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On the Efficiency of Financial Intermediation in Nigeria’s Growth Performance: A Two Stage Least Square Approach

Author

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  • Umoh, Okon J.
  • Onye, Kenneth U.

Abstract

We test the efficiency of financial intermediation in Nigeria’s economic growth performance using the Two Stage Least Square (TSLS) technique of regression analysis. Relying on a tripartite simultaneous equation regression model, the results show that financial intermediation process in Nigeria has been partly effective but sub-optimal. Evidence from the structural parameter estimates indicate that low savings coupled with poor credit support to the real sector attenuated the growth effect of financial intermediation in Nigeria. This is attributable to high interest spread, low per capita income, poor banking habit and high inflation, among others. It is recommended that the devices for improving financial intermediation and Nigeria’s growth performance are to set a positive and moderate interest rate, increase the volume of deposit, increase bank branches, increase income per capita and continue with liberalization.

Suggested Citation

  • Umoh, Okon J. & Onye, Kenneth U., 2012. "On the Efficiency of Financial Intermediation in Nigeria’s Growth Performance: A Two Stage Least Square Approach," MPRA Paper 88307, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:88307
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    References listed on IDEAS

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    6. Ford, J.L. & Agung, J., 1998. "Financial Development, Liberalisation and Economic Development in Indonesia, 1966-1996: Cointegration and Causality," Discussion Papers 98-12, Department of Economics, University of Birmingham.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Financial intermediation; Economic growth; TSLS; Nigeria;
    All these keywords.

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

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