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FINANCIAL SECTOR DEVELOPMENT AND ECONOMIC GROWTH IN NIGERIA

ABSTRACT

One of the most unending debates in economics is whether financial development causes economic growth or whether it is a consequence of increased economic activity. The paper empirically examines the relationship between financial development and economic growth. In this study, the perceived relationship between financial development and economic growth is estimated econometrically using the Ordinary Least Square Estimation Method (OLSEM). The result showed that there is a substantial positive effect of financial development on economic growth in Nigeria. The Granger causality test showed that financial development promotes economic growth, but there is evidence of causality from economic growth to the development of financial intermediaries. Thus, advancement of the financial sector development, including diversification of financial instruments should be pursued to facilitate economic development in Nigeria.

Keywords: Financial Development, Granger Causality, Economic

Growth

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