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Financial Deepening and Economic Growth in Nigeria: A Johannsen and Error Correction Model Techniques

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  • Victoria Okafor
  • Ebenezer Bowale
  • Ademola Onabote
  • Adedeji Afolabi
  • Jeremiah Ejemeyovwi

Abstract

The desire to ascertain the kind of relationship between finance and growth is not new among scholars. This study attempted to give a better understanding of the type of relationship by analysing post-SAP (Structural Adjustment Programme) time-series data since the notable financial reforms began with SAP in Nigeria. The study employed the Johannsen Cointegration, error correction and granger causality as estimation techniques to determine the nexus between financial deepening and economic growth. The variables contained in the model include the ratio of credit to the private sector to gross domestic product (CPS) which proxy bank-based financial deepening, the proportion of market capitalisation to gross domestic product (MCAP) which proxy for stock market development. The result of the analysis revealed that the Nigerian economic growth is influenced by financial deepening positively and significantly, especially the bank-based financial depth.

Suggested Citation

  • 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.
    • Handle: RePEc:jfr:ijfr11:v:12:y:2021:i:2:p:263-273
    DOI: 10.5430/ijfr.v12n2p263
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    1. Victoria I. Okafor & Isaiah O. Olurinola & Ebenezer Bowale & Romanus Osabohien, 2023. "Financial development and income inequality in Africa," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-10, December.

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