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Bank-Based versus Stock Market-Based Development in Nigeria: A Fully-Modified Ordinary Least Squares Approach

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  • Samuel Orekoya
  • Joseph Afolaby
  • Oluwatoyin Akintunde

Abstract

This study examines the relative effectiveness of bank-based and market-based financial development on the economic growth of Nigeria with data from 1989 to 2018 using the Auto-Regressive Distributive Lag (ARDL) estimation technique. The study found that bank-based financial development exerts positive and significant influence on Nigeria’s economic performance while stock market-based, rather than contributing positively to the economic prosperity, was found to have an insignificant negative effect. Using GDP per capita growth for sensitivity analysis also showed a somewhat similar result. From this finding, the study concludes that bank-based financial development drives growth in Nigeria more than market-based. The study therefore recommends intensive financial literacy and inclusion campaign to create awareness and bolster public confidence in the stock market and the financial sector.

Suggested Citation

  • Samuel Orekoya & Joseph Afolaby & Oluwatoyin Akintunde, 2021. "Bank-Based versus Stock Market-Based Development in Nigeria: A Fully-Modified Ordinary Least Squares Approach," The Review of Finance and Banking, Academia de Studii Economice din Bucuresti, Romania / Facultatea de Finante, Asigurari, Banci si Burse de Valori / Catedra de Finante, vol. 13(1), pages 33-45, June.
    • Handle: RePEc:rfb:journl:v:13:y:2021:i:1:p:33-45
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