FINANCIAL SECTOR REFORMS AND ECONOMIC GROWTH IN NIGERIA

Abstract

The financial sector development in Nigeria has been accompanied by structural and institutional changes however; it faces enormous challenges leading to weak performance of banks. The paper examines the trend of financial sector reforms and its relationship on economic growth in Nigeria from 1980 to 2016. Financial reform dummy, bank lending to manufacturing sector, inflation rate, exchange rate, deposit rate, and lending rate were the independent variable while Gross domestic product was the dependent variable. Ordinary least square (OLS) and Autoregressive Distributed Lag (ARDL) were employed. The regression result showed that; financial reform dummy as well as bank lending to manufacturing sector, exchange rate, and deposit rate, all had a positive and significant effect on gross domestic product except for lending rate though positive but insignificant. However, inflation had a negative and insignificant effect on gross domestic product. The autoregressive distribution lag revealed a long run relationship between the variables and gross domestic product. The conclusion derived is that financial sector reforms impacted significantly positively on economic growth during the study period. The paper recommends that the regulatory authority and the policy maker should promote financial sector reforms in order to encourage financial development and strengthen their intermediating roles in the economy.