages 82-114, January.

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