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Financial Deepening and Economic Growth Nexus in Nigeria: Supply-Leading or Demand-Following?

Author

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  • Tari Moses Karimo

    (Department of Economics, Niger Delta University, Wilberforce Island, P.O. Box 1464, Yenagoa 560001, Bayelsa State, Nigeria)

  • Oliver Ejike Ogbonna

    (Department of Economics, Faculty of the Social Sciences, University of Nigeria, Nsukka 410001, Enugu State, Nigeria)

Abstract

This paper examined the direction of causality between financial deepening and economic growth in Nigeria for the period 1970–2013. The study adopted the Toda–Yamamoto augmented Granger causality test and results showed that the growth-financial deepening nexus in Nigeria follows the supply-leading hypothesis. This means that it is financial deepening that leads to growth and not growth leading financial deepening. Among other things, the study recommended that policy efforts should be geared towards removing obstacles that undermine the growth of credit to the private sector, and must restore investors’ confidence in the stock market operations.

Suggested Citation

  • Tari Moses Karimo & Oliver Ejike Ogbonna, 2017. "Financial Deepening and Economic Growth Nexus in Nigeria: Supply-Leading or Demand-Following?," Economies, MDPI, vol. 5(1), pages 1-18, January.
    • Handle: RePEc:gam:jecomi:v:5:y:2017:i:1:p:4-:d:88511
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    Cited by:

    1. AJAYI Ibidolapo Ezekie & EDEWUSI Damilola Gabrie & ADELEKE Kareem Olalekan, 2021. "The Impact of a Global Crisis on the Economic Sustainability of Nigeria: The Case of Covid-19 Pandemic," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(07), pages 738-745, July.
    2. AJAYI Ibidolapo Ezekie & EDEWUSI Damilola Gabrie & ADELEKE Kareem Olalekan, 2021. "The Impact of a Global Crisis on the Economic Sustainability of Nigeria: The Case of Covid-19 Pandemic," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 5(7), pages 738-745, July.
    3. Liu, Haiyun & Islam, Mollah Aminul & Khan, Muhammad Asif & Hossain, Md Ismail & Pervaiz, Khansa, 2020. "Does financial deepening attract foreign direct investment? Fresh evidence from panel threshold analysis," Research in International Business and Finance, Elsevier, vol. 53(C).
    4. Gbenga F. BABARINDE, 2020. "Growth Effects Of Foreign Direct Investment And Financial Deepening In Nigeria (1981-2018)," Business Excellence and Management, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 10(4), pages 49-67, December.
    5. Sin-Yu Ho, 2018. "Determinants of economic growth in Hong Kong: The role of stock market development," Cogent Economics & Finance, Taylor & Francis Journals, vol. 6(1), pages 1510718-151, January.
    6. Kayode David Kolawole & Micheal Adebayo Ajayi & Abdulkareem Alhassan & Festus Victor Bekun & Gizem Uzuner, 2022. "Sustainable Energy Supply, Finance, and Domestic Investment Nexus in West Africa," Sustainability, MDPI, vol. 14(19), pages 1-11, September.
    7. Kizito Uyi Ehigiamusoe & Hooi Hooi Lean, 2019. "Influence of Real Exchange Rate on the Finance-Growth Nexus in the West African Region," Economies, MDPI, vol. 7(1), pages 1-21, March.
    8. Victoria Okafor & Ebenezer Bowale & Ademola Onabote & Adedeji Afolabi & Jeremiah Ejemeyovwi, 2021. "Financial Deepening and Economic Growth in Nigeria: A Johannsen and Error Correction Model Techniques," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 12(2), pages 263-273, April.
    9. Hamisu S. Ali & Solomon P. Nathaniel & Gizem Uzuner & Festus V. Bekun & Samuel A. Sarkodie, 2020. "Trivariate Modelling of the Nexus between Electricity Consumption, Urbanization and Economic Growth in Nigeria: Fresh Insights from Maki Cointegration and Causality Tests," Research Africa Network Working Papers 20/010, Research Africa Network (RAN).
    10. Vinay Kumar Singh & Salah Abosedra & Ali Fakih & Sajal Ghosh & Kakali Kanjilal, 2023. "Economic volatility and financial deepening in Sub-Saharan Africa: evidence from panel cointegration with cross-sectional heterogeneity and endogenous structural breaks," Empirical Economics, Springer, vol. 65(5), pages 2013-2038, November.
    11. Sajida Sari & Shochrul Rohmatul Ajija & Wasiaturrahma Wasiaturrahma & Raja Adzrin Raja Ahmad, 2022. "The Efficiency of Indonesian Commercial Banks: Does the Banking Industry Competition Matter?," Sustainability, MDPI, vol. 14(17), pages 1-16, September.
    12. Klara Zalesakova, 2022. "Stock market development as a leading indicator of future economic growth in the BRICS countries," MENDELU Working Papers in Business and Economics 2022-82, Mendel University in Brno, Faculty of Business and Economics.

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