Financial Intermediation In Post Bank Consolidation Era And Economic Growth In Nigeria

The study examine the relationship between financial intermediation and economic growth in Nigeria after the consolidation of the banking sector reform in Nigeria. Augmented Dickey Fuller Unit root test was conducted as a pretest to avoid giving spurious results. Granger causality was also employed to look at the direction of relationship between the dependent variable and the independent variables, the result shows a bidirectional relationship between Money Supply (MoS) and Gross Domestic Product (GDP) while Credit to Private Sector (CPS) does not granger GDP and GDP does not granger cause CPS, a unidirectional relationship however exist between CPS and MoS all at 5% level of significance. The Ordinary least square (OLS) method of analysis with data spanning 13 years shows that the variables for financial intermediation significantly affect economic growth in Nigeria. CPS has a positive impact on economic growth and so does MoS even though MoS contributes more to GDP than CPS contributes to GDP. Thus the result provide evidence that financial intermediation role of Nigerian banks have increased during the period of study an indication that people are having increased confidence on Nigerian banks after the consolidation and hence depositing the money in the banks. The study therefore recommend increase in granting credit to the private sector, expansionary monetary policy and policies aimed at strengthening further the banks in Nigeria so that their intermediation function can improve hence economic growth.