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Financial reforms and credit growth in Nigeria: empirical insights from ARDL and ECM techniques

Author

Listed:
  • Ngozi Adeleye
  • Evans Osabuohien
  • Ebenezer Bowale
  • Oluwatoyin Matthew
  • Emmanuel Oduntan

Abstract

In the last 37 years, Nigeria has undergone several stages of financial reforms with different impacts on the economy. This paper analyses the impact of these financial reforms on credit growth in Nigeria using annual data from 1980 to 2016. The research work hinges on the theoretical underpinning of McKinnon-Shaw hypothesis on the relevance of financial reforms in a lagging economy. Analysing the data with autoregressive distributed lag error correction representation and bounds testing techniques, we find evidence supporting this hypothesis, and specifically that at higher real interest rates there is increased financial intermediation evidenced by credit growth. Other findings are that in the long-run, financial system deposits, inflation rate and per capita GDP are strong asymmetrical predictors of credit growth and real interest rates (the financial reform indicator), while the short-run relationships are indicator-specific. We further show that a long-run cointegration relationship exists between domestic credit and other covariates and likewise between the real interest rate and its regressors.

Suggested Citation

  • Ngozi Adeleye & Evans Osabuohien & Ebenezer Bowale & Oluwatoyin Matthew & Emmanuel Oduntan, 2018. "Financial reforms and credit growth in Nigeria: empirical insights from ARDL and ECM techniques," International Review of Applied Economics, Taylor & Francis Journals, vol. 32(6), pages 807-820, November.
    • Handle: RePEc:taf:irapec:v:32:y:2018:i:6:p:807-820
    DOI: 10.1080/02692171.2017.1375466
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    1. Lawrence U. Okoye & Alexander E. Omankhanlen & Johnson I. Okoh & Ngozi B. Adeleye & Felix N. Ezeji & Gideon K. Ezu & Benjamin I. Ehikioya, 2021. "Analyzing the Energy Consumption and Economic Growth Nexus in Nigeria," International Journal of Energy Economics and Policy, Econjournals, vol. 11(1), pages 378-387.
    2. Oludele Emmanuel Folarin, 2019. "Financial reforms and industrialisation: evidence from Nigeria," Journal of Social and Economic Development, Springer;Institute for Social and Economic Change, vol. 21(1), pages 166-189, June.
    3. Oluwatoyin A. Matthew & Christian Ede & Romanus Osabohien & Jeremiah Ejemeyovwi & Tunde Ayanda & Joshua Okunbor, 2021. "Interaction Effect of Tourism and Foreign Exchange Earnings on Economic Growth in Nigeria," Global Business Review, International Management Institute, vol. 22(1), pages 7-22, February.
    4. Okoro, Emmanuel E. & Adeleye, Bosede N. & Okoye, Lawrence U. & Maxwell, Omeje, 2021. "Gas flaring, ineffective utilization of energy resource and associated economic impact in Nigeria: Evidence from ARDL and Bayer-Hanck cointegration techniques," Energy Policy, Elsevier, vol. 153(C).
    5. Bapon Chandra Kuri & Md. Nahiduzzaman & Bablu Kumar Dhar & Rubaiyat Shabbir & Rejaul Karim, 2025. "Macroeconomic Drivers of Sustainable Tourism Development in Bangladesh: An ARDL Bounds Testing Approach," Sustainable Development, John Wiley & Sons, Ltd., vol. 33(3), pages 3918-3940, June.
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    7. Oluwafadekemi S. Areo & Obindah Gershon & Evans Osabuohien, 2020. "Improved Public Services and Tax Compliance of Small and Medium Scale Enterprises in Nigeria: A Generalised Ordered Logistic Regression," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 10(7), pages 833-860, July.
    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. Abiola Ayopo Babajide & Lawal Adedoyin Ishola & Adetiloye Kehinde Adekunle & Bede Uzoma Achugamonu & Akinjare Victoria Bosede, 2021. "Financial Sector Reform and Economic Development in Nigeria," Asian Economic and Financial Review, Asian Economic and Social Society, vol. 11(2), pages 160-172, February.
    10. Bosede Ngozi Adeleye & Michael Adusei & Olayinka Olohunlana & Opeyemi Akinyemi-Babajide & Arumugam Sankaran & Abdul Jamal, 2022. "Real deposit rate and credit supply nexus in ECOWAS," SN Business & Economics, Springer, vol. 2(2), pages 1-24, February.
    11. William Djamfa Mbiakop & Hlalefang Khobai & Djomo Choumbou Raoul Fani, 2023. "The Impact of Public Agricultural Spending on Foreign Direct Investment Inflows in Agriculture in South Africa: An ARDL Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 13(5), pages 76-87, September.
    12. Bosede Ngozi Adeleye & Ismail Bengana & Abdelaziz Boukhelkhal & Mohammad Musa Shafiq & Hauwah K. K. Abdulkareem, 2022. "Correction to: Does Human Capital Tilt the Population‑Economic Growth Dynamics? Evidence from Middle East and North African Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 162(2), pages 885-886, July.
    13. Waqar Badshah & Mehmet Bulut, 2020. "Model Selection Procedures in Bounds Test of Cointegration: Theoretical Comparison and Empirical Evidence," Economies, MDPI, vol. 8(2), pages 1-23, June.
    14. Emmanuel Nketiah & Bosede Ngozi Adeleye & Lawrence Uchenna Okoye, 2025. "Comparative Investigation of Growth-Led Energy and Environmental Kuznets Curve Hypotheses in Ghana and Nigeria," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 8524-8545, June.
    15. Kingsley Imandojemu & Bosede Ngozi Adeleye & Babatunde Aina, 2023. "Monetary Policy And Economic Growth In Nigeria: Evidence From Bounds And Bayer-Hanck Cointegration Techniques," Economic Annals, Faculty of Economics and Business, University of Belgrade, vol. 68(236), pages 81-103, January –.
    16. Sri Fatmawati & Ardyanto Fitrady & Tri Widodo, 2025. "Politically Driven Cycles in Fiscal Policy: Evidence from Disaggregated Budgets in Middle-Income Countries," Economies, MDPI, vol. 13(6), pages 1-29, May.
    17. Mostafa A. Ali & Nazimah Hussin & Hossam Haddad & Dina Alkhodary & Ahmad Marei, 2021. "Dynamic Capabilities and Their Impact on Intellectual Capital and Innovation Performance," Sustainability, MDPI, vol. 13(18), pages 1-32, September.
    18. Faria Hossain Borsha & Liton Chandra Voumik & Mamunur Rashid & Mihir Kumar Das & Nina Stępnicka & Grzegorz Zimon, 2024. "An Empirical Investigation of GDP, Industrialization, Population, Renewable Energy and CO2 Emission in Bangladesh: Bridging EKC-STIRPAT Models," International Journal of Energy Economics and Policy, Econjournals, vol. 14(3), pages 560-571, May.
    19. Bosede Ngozi Adeleye & Jimoh Sina Ogede & Mustafa Raza Rabbani & Lukman Shehu Adam & Maria Mazhar, 2022. "Moderation analysis of exchange rate, tourism and economic growth in Asia," PLOS ONE, Public Library of Science, vol. 17(12), pages 1-17, December.

    More about this item

    JEL classification:

    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G19 - Financial Economics - - General Financial Markets - - - Other

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