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Does Rural Financial Development Spur Economic Growth? Evidence from Nigeria

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  • Sani Ibrahim, Saifullahi

Abstract

Robust economic development is not possible without financial deepening more especially in rural communities where the majority of the populace of Less Developed Countries (LDCs) resides. This paper analyses the impact of rural financial development on economic growth of Nigeria. The study uses time series data covering 1980 to 2011 periods paving the way for the application of Johansen and Juselius model of cointegration to detect the long-run relation among the variables in question. Accordingly, Dynamic Ordinary Least Square (DOLS) method was applied to unveil relationship between rural financial development and economic growth. The cointegration test result reveals the presence of long run relation between rural financial development and economic growth of Nigeria. Moreover, the DOLS results found a significant positive relationship between rural financial development and the growth of the Nigerian economy. It has been confirmed in this study that rural finance serves as an engine of growth in the country. It could therefore be concluded that enhancing productive credit, especially in rural areas could free the disadvantaged entrepreneurs and thus enable them to contribute immensely toward the growth of the Nigerian economy. As such, for the transformation agenda of the Federal Government of Nigeria to be achieved, sufficient financing arrangement need to be in place in order to satisfy the financial needs of the farmers. The study, therefore recommends, among other things, barriers to the productive credit allocation in the rural community should be reduced to the barest minimum.

Suggested Citation

  • Sani Ibrahim, Saifullahi, 2013. "Does Rural Financial Development Spur Economic Growth? Evidence from Nigeria," MPRA Paper 87496, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:87496
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    1. Abdullahi Shagali, Aminu & Sani Ibrahim, Saifullahi & Mukhtar, Shuaibu, 2020. "Contemporary issues on the sustainable rural development in Sub-Saharan Africa: A survey of salient literature," MPRA Paper 101443, University Library of Munich, Germany.

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    More about this item

    Keywords

    Growth; Financial development; Rural Finance;
    All these keywords.

    JEL classification:

    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development

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