Financial Intermediation and Economic Growth in Nigeria: A Disaggregated Analysis

Abstract

Financial intermediation entail mobilization of financial resources from the surplus unit to the deficit unit of the economy by transforming bank deposits into loans and credits. Generally, the study analyzed financial intermediation and economic growth in Nigeria. Specifically, total Loan and advances, bank deposit, interest rate and liquidity ratio were regressed on economic growth. An ex-post facto research design was   adopted for this study because the data are time series data that already exist in various financial publications and reports of various issues. Econometric techniques, including Augmented Dickey Fuller and Philip Perron tests for unit roots and Ordinary Least Square (OLS) ), were used to determine the effect of independent variables (X) on the dependent variable (Y). Findings from the Ordinary Least Square revealed that total Loan and advances; bank deposit and liquidity ratio had positive and significant effect on economic growth, while interest rate had negative and insignificant effect on economic growth in Nigeria. We therefore conclude that financial intermediation has positive and significant effect on economic growth in Nigeria and has helped to improve economic growth in Nigeria’s. We suggest that Policy makers should prioritize financial sector policies and formulate policy determinants of financial intermediation as a apparatus for enhancing growth and development. Policy makers should stimulating investment and economic growth by adopting appropriate mix of regulatory, fiscal and monetary policies that will boost efficient and effective financial intermediation in Nigeria.