Effects of Financial Service Delivery and Trade Openness on Economic Growth in Nigeria (1970-2010): Implications for Nigerian Agricultural Trade Development

The study identified the major long-run determinants of economic growth in Nigeria with emphasis on financial services delivery and trade liberalization. It also discussed the trend of financial services performance, economic growth and trade openness in the economy alongside the policy implications of the findings for agricultural transformation in Nigeria. It relied on time series data spanning over 41 years (1970-2010), obtained from World Bank and Central Bank of Nigeria. Unit root tests were performed after which the bound testing for co-integration (Autoregressive Distributed Lagged [ADRL]) model was used. The results indicated a combination of downward and upward swinging trend of economic growth rate and financial services performance from 2004 to 2010. Agricultural growth, financial service performance and trade openness appeared to be moving in similar directions. The ARDL model estimated had an estimated F-ratio of 25.47, (p<0.05 with upper value of 5.966) signifying that there is co-integration among the series. The empirical results of the long-run model obtained by normalizing the explanatory variables on the log of real GDP indicated that financial services delivery (M2) indicated a significant positive relationship with economic growth (real GDP) at p <0.05. It was recommended that the Federal Government of Nigeria and its Central Bank should pursue implementation of effective macro-economic policies along with momentous improvements in the structure and functioning systems of governance for stabilising economic growth along financial liberalisation reforms among other recommendations. Need to also use the financial service sector to improve agricultural growth via increased access of farmers to long-term loans was recommended.