Financial Development, Trade Performance and Economic Growth in Nigeria

Abstract

The study examined the link between financial development, trade performance and economic growth in Nigeria between the period 1985 to 2021. Financial deepening (FD), government expenditure (GOVEXP), inflation rate (INFL) exports (EXP) and imports (IMP) are the measures used to proxy the independent variables while real gross domestic product (RGDP) was used as a dimension of economic growth which is the dependent variable. The data used in this study were sourced from secondary sources which includes; World Bank, the Central Bank of Nigeria annual statistical bulletin and World development indicators. The Eview10 Software was used to empirically and econometrically analyze data. The stationarity test shows that financial development, government expenditure, trade openness and real gross domestic product are all of order one I(1) while inflation rate is of order zero I(0). The data were analyzed using the Autoregressive distributed lag. The ARDL result estimates show that in the long run financial development and government expenditure variables have positive relationships with real gross domestic product and they are also statistically significant. The study amongst others recommends that appropriate trade and foreign exchange policies in favor of export expansion should be encouraged because exports drive economic growth. Proper implementation of import control measures that will certainly sharpen the understanding of the determinants of import behaviour.

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