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Financial Intermediation and Economic Growth in Nigeria: Evidence from the Banking Sector

Monday A Gbanador

Abstract

The study investigates the nexus between financial intermediation and economic growth in Nigeria from 1985 to 2023. Using annual time series data and the Autoregressive Distributed Lag (ARDL) approach, the results indicate that Total savings (TSV) has a positive and significant impact on the Gross Domestic Product (GDP), Credit to Private sector (CPS) has a negative but significant influence on the GDP while Deposit of Rural branches of Banks (RBD) and Loan of Rural branches of Banks (RBL) have negative and insignificant effects. Thus, the study reveals a substantial and positive link between financial intermediation and economic growth in Nigeria. Specifically, total savings emerges as a key driver of economic growth. However, credit to the private sector, deposits from rural bank branches, and loans from rural bank branches have limited effects on economic growth. Finally, to boost economic growth, the study suggests that Banks should create incentives to encourage individuals and businesses to save more.

Keywords

ARDLbanking sectoreconomic growthfinancial intermediationtotal savings.

References

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