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Oil price and the development of financial intermediation in developing oil-exporting countries: Evidence from Nigeria

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  • Chinazaekpere Nwani
  • Eugene Iheanacho
  • Chijioke Okogbue

Abstract

This study examines the relationship between crude oil price and financial sector intermediary development in Nigeria over the period 1975–2011, using the autoregressive distributed lag approach to cointegration analysis. Four measures of financial intermediary development are used including an index of financial intermediary development constructed from three indicators of financial intermediary development using principal component analysis. The results show that crude oil price is a key driver of financial intermediary development in Nigeria. A positive and significant long run relationship between financial intermediary development and crude oil price coexists with a negative short run relationship. The results show that even if we control for economic growth, inflation and trade openness, crude oil price still has significant influence on the development of financial intermediation in Nigeria. The findings of this study have important policy implications for financial intermediary development in Nigeria and other developing oil-exporting countries.

Suggested Citation

  • Chinazaekpere Nwani & Eugene Iheanacho & Chijioke Okogbue, 2016. "Oil price and the development of financial intermediation in developing oil-exporting countries: Evidence from Nigeria," Cogent Economics & Finance, Taylor & Francis Journals, vol. 4(1), pages 1185237-118, December.
    • Handle: RePEc:taf:oaefxx:v:4:y:2016:i:1:p:1185237
    DOI: 10.1080/23322039.2016.1185237
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    2. Atil, Ahmed & Nawaz, Kishwar & Lahiani, Amine & Roubaud, David, 2020. "Are natural resources a blessing or a curse for financial development in Pakistan? The importance of oil prices, economic growth and economic globalization," Resources Policy, Elsevier, vol. 67(C).
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    4. Ahmed Rufai Mohammad & Mohamad Helmi Bin Hidthiir & Alias Mat Nor, 2018. "The Impact of Reserves Debt Ratio on Profitability of Commercial Banks: Lesson from Nigeria," International Journal of Finance, Insurance and Risk Management, International Journal of Finance, Insurance and Risk Management, vol. 8(2), pages 1419-1419.
    5. Md Shajedur Rahaman & Mohammad Chhiddikur Rahman & Md Abdur Rouf Sarkar & Mohammad Ariful Islam, 2023. "Contribution of agriculture subsectors on economic growth in Bangladesh: An application of the ARDL method," Economics Bulletin, AccessEcon, vol. 43(1), pages 245-264.
    6. Ofori-Sasu, Daniel & Adu-Darko, Eunice & Asamoah, Michael Effah & Abor, Joshua Yindenaba, 2023. "Oil rents, trade environment and financial development: An international evidence," Resources Policy, Elsevier, vol. 82(C).
    7. Rousseau, Peter L. & Yilmazkuday, Hakan, 2009. "Inflation, financial development, and growth: A trilateral analysis," Economic Systems, Elsevier, vol. 33(4), pages 310-324, December.
    8. Kassouri, Yacouba & Altıntaş, Halil & Bilgili, Faik, 2020. "An investigation of the financial resource curse hypothesis in oil-exporting countries: The threshold effect of democratic accountability," Journal of Multinational Financial Management, Elsevier, vol. 56(C).

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