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Financial Deepening and Entrepreneurial Development in Nigeria: Evidence from 1981–2024

Author

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  • Keremah, Sydney Clever

    (Department of Accounting and Finance, Faculty of Management and Social Sciences, Margaret Lawrence University)

Abstract

This study investigates the relationship between financial deepening and entrepreneurial development in Nigeria using annual data from 1981 to 2024. Non-oil GDP is used as a proxy for entrepreneurial development, while financial deepening is captured through money supply, credit to the private sector, lending rate, and exchange rate. The analysis employs various econometric techniques, including the Johansen cointegration test, Vector Error Correction Model (VECM), and Granger causality tests, to examine both short- and long-run dynamics. The results reveal the existence of a stable long-run relationship among the variables. Money supply and exchange rate exert positive effects on entrepreneurial development, while credit to the private sector shows a negative long-run effect, suggesting inefficiencies in credit allocation. Lending rates appear largely insignificant. Granger causality findings indicate that non-oil GDP drives changes in money supply, private sector credit, and exchange rate, highlighting the role of entrepreneurial activity in shaping financial sector dynamics. The study concludes that entrepreneurial development is a key driver of Nigeria’s financial and monetary system and recommends that financial institutions enhance access to credit for small and medium-sized enterprises (SMEs). Additionally, government policies should prioritize support for sectors such as agriculture, manufacturing, and services to stimulate sustainable economic growth.

Suggested Citation

  • Keremah, Sydney Clever, 2026. "Financial Deepening and Entrepreneurial Development in Nigeria: Evidence from 1981–2024," East African Finance Journal, East African Finance Journal, vol. 5(1).
    • Handle: RePEc:cwk:eafjke:2026-14
    DOI: 10.59413/eafj/v5.i1.14
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    References listed on IDEAS

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    3. Maria Widyastuti & Deograsias Yoseph Yustinianus Ferdinand & Yustinus Budi Hermanto, 2023. "Strengthening Formal Credit Access and Performance through Financial Literacy and Credit Terms in Micro, Small and Medium Businesses," JRFM, MDPI, vol. 16(1), pages 1-14, January.
    4. Muhuhu Monicah Wambui & Dr. Richard Ngali, PhD, CFE & Dr. Joshua Matanda Wepukhulu, PhD, 2023. "Venture Capital and Growth of Small and Medium- Sized Enterprises in Kiambu County, Kenya," International Journal of Finance, CARI Journals Limited, vol. 8(2), pages 65-89.
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    6. linus, Justin Ogbonna & lawal, Faith Chidinma & Rasheed Azeez & Sunday O Okafor & Ifeanyi Ozioma Patricia, 2025. "Financial Development and Entrepreneurship Growth in Nigeria," International Journal of Research and Scientific Innovation, International Journal of Research and Scientific Innovation (IJRSI), vol. 12(3), pages 922-931, March.
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    Keywords

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    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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